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

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

However, [Chaoqun Group] borrows more of the magical effects of organisms in its sewage biological treatment process. Its operating and maintenance costs are very low. The highest costs may still be this process and [Dianjin Mulberry]. Intellectual property fees for new plants.

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

Does He Youman have a salary?

It seems to have!

She holds the two positions of general manager of a business unit and chief biotechnology research officer of [Chaoqun Group]. She is a proper executive and her salary is really high.

However, the monthly salary was deposited into her account, but she never spent it.

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

But even one-third of the cost of traditional water treatment processes is enough to excite executives.

Another executive meeting was held in the [Bikong Domestic Waste Treatment Plant]. At the meeting, all the executives fully agreed with Wu Siyuan's suggestion of [deepening the environmental protection industry chain and developing all aspects] and decided to completely intervene in the waste treatment industry. As before, it only processes domestic waste, but this time it will be expanded to sewage sludge, industrial waste and other fields.

In addition, in order to thoroughly develop the potential of this [biological treatment process], this meeting also decided to expand the business scope of the [domestic waste treatment plant], which is no longer limited to [garbage treatment], but also involves the [collection and transportation] link. That is, environmental sanitation contracting controls the source of resources like [garbage] from the source.

In addition, the water quality treated by [Chaoqun Group]'s unique [biological treatment process] can reach drinking water standards after simple treatment.

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

Therefore, during this meeting of [Chaoqun Group], Wu Siyuan decided against all opinions and decided to enter the urban water industry.

Sewage treatment is originally one of the important areas in the water industry. It is logical to rely on the sewage treatment business to get involved in the water industry.

Executives have different opinions, mainly because the water industry is not a sunrise industry because of its particularity and its public welfare nature.

The long-term cost inversion has made it unaffordable for enterprises related to the water industry. Even if water prices increase, it will be difficult to maintain profitability.

It is reported that 70% of water companies in the industry are in a state of loss or low profit.

The Twelfth Five-Year Plan Period - (China uses a five-year period to make short- and medium-term plans for the country. The first [Five-Year Plan] is from 1953 to 1957, referred to as the [1st Five-Year Plan], and the second Five-Year Plan is The 2006 plan was stillborn due to the interruption of aid. The third five-year plan was restarted in 1966 as 1966-1970. The subsequent five-year plans were not interrupted, and the first and last five years of each decade were Years. Among them, the [1st Five-Year Plan] to the [10th Five-Year Plan] are called plans, and from the [11th Five-Year Plan] onwards it is renamed [Planning]. The starting and ending time of the [12th Five-Year Plan] plan: 2011-2015.)

China's water market is booming, with the market size reaching trillions. However, unexpectedly, this has not continued the myth of water companies. On the contrary, the market size has been shrinking.

According to statistics from the e20 Research Institute, during the 12th Five-Year Plan period, the market share of foreign-funded enterprises dropped from 50% during the 11th Five-Year Plan to 10% at the end of the 12th Five-Year Plan, and there are no signs of recovery so far.

There have always been many misunderstandings about the water industry.

Huaguo Water Network once announced that the average gross profit margin of the water industry is 40%, which aroused heated discussion among the public and accused the water industry of being the number one 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 margin of this business was 46.74%. There are 11 companies involved in municipal water supply investment and operation, and the average gross profit margin of this business is 34.56%. In terms of water project construction, 9 companies are involved in this type of business, with an average gross profit margin of 38.59%.

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

But in fact, high gross profit margin does not mean high profit margin. [The average gross profit margin of more than 40%] is actually a big blister.

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

For a city with a population of one million, based on the current water price, the water company’s annual operating income is about 70 million to 80 million yuan, of which the gross profit is about 30 million yuan. Based on this calculation, there is no problem that the water company’s gross profit margin is close to 50%. of.

However, depreciation, loan interest and other costs are also close to 40 million yuan, so the company will lose money. The gross profit margin calculation method does not take into account financial costs and upfront investment in pipe networks, which are the largest costs in water supply.

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

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

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

In fact, starting in 1995, domestic water companies began to suffer losses across the industry.

Statistics from Huaguo Water Network show that in February 2009, the overall gross profit margin of the national tap water production industry was 17.75%, but the profit margin during the same period was -9.15%, and the return on net assets was -0.6373%.

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

The main reason for the losses of water companies is the rising cost of water supply. As an important component of water supply costs, the increase in water resources fees and direct costs such as raw materials, electricity prices, and labor in recent years 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 sharing, blind construction, etc. are also a major reason for the losses of water companies.

Until last year, 2016, losses for water companies were the norm.

According to data from the China Business Industry Research Institute through water industry monitoring, as of the end of December 2016, the number of enterprises above designated size in China's water industry reached 1,620, which was the same number as in November.

In December, the industry's loss level decreased, but the number of loss-making enterprises still reached 364, a decrease of 14 compared with the previous month. The loss ratio of enterprises above designated size reached 22.47%, a decrease of 0.86 percentage points from the previous month.

Throughout 2016, the water industry suffered a total loss of 5.97 billion yuan, a year-on-year increase of 2.1%.

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