RNS Number : 5660D
HaiKe Chemical Group Ltd.
17 September 2008
HaiKe Chemical Group Ltd.
UNAUDITED RESULTS FOR THE SECOND QUARTER AND SIX MONTHS ENDED
30 JUNE 2008
HaiKe Chemical Group Ltd ("HaiKe" or the "Company"), the AIM quoted (AIM: HAIK)
petrochemical, speciality chemical and biochemical
business based in China, is pleased to announce its unaudited results for the second quarter
("2008Q2") and six months ended 30 June 2008
("2008H1").
The results for the second quarter ("2007Q2") and six months ended 30 June 2007
("2007H1"), which are set out below for comparative
purposes, are those of the Company and its subsidiaries.
First Half 2008 Highlights
* Total revenues increased 85% to US$ ("$") 317.5m (2007H1: $171.4m)
* Petrochemical revenues increased 98% to $266.8m (2007H1: $134.9m)
* Speciality chemical and biochemical revenues increased 39% to $50.7m (2007H1:
$36.6m)
* Gross margin decreased to 3.6% (2007H1: 10.1%)
* Loss after tax of $1.0m (2007H1: profit of $8.4m)
* Loss after minority interests of $3.0m (2007H1: profit of $5.9m)
* Construction of the speciality chemical facilities completed
Second Quarter 2008 Highlights
* Total revenues increased 80% to $175.8m (2007Q2: $97.6m)
* Petrochemