Yip's Chemical Holdings Limited (SEHK: 00408) ("Yip's Chemical" or the "Group"), the world's largest manufacturer of acetate solvents and one of China's largest manufacturers of petrochemical products, has announced its interim results for the six months ended 30 June 2015 (the "review period").
During the review period, the operating environment was tougher than expected due to the sluggish global economy and the downward pressure of China's economic growth. Production overcapacity exacerbated the fierce competition in the industry. However, as the Group has steadfastly adhered to the principles of steady development as well as execution of prudent strategies, stringent controls and effective measures, the overall business operation remained healthy. During the review period, the Group recorded a turnover of HK$4,277,244,000, down by 9% year-on-year. The decline was primarily attributable to the drop of raw materials prices which dragged down unit selling prices. Total product sales tonnage grew by 6% from last year to another historical high of approximately 474,000 metric tons. Profit attributable to owners surged by 61% year-on-year to HK$82,795,000. However, after excluding gains and losses from non-recurring items such as exchange differences, a small growth in profit was actually recorded during the review period. Meanwhile, the Group has maintained a sound financial position with a gearing ratio of 59.7%. Basic earnings per share were HK14.7 cents (2014 same period: HK9.1 cents), a year-on-year increase of about 62%. The Board of Directors has proposed the payment of an interim dividend of HK10 cents per share (2014 same period: HK10 cents per share).
Mr. Tony Ip, Chairman of Yip's Chemical, said, "The feeble economic development in China as well as the weak local consumer sentiment have presented challenges and obstacles to the Group. However, we have steadfastly adhered to maintaining steady development of our businesses, upholding the operational focus of ensuring growth and sustainability, as opposed to blindly pursuing higher turnover, while emphasising improvement of operational quality and striving for higher profitability. It is worth noting that the business optimisation measures such as business consolidation and cost controls which the Group has been implementing in earnest in recent years have begun to yield benefits and are expected to enhance our overall competitiveness. We will continue to build on the Group's management capabilities and good corporate governance in order to accomplish the medium to long-term vision of 'Towards a Century of Revered Leadership'."
Business Review and Prospects
Solvents
During the review period, dragged by the decline in the prices of raw materials caused by the fall in oil prices, turnover of the solvents business consequently dropped by 12% year-on-year to HK$2,460,546,000. The sales volume of the flagship acetate solvents increased by 11% year-on-year to a record high of 336,000 metric tons. Meanwhile, the new product butyl acrylate recorded a drop in sales volume to reach 21,000 metric tons, and the decline was mainly because the management sized up the situation and decided to appropriately reduce production to ensure steady development of butyl acrylate. The fact that acetates business was still profitable in a down market has again exemplified its overall competitive strength. The operating profit of the solvents business amounted to HK$85,922,000.
Construction of a new 300,000-metric ton acetate solvents production line in the Taixing plant in Jiangsu has been completed and the new production line is waiting for the inspection and approval of various authorities concerned. It is expected to be operational in the third quarter this year. By then, the Group should have sufficient output to further tap into the northern China market. As for medium to long-term strategy, the Group plans to actively develop new products to further enrich its product portfolio and provide a new growth driver in the future.
Coatings
The Group has completed the consolidation of household coatings, industrial coatings and resins businesses and introduced a new management team in order to enhance the professionalism of the business operation. The coatings business reported a robust performance during the review period, with turnover reaching HK$989,598,000 and sales volume increasing by 15% year-on-year to 85,000 metric tons. As the gross profit margin improved by 3.5 percentage points and the operating costs were effectively controlled, the operating profit of the coatings business soared by nearly 2.4 times to HK$53,634,000. The coatings business after consolidation has achieved its expected benefits gradually given the significantly improved business performance compared with the past.
On one hand, the Group has strived to raise the selling prices and optimise sales channels. On the other hand, the Group has introduced the new concept of adopting "Production and Material Control" (PMC) quality management as a means to further improve its operational efficiency. As for household coatings and resins, notable growth was recorded in sales volume, turnover and operating profit. With regard to industrial coatings, the Group has strategically cultivated and consolidated its major customer base thereby providing strong support for long-term development. Moreover, the Group will implement marketing plans for products in different locations and with different features. It will also provide professional training for distributors and sales representatives to further hasten business development.
