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| Consolidation for Coatings Business Completes Enhances Long-Term Competitiveness Persistently |
HONG KONG, Mar 18, 2015 - (ACN Newswire) - Yip's Chemical Holdings Limited ("Yip's Chemical" or the "Group") (SEHK: 00408), the world's largest manufacturer of acetate solvents and one of China's largest manufacturers of petrochemical products, announced its annual results for the year ended 31 December 2014 (the "review period").
Highlights:
- Annual turnover for 2014 reached a record high of HK$10.26 billion, an increase of 4%
- Total product sales tonnage grew 7% from last year
- Profit attributable to owners dropped 11% year-on-year to HK$223 million
- In 2014, the Group completed the strategic consolidation of the coatings business by integrating household and architectural coatings, industrial coatings and resins to establish Bauhinia Coatings Group, which officially started operation on 1 January 2015
- The Board of Directors recommended the payment of a final dividend of HK15 cents per share. Together with the interim dividend of HK10 cents per share, total dividend for the year amounted to HK25 cents per share, the same as in the previous two years
During the review period, the global economy remained weak while economic growth in China slowed down, demand in consumer markets shrank and the Renminbi (RMB) exchange rate adjusted downward. All of these factors have combined to create a negative impact on industry development. Despite the difficult operating environment, the Group's turnover increased year-on-year by 4% to a record high of HK$10,255,839,000, exceeding the preset medium-term target of HK$10 billion. Total product sales tonnage grew 7% from last year to 973,600 metric tons. During the year under review, profit attributable to owners dropped 11% to HK$223,182,000. The decrease was a combination of various reasons during the year: the solvents division made a provision for impairment of its goods in stock and raw materials due to sliding oil prices; the coatings division made an one-off expenditure for plants consolidation due to business restructuring; and the exchange loss generated from the depreciation of the RMB. The Group has been adhering steadfastly to the principle of sound and prudent financial management and hence it was able to maintain the gearing ratio at a healthy level of 58.1%. Basic earnings per share amounted to HK39.7 cents (2013 same period: HK44.6 cents).
The Board of Directors recommended a final dividend of HK15 cents per share (2013 same period: HK15 cents per share). Together with the interim dividend of HK10 cents per share, total dividend for 2014 amounted to HK25 cents per share (2013 same period: HK25 cents per share).
Mr. Tony Ip, Chairman of the Group, said, "Though the decline in the RMB exchange rate has brought about exchange loss during the review period, it did not constitute an unfavourable impact on the Group's real business performance and cash flow. We strived to optimise the coatings business last year by integrating the businesses of household and architectural coatings, industrial coatings and resins to establish Bauhinia Coatings Group. This initiative will enhance the competitiveness of our coatings business, and an one-off related expenditure from plants consolidation was already reflected in the review period. Despite China has lowered its economic growth target in recent years, it is still the most vibrant market with the most business opportunities in the world today. Having set root in China for many years and having prepared ourselves accordingly, we are confident that we can enjoy the fruit of the country's economic boom by leveraging our competitive edge. After consolidating and optimizing the core businesses of the Group, a streamlined management structure and a clear market position will further strengthen our overall competitiveness and synergies will gradually appear."
Business Review and Prospects
Solvents
During the review period, turnover of the solvents business grew 7% year-on-year to hit a new high of HK$6,575,516,000. Thanks to increased demand for eco-friendly solvents, sales tonnage of acetates, the Group's flagship products, maintained a strong momentum and grew as much as 6% year-on-year to 679,000 metric tons. This indicated the exceptional overall competitiveness of the products. The sales volume of butyl acrylate also met the expected target and reached 63,000 metric tons.
In addition to the exchange loss from depreciation of the RMB, the selling price of solvent products dropped as a result of the sharp decline of oil prices at the end of last year. The Group therefore made a provision of HK$28,814,000 for the impairment of its goods in stock and raw materials, which in turn dragged down the operating profit of this segment by 14.5% from the same period last year to HK$226,657,000. Operating profit after excluding the exchange difference slightly dropped 1.6% year-on-year. The operating profit of the flagship acetate solvents however managed to sustain growth momentum and increased by 4.9% during the review period.
