I collect gold fingers in the heavens

Chapter 354 Current Situation of Water Industry
In fact, what He Youman did not tell the executives was that the real cost of the sewage biological treatment process developed by the group may be less than one percent of other treatment processes on the market.

After all, the biggest cost of sewage treatment is operating cost and maintenance cost.

However, [Chaoqun Group] borrows more of the miraculous effects of organisms in terms of sewage biological treatment process, and its operating and maintenance costs are very low. The biggest cost may be this process and [Dianjinsang] Intellectual property costs for new plants.

But in fact, this intellectual property fee is actually He Youman's salary.

Does He Youman get paid?
It seems to have!
She is also the general manager of a business unit of [Super Group] and the chief biotechnology research officer. She is a proper executive with a really high salary.

It's just that the monthly salary is transferred to her account, and she has never been seen spending it.

... The reason why He Youman said that the cost of the biological sewage treatment process is high is actually because Wu Siyuan was afraid of scaring the executives.

However, even a third of the cost of traditional water treatment processes is enough to excite executives.

In the [Bikong Household Garbage Treatment Factory], another executive meeting was held. At the meeting, all the executives fully agreed with Wu Siyuan’s proposal of [Deepen the environmental protection industry chain and develop in all aspects], and decided to completely intervene in the garbage disposal industry. As before, we only deal with domestic waste, but this time we will expand to sewage sludge, industrial waste and other fields.

In addition, in order to fully develop the potential of this set of [biological treatment process], this meeting also decided to expand the business scope of [domestic waste treatment plant], not limited to [garbage treatment], but also involved in [collection, clearing and transportation]. That is, sanitation contracting, which controls the source of resources such as [garbage] from the source.

In addition, the water quality treated by the unique [Biological Treatment Process] of [Chaoqun Group] can reach the standard of drinking water with simple treatment.

It would be a pity not to make good use of this point.

So [Chaoqun Group] in this meeting, Wu Siyuan overcame all opinions and decided to enter the urban water industry.

Originally, sewage treatment is one of the important areas of the water industry. Relying on the sewage treatment business, it is also a matter of course to intervene in the water industry.

The executives have different opinions, mainly because the water industry is not a sunrise industry, because of its particularity, it also has the nature of public welfare.

The long-term cost inversion has made it impossible for related companies in the water industry to afford it. Even if the price of water increases, it will be difficult to maintain a profitable state.

It is reported that [-]% of water companies in the industry are in a state of loss or low profit.

The Twelfth Five-Year Period——(Huaguo makes national short-term and medium-term planning in a period of five years. The first [Five-Year Plan] is 1953-1957, referred to as [First Five-Year], and the second Five-Year Plan The annual plan was aborted due to the interruption of aid, and the third five-year plan was restarted in 1966 as 1966-1970. Among them, the [First Five-Year] to [Tenth Five-Year] are called "plans", and the [Eleventh Five-Year] is renamed [Plan]. The start and end time of the [Twelfth Five-Year] plan: 2011-2015.)
Huaguo's water market is booming, and the market size has reached trillions, but unexpectedly, instead of continuing the myth of water companies, on the contrary, the market size has continued to shrink.

According to the statistics of the E20 Research Institute, during the 50th Five-Year Plan period, the market share of foreign-funded enterprises dropped from 10% during the [-]th Five-Year Plan period to [-]% at the end of the [-]th Five-Year Plan period, and it is difficult to see signs of recovery so far.

For a long time, there have been many misunderstandings about the water industry.

Huaguo Water Network once announced that the average gross profit rate of the water industry is 40%, which has attracted heated discussions among the people, accusing the water industry of being the "first profiteering industry".

In 2010, among the 18 water companies, 14 listed companies participated in the investment and operation of sewage treatment, and the average gross profit rate of this business was 46.74%.There are 11 companies involved in municipal water supply investment and operation, and the average gross profit rate of this business is 34.56%.In terms of water engineering construction, 9 companies participated in this type of business, with an average gross profit rate of 38.59%.

Looking at it this way, it seems that the water industry is really a profiteering industry.

But in fact, high gross profit margin does not mean high profit margin. [Average gross profit margin of more than 40%] is actually a big "bubble".

Water companies are an asset-heavy industry with high financial costs and higher depreciation. It is unscientific to judge their overall profit level only by gross profit rate.

Calculated in a city with a population of one million, according to the current water price, the annual operating income of the water company is about 7000 million to 8000 million yuan, of which the gross profit is about 3000 million yuan. It is no problem to calculate the gross profit rate of the water company close to 50%. of.

But depreciation, loan interest and other costs are also close to 4000 million yuan, so the company will lose money after calculation.The calculation method of gross profit margin does not take into account the financial cost and the initial investment of the pipe network, which is the largest cost of water supply.

A large part of the cost of water supply is the cost of investment and reconstruction, including funds for aging and repairing pipe networks, new factories and facilities, etc.

Since 1998, the investment in facilities such as pipe networks in the urban water supply industry has come from water companies, and the government's investment has basically been zero.

This means that the cost of investment and construction by water companies will be very heavy.

In fact, since 1995, domestic water companies have started to lose money throughout the industry.

According to the statistics of Huaguo Water Network, in February 2009, the overall gross profit rate of the national tap water production industry was 2%, but the profit rate in the same period was -17.75%, and the return on net assets was -9.15%.

This shows that the water industry is an unprofitable industry that may even suffer serious losses.

The main reason for the loss of water companies is the rising cost of water supply.As an important part of water supply costs, the increase in water resource fees in recent years and the increase in direct costs such as raw materials, electricity prices, and labor are the fundamental reasons for the increase in water supply costs.

Among them, due to the lack of effective cost constraints, unreasonable costs caused by pipe network leakage due to poor management, overstaffing of water management units, unreasonable cost allocation, blind construction and other reasons are also a major cause of losses for water companies.

Until last year - 2016, the loss of water companies was a norm.

According to the monitoring data of the China Commercial Industry Research Institute through the water industry, as of the end of December 2016, the number of enterprises above designated size in the water industry in Huaguo reached 12, which is consistent with the number in November.

In December, the industry's loss-making area has declined, but the number of loss-making enterprises still reached 12, a decrease of 364 compared with the previous month, and the loss ratio of enterprises above designated size reached 14%, a decrease of 22.47 percentage points from the previous month.

Throughout 2016, the total loss of the water industry was 59.7 billion yuan, a year-on-year increase of 2.1%.

(End of this chapter)