Inks
During the review period, affected by continuous fall in the market demand for inks, the performance of the two mainstay products, namely food packaging inks and offset printing inks, was unsatisfactory. Turnover was HK$725,533,000, representing a year-on-year decrease of 10%, while operating profit amounted to HK$18,552,000. As the current products are restricted by the market conditions, the Group is determined to develop certain new products and has made obvious progress in technical development and expansion of clientele.
Design of the "Mega Plant" concept has come to fruition. Starting from this October, the Group will introduce measures such as expanding production lines, combining production capacity and merging production management in orderly steps to various products. This initiative will help lower production costs and further boost overall competitiveness and operational efficiency of the inks business.
Lubricants
Turnover of the lubricants business during the review period was HK$180,226,000. Sales of automotive lubricants continued to achieve growth while sales of industrial lubricants dropped slightly. The antifreezes are to be launched to the market in the second half of this year. The gross profit margin of this business continued to improve by 1.9 percentage points year-on-year. Operating loss was narrowed slightly from last year to HK$989,000.
In March this year, the Group has put up its headquarters property in Fanling for open tender and closed the tender at the end of April. Since the market environment of industrial and commercial properties had deteriorated as a result of changes in the Individual Visit Scheme from Mainland China to Hong Kong, no offer meeting the Group's expectation was received. In light of this, the management will continue to evaluate possibilities of selling or leasing out the property that would be both cost-effective and financially beneficial to ensure that shareholders' best interests are served.
Mr. Stephen Yip, Chairman of the Group Executive Committee of Yip's Chemical, concluded, "The overall operations of the Group's various lines of business were sound and healthy. The initial benefits of our plant consolidation projects are clear to see and will be conducive to boosting profit when the peak season arrives in the second half of the year. We will pay close attention to market situations and make timely adjustments to our measures as warranted by the prevailing operating environment. In accordance with the operating objectives set down by the Board of Directors, we will work towards becoming a century-old company. We will continue to enhance cost controls and credit monitoring, strengthen our business capabilities and step up branding and R&D efforts, thus laying a solid foundation for our medium to long-term development."
Yip's Chemical Holdings Limited (SEHK: 00408) ("Yip's Chemical" or the "Group"), the world's largest manufacturer of acetate solvents and one of China's largest manufacturers of petrochemical products, has announced its interim results for the six months ended 30 June 2015 (the "review period").
During the review period, the operating environment was tougher than expected due to the sluggish global economy and the downward pressure of China's economic growth. Production overcapacity exacerbated the fierce competition in the industry. However, as the Group has steadfastly adhered to the principles of steady development as well as execution of prudent strategies, stringent controls and effective measures, the overall business operation remained healthy. During the review period, the Group recorded a turnover of HK$4,277,244,000, down by 9% year-on-year. The decline was primarily attributable to the drop of raw materials prices which dragged down unit selling prices. Total product sales tonnage grew by 6% from last year to another historical high of approximately 474,000 metric tons. Profit attributable to owners surged by 61% year-on-year to HK$82,795,000. However, after excluding gains and losses from non-recurring items such as exchange differences, a small growth in profit was actually recorded during the review period. Meanwhile, the Group has maintained a sound financial position with a gearing ratio of 59.7%. Basic earnings per share were HK14.7 cents (2014 same period: HK9.1 cents), a year-on-year increase of about 62%. The Board of Directors has proposed the payment of an interim dividend of HK10 cents per share (2014 same period: HK10 cents per share).
Mr. Tony Ip, Chairman of Yip's Chemical, said, "The feeble economic development in China as well as the weak local consumer sentiment have presented challenges and obstacles to the Group. However, we have steadfastly adhered to maintaining steady development of our businesses, upholding the operational focus of ensuring growth and sustainability, as opposed to blindly pursuing higher turnover, while emphasising improvement of operational quality and striving for higher profitability. It is worth noting that the business optimisation measures such as business consolidation and cost controls which the Group has been implementing in earnest in recent years have begun to yield benefits and are expected to enhance our overall competitiveness. We will continue to build on the Group's management capabilities and good corporate governance in order to accomplish the medium to long-term vision of 'Towards a Century of Revered Leadership'."