In response to the changing operating environment, the management has launched appropriate measures by expanding the capacity of acetate solvents and enriching product portfolio. The Group is speeding up the construction of the new 300,000-metric ton acetate production line in the Taixing plant in Jiangsu to target for commissioning in the second quarter of 2015. The new production line will bring the total capacity to more than one million metric tons. In addition, the Group is developing acetate product series with higher added-value. The Group plans to increase R&D investment in the two flagship products, acetates and butyl acrylate, and gradually revamp the production facilities so as to bring in better effects in energy and material saving.
Coatings
Total product sales tonnage of coatings recorded a 4% growth during the review period, setting another new high. Turnover of the coatings business (including inks business) in 2014 was HK$3,350,517,000, representing a slight decrease of 1% from last year. The main cause was the drop in selling prices due to decrease in raw material prices. The overall sales turnover was also dragged down by the increased sales of water-based coatings which have lower unit prices than oil-based coatings. Operating profit of this segment amounted to HK$95,300,000, while operating profit after excluding exchange difference was down 14.1% from the same period in the previous year due to the one-off expenditure of HK$20,768,000 in plants consolidation.
During the review period, the Group's key focus was the consolidation of household and architectural coatings, industrial coatings and resins to form Bauhinia Coatings Group. Specialists in the industry were recruited to join the existing elites from the three businesses to form a new management core team which assumed full responsibility officially on 1 January 2015. It is expected that Bauhinia Coatings Group will bring in synergies and brand complementation benefits from the integration of technologies, sales, procurement, logistics and production.
As for the inks business, hampered by feeble domestic demand and isolated food safety scares, the sales volume of food packaging inks remained flat, resulting in a drop in overall sales dollar amount of 4% to HK$1,603,868,000. Meanwhile, with the increasing popularity of digital media, market demand for offset inks used in paper printing was slowed down. Therefore, there was only a single-digit growth in sales volume of offset inks. The Group will respond to the environmental conscience trend in China by introducing alcohol soluble and water-based inks for the first time into the market for seizing preemptive advantage over competitors. Following the acquisition of the Huacai Resins plant in the end of 2013, the Group will further optimise the upstream and downstream production of the inks business in order to improve its cost structure.
Lubricants
Turnover of the lubricants business in the review period was HK$431,837,000, down 7% from the same period in 2013. Sales volume tonnage dropped 2% to 25,200 metric tons. Facing a challenging and changing operating environment, the Group will proactively adjust its sales strategies and implement stringent cost control measures.
Mr. Stephen Yip, Chairman of the Group Executive Committee of Yip's Chemical, concluded, "The competition in the solvents business remains intense, but the Group's flagship acetate solvents line has maintained its leading position in the market. The Group will continue to expand its production capacity and enrich its product series in order to maintain its market share. The successful establishment of the 'Bauhinia Coatings Group' signifies that the consolidation of our plants has come to an end and the integration benefits would surface gradually. For the inks business, in line with the market trend, we are developing eco-friendly water-based and alcohol soluble inks, which are expected to be introduced to the market this year. The Group is also reviewing the cost structure of its lubricants business to address the current weak market sentiments. The Group believes that, as long as we can adhere to the three main pillars of growth: economies of scale, branding and R&D investments, coupled with taking a sales-oriented approach, controlling costs and raising profitability, we can enjoy long term and sustainable healthy growth."
Contact:
Yip's Chemical Holdings Limited
Wendy Tse
Tel: (852) 2675 2353
Email: wendy.tse@yipschemical.com
Fax: (852) 2675 2354
Eunice Lai
Tel: (852) 2675 2450
Email: eunice.lai@yipschemical.com
Fax: (852) 2675 2468
Strategic Financial Relations Limited
Vicky Lee Tel: (852) 2864 4834 Email: vicky.lee@sprg.com.hk
Jovanni Cai Tel: (852) 2114 4937 Email: jovanni.cai@sprg.com.hk
Kelly Chan Tel: (852) 2114 4912 Email: kelly.chan@sprg.com.hk
Fax: (852) 2527 1196
Topic: Press release summary
Source: Yip's Chemical Holdings Limited
Sectors: Daily Finance, Chemicals, Spec.Chem, Daily News
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