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Yip's Chemical Announces 2009/10 Interim Results

Published on 2010-01-06. Author : SpecialChem

HONG KONG -- Yip's Chemical Holdings Limited, one of China's largest manufacturers of petrochemical products, announced its interim results for the six months ended 30 September 2009.

During the period under review, the Group made HK$2,675,814,000 in turnover, a slight drop of 13% when compared with the same period last year. However, putting aside the general decline in unit selling prices, the volume of the core businesses actually grew at approximately 12%. Net profit attributable to equity holders surged by 44% to HK$227,724,000, basic earnings per share increased by 43% to HK42.5 cents. The Group maintained a strong financial position with strong cash flow, its net cash position reached HK$155,024,000. The Board recommends payment of an interim dividend of HK12.0 cents per share, an increase of 50% over last period's HK$8.0 cents.

Mr. Tony Ip, Chairman of Yip's Chemical, said, "In face of declining consumption sentiment and market demand under the impact of the financial tsunami, riding on the commitment to focusing on our core businesses, fast response of the management, coupled with the dedication of the entire workforce, the Group's business managed to stay robust. We also demonstrated our consolidated competitive strengths, allowing us to capture the opportunities Yip's Chemical Announces 2009/10 Interim Results provided by the sustained development in China's domestic consumption markets, and thus recorded highly gratifying growth in the first half of the year."

Business Review

Solvents

The division recorded turnover of HK$1,425,717,000, while the operating profit rose by 6% to HK$151,344,000. On account of the decline in raw materials and commodities prices, turnover for the solvents business was lower than the same period last year, but sales volume actually registered a healthy growth, with raw solvents reaching a record 197,000 metric tons, thus further enhancing the advantages of economy of scale. Mixed solvents benefited from efforts into optimizing the formulations to reduce costs.

With the effects of the financial tsunami on the wane, the advantages of economy of scale for the solvents business will further be enhanced. For raw solvents, Taixing Jinjiang generates steady profit, the 120,000 metric tons production facility for acetate solvents will commence operation by end of 2009, bringing the total acetate capacity of the Group to 430,000 metric tons and securing the Group's position as the world's largest acetate solvents producer, and further improving the Group's competitiveness in Eastern China. It also helps to drive the Group's business development in the region. As for mixed solvents, since thinners are an integral package for coatings, the business will benefit from the continued growth of the coatings business.

Coatings

Turnover of the division grew 3% to HK$1,092,724,000, while operating profit recorded an increase of 129% to reach HK$146,657,000. The growth was mainly attributed to household architectural paints business, which benefited from the strategy of heavier investment in brand promotion and expanding and improving the distribution network, while new coatings plant in Tungxiang commissioned in May this year also gave additional impetus to the growth of the inks and industrial coatings businesses in Eastern China. As a result, the overall coatings business registered a 12% volume growth after adjusting for the changes in product selling prices. In particular, the household architectural paints business and the inks business have both had increases of 23% by volume. The volume growth, coupled with improvements in brand value, favourable changes in raw materials prices, and the development of a new line of environmentally friendly products, and cost reductions as a results of plant rationalizations, have all contributed to significant improvements in gross margins.

The Group is accelerating the expansion of Bauhinia Paint's production facilities in Shanghai and Bauhinia Variegata Ink's production facilities in Hebei. It has also acquired 90 acres and 30 acres of land adjacent to Tungxiang and Zhongshan Inks plants respectively to further expand its coatings production facilities to cater for the Group's future needs. All expansion projects will be commissioned in phases, with final completion by end 2012, by which time the total capacity for coatings will increase by at least 60%.

Besides, the Group will continue to increase investment in brand promotion, accelerate expansion of distribution coverage in the secondary and tertiary towns, and complete the face-lifting of Bauhinia's distribution outlets by the middle of next year. The Group will also upgrade its R&D capacity and increase in sales proportion of new product, with particular emphasis on development and promotion of safe, healthy and environmentally friendly new products.

Lubricants

In face of a relatively more severe operating environment during the review period, turnover of the lubricant business declined by 10% to HK$138,024,000. Operating loss was HK$552,000, but nevertheless a significant improvement over the much larger operating loss in the second half of the last financial year. Demand for industrial specialty lubricants business dropped as a result of Yip's Chemical Announces 2009/10 Interim Results the decline in export markets. Automotive engine oils, on the other hand, saw a rebound in demand as it mainly serves the domestic market. However, due to the twin effects of cut-throat competition and the need to work off the high-priced inventory, gross profit margins have declined. The prospects for the lubricants division is expected to improve. The specialty lubricants business is expected to benefit from the gradual picking up of the export market together with growth in Eastern China, while automotive lubricants will continue to develop the distribution network in the secondary and tertiary towns and in developing the market for anti-freeze in Northern China. Moreover, as the high-priced inventories are being progressively used up, gross profit margins should improve.

Looking ahead, Mr. Ip concluded, "The Group expects that the global economy will begin to recover by the middle of next year, while China's domestic economy should continue to grow strongly. We, therefore, are optimistic about the prospects for the second half of the year. The Group is fully prepared to exploit the opportunities offered by these favorable conditions in China to scale even greater heights in our business performance."

About Yip's Chemical Holdings Limited:

Yip's Chemical Holdings Limited , formerly known as Hang Cheung Hong, was established in 1971 and listed on the Hong Kong Stock Exchange in 1991. The Group focuses on the production and sale of petrochemical products. Its three core businesses are solvents, coatings and lubricants. It is one of China's largest manufacturers of petrochemical products, and the largest manufacturer of acetate solvents in the world and in China. The Group is headquartered in Hong Kong, with 17 manufacturing plants across China and a nation-wide sales network covering every major Chinese province and city. Brands operated under the Group include the "Bauhinia" for paints, "Bauhinia Variegata" for inks, "Golaxxo" for specialty varnishes, "Da Chang" for resins, "Ad-Coat" for electronic insulating coatings, "Pak Lam Choice" for digital electronic coatings, "Hercules" for lubricants and "Pacoil" for specialty lubricants. Since 2008, the Group has made prominent rankings in the FinanceAsia's Best Managed Companies Poll - Hong Kong for two consecutive years, and was named the "Best Mid-Cap" in 2008.

Source: Yip's Chemical Holdings Limited


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