Business Review and Prospects
Solvents
During the review period, dragged by the decline in the prices of raw materials caused by the fall in oil prices, turnover of the solvents business consequently dropped by 12% year-on-year to HK$2,460,546,000. The sales volume of the flagship acetate solvents increased by 11% year-on-year to a record high of 336,000 metric tons. Meanwhile, the new product butyl acrylate recorded a drop in sales volume to reach 21,000 metric tons, and the decline was mainly because the management sized up the situation and decided to appropriately reduce production to ensure steady development of butyl acrylate. The fact that acetates business was still profitable in a down market has again exemplified its overall competitive strength. The operating profit of the solvents business amounted to HK$85,922,000.
Construction of a new 300,000-metric ton acetate solvents production line in the Taixing plant in Jiangsu has been completed and the new production line is waiting for the inspection and approval of various authorities concerned. It is expected to be operational in the third quarter this year. By then, the Group should have sufficient output to further tap into the northern China market. As for medium to long-term strategy, the Group plans to actively develop new products to further enrich its product portfolio and provide a new growth driver in the future.
Coatings
The Group has completed the consolidation of household coatings, industrial coatings and resins businesses and introduced a new management team in order to enhance the professionalism of the business operation. The coatings business reported a robust performance during the review period, with turnover reaching HK$989,598,000 and sales volume increasing by 15% year-on-year to 85,000 metric tons. As the gross profit margin improved by 3.5 percentage points and the operating costs were effectively controlled, the operating profit of the coatings business soared by nearly 2.4 times to HK$53,634,000. The coatings business after consolidation has achieved its expected benefits gradually given the significantly improved business performance compared with the past.
On one hand, the Group has strived to raise the selling prices and optimise sales channels. On the other hand, the Group has introduced the new concept of adopting "Production and Material Control" (PMC) quality management as a means to further improve its operational efficiency. As for household coatings and resins, notable growth was recorded in sales volume, turnover and operating profit. With regard to industrial coatings, the Group has strategically cultivated and consolidated its major customer base thereby providing strong support for long-term development. Moreover, the Group will implement marketing plans for products in different locations and with different features. It will also provide professional training for distributors and sales representatives to further hasten business development.
Inks
During the review period, affected by continuous fall in the market demand for inks, the performance of the two mainstay products, namely food packaging inks and offset printing inks, was unsatisfactory. Turnover was HK$725,533,000, representing a year-on-year decrease of 10%, while operating profit amounted to HK$18,552,000. As the current products are restricted by the market conditions, the Group is determined to develop certain new products and has made obvious progress in technical development and expansion of clientele.
Design of the "Mega Plant" concept has come to fruition. Starting from this October, the Group will introduce measures such as expanding production lines, combining production capacity and merging production management in orderly steps to various products. This initiative will help lower production costs and further boost overall competitiveness and operational efficiency of the inks business.
Lubricants
Turnover of the lubricants business during the review period was HK$180,226,000. Sales of automotive lubricants continued to achieve growth while sales of industrial lubricants dropped slightly. The antifreezes are to be launched to the market in the second half of this year. The gross profit margin of this business continued to improve by 1.9 percentage points year-on-year. Operating loss was narrowed slightly from last year to HK$989,000.
In March this year, the Group has put up its headquarters property in Fanling for open tender and closed the tender at the end of April. Since the market environment of industrial and commercial properties had deteriorated as a result of changes in the Individual Visit Scheme from Mainland China to Hong Kong, no offer meeting the Group's expectation was received. In light of this, the management will continue to evaluate possibilities of selling or leasing out the property that would be both cost-effective and financially beneficial to ensure that shareholders' best interests are served.
Mr. Stephen Yip, Chairman of the Group Executive Committee of Yip's Chemical, concluded, "The overall operations of the Group's various lines of business were sound and healthy. The initial benefits of our plant consolidation projects are clear to see and will be conducive to boosting profit when the peak season arrives in the second half of the year. We will pay close attention to market situations and make timely adjustments to our measures as warranted by the prevailing operating environment. In accordance with the operating objectives set down by the Board of Directors, we will work towards becoming a century-old company. We will continue to enhance cost controls and credit monitoring, strengthen our business capabilities and step up branding and R&D efforts, thus laying a solid foundation for our medium to long-term development."
distributed by
 |