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on the evening of september 29, piano (002853) issued an announcement that due to multiple influences such as macroeconomics, industry prosperity, changes in consumption trends, and intensified market competition, the company has adjusted its production and operation strategy and recently made adjustments to its wholly-owned subsidiary piano. the factory production line of arnold home furnishing (tianjin) co., ltd. (hereinafter referred to as the "tianjin subsidiary") temporarily suspended production and transferred original business orders to the company's zhongshan banfu production base. subsequent production will be resumed based on changes in market demand.

the announcement shows that piano's tianjin subsidiary was established in 2012. its operating income in 2023 will be 169 million yuan and its net profit will be 6.3407 million yuan; in the first half of 2024, its operating income will be 47.2495 million yuan and its net profit will be -3.0245 million yuan. as of june 30, 2024, the net assets of the tianjin subsidiary were 194 million yuan.

the announcement stated that the tianjin subsidiary factory, as one of the company's retail business production bases, has been affected by multiple factors such as macroeconomics, industry prosperity, changes in consumption trends, and intensified market competition in recent years, and order growth has been lower than expected. in order to optimize resource allocation and industrial layout and achieve cost reduction and efficiency increase, the company's management decided to adjust the company's production and operation strategy after careful consideration, optimize the company's existing production base layout, and temporarily suspend production at the tianjin subsidiary factory.

in order to ensure the continuity of the original business of the tianjin subsidiary, piano plans to transfer the original business orders of the tianjin subsidiary to the zhongshan banfu production base. the zhongshan banfu production base is the company's 4.0 industrial manufacturing base and an important production base for the company's retail business. the base adopts flexible intelligent manufacturing production lines, introduces advanced international production equipment, and upgrades from multiple dimensions such as intelligent product manufacturing upgrades, production model innovation, service model iteration, etc., to achieve high production capacity and high quality assurance. at present, the base is operating well, and the existing production capacity and technology can meet the needs of the tianjin subsidiary's original business orders.

currently, piano is actively coordinating relevant resources, maintaining good communication with dealers, meeting consumer demands such as delivery dates, and achieving a smooth transition of the business. after the tianjin subsidiary factory ceases production, the company will gradually dispose of finished products, raw materials and other assets, and properly resettle relevant employees. it is expected that the resulting gains and losses from asset disposal and personnel resettlement expenses may have an impact on the company's profits.

piano said that the temporary suspension of production of the tianjin subsidiary is an important measure to make timely adjustments to the company's production and operation strategy after careful consideration by the company's management. the temporary suspension of production at the tianjin subsidiary factory will not have a significant impact on the company's normal operating activities and ability to continue operating. this measure is out of consideration to ensure the company's overall production efficiency and operating benefits, and is conducive to integrating company resources, optimizing production layout, improving overall benefits, and promoting the healthy development of the company's production and operations.

in fact, in the first half of this year, the overall performance of piano’s customized home furnishing industry was not ideal. in the semi-annual reports of 9 customized home furnishing companies, 8 companies experienced a decline in net profit, and 7 companies experienced a decline in revenue, including two companies suffered performance losses. among them, piano's operating income and net profit fell by 20.87% and 86.32% respectively in the first half of the year.

as a post-real estate cyclical industry, the customized home furnishing industry is very obviously affected by the real estate market. in the first half of 2024, china's real estate market continued to be sluggish, which directly led to weak market demand in the home furnishing industry. an industry report released by the china building materials circulation association shows that in the first half of this year, the cumulative sales of building materials and home furnishing stores above designated size nationwide were 688.18 billion yuan, a year-on-year decrease of 8.12%.

piano also admitted in the semi-annual report that factors such as weak income expectations of residents and expectations of falling housing prices still restrict the pace of real estate market recovery. the adjustment trend of the new housing market has not changed, and the effects of policies in core cities are insufficient. if the subsequent real estate control policies are not as effective as expected and the real estate market continues to be depressed, it will affect the development of the customized furniture industry, which will in turn have an adverse impact on the company's production and operations.