Letter to the Shareholders
Fifty years ago, in 1968, Midea founder, He Xiangjian, sowed the seeds of Midea's enterprises with the goal of improving lives. After half a century, Midea has prospered into a towering presence and become a technology group with operations in consumer appliances, HVAC systems, robotics and industrial automation systems, and smart supply chain (logistics) as it takes the lead in grasping new opportunities brought forth by industrial networks, digitalization, artificial intelligence, and human-machine collaboration.
Each momentous advancement in human history is dependent on the grand context of the era; we must salute and express our gratitude to this vibrant time, for it was in these 40 years of economic reforms in China that gave birth to entrepreneurship and propagated the nation's revival. Each generation of Midea people has fought through dire times, and their unwavering resolve and courage to embrace changes and innovation has advanced Midea's glorious transformation from that small rural workshop 50 years ago.
Midea achieved some remarkable results in 2017, boasting a 51.35% growth in revenue to RMB241.92 billion, while net profit attributable to shareholders of the company rose by 17.70% to RMB17.28 billion. Midea ranked 450th in the Fortune 500 rankings of 2017, moving up 31 places from the previous year. Midea also ranked 335th in the Forbes 2017 Global 2000, an improvement of 67 ranks. According to the "BrandZ™ Top 100 Most Valuable Chinese Brands 2018", Midea rose to the 26th spot in their rankings and maintained its lead as the highest-ranking home appliance brand in three consecutive years. Midea was featured among the Top 10 companies of CCTV's "National Brands Plan”and it has been selected as one of the top ten public companies in China by CCTV for two consecutive years. As of the end of 2017, Midea's market value reached RMB 363 billion after an annual growth of more than 100% .
By the age of fifty, people must be able to understand and accept their place in the world, give up on superficial complaints, and be free of idle thoughts. To be an evergreen enterprise, we should keep up with the times, set high goals, restore confidence in entrepreneurship and the creative spirit, and undertake tasks set forth by the times.
This era’s changes have been beyond imaginable. Half of the top Fortune 500 companies from 2000 have disappeared from the rankings. A large group of companies that were once great have fallen from grace in 2017. Under the swift current of changes of this era, Midea must remain humble and respectful while embracing changes and innovation in order to keep up with the times. We must always keep a progressive mind and an entrepreneurial spirit to fulfill our dreams and abandon mediocrity. Today, Midea must progress with simultaneous grace and vigor; much like the flowing Amazon River, still waters run deep. Today, Midea must look to the stars while keeping its feet planted firmly on the ground in order to strike forward thousands of miles with small steps.
Our past is merely a preface to our future achievements. In 2018, Midea will be moving forward with a new transformative phase and reform with greater courage and resolve. We shall boldly choose what is right; only by abandoning the alluring sights before us can we make long-term plans for the future and attain our renaissance. Our struggles inside our cocoon shall give birth to a beautiful butterfly embodied in yet another glorious era for Midea.
This year, Midea shall initiate a new round of change based on user-centric core values as we reconstruct the value chain, corporate structure, and corporate culture to improve user experience and create value for users.
We shall continue to focus on fostering internal growth within the company and seize market opportunities in consumptive and structural upgrades. We shall build a user-centric business model and management system to expand investment in innovation, improve the R&D environment, innovate incentive systems, recruit top R&D talents, and improve R&D layout. We shall also continue to improve user experience and build high-quality products to improve the overall core competitive ability of our products.
We shall further promote transformation of corporate digitalization and use software and data to construct and drive high-performance operations in the value chain, including R&D, planning, manufacturing, procurement, quality, logistics, customer service, and installation. We aim to implement an end-to-end synergy, advance flexible customization, production platformization and modularization, digitalized craftsmanship, smart logistics, smart customer services, and other in-depth reforms to strengthen the foundation of industrial internet.
We shall continue to advance the integration and business development in robotics and automation and speed up our preparation for the entire industrial automation and robotics sectors. We shall seize opportunities in the robotics market in China and advance the integration and rapid growth of domestic robots in China. We shall improve our capabilities in developing core robotic parts and software systems as well as integrate artificial intelligence and sensory and visual technologies for expansion into new sectors such as smart manufacturing, smart logistics, smart home, and medical and recovery.
We shall advance the integration and synergy of global operations and M&A projects and advance Midea's global presence to establish a framework for different sectors, different market spaces and regions, and different cultural backgrounds and mindsets. We shall promote our global sales operations and increase the growth of our own brand as we strengthen risk controls overseas and establish a comprehensive overseas corporate governance and compliance system.
Midea is standing at the forefront of the era, but only by actively seeking changes and rapid reforms can it fulfill its mission in the midst of the great rejuvenation of the Chinese nation, resonate with the nation, and write a more beautiful chapter.
The path towards transformation is still long and arduous. In 2018, the Midea team shall demonstrate resolve and courage for reforms in every opportunity and make unremitting efforts. The peak may be steep but we must climb.
Hereby, we would like to thank all shareholders for their company, support and trust, and pay tribute to all shareholders and investors who are committed to our value creation!
Board of Directors, Midea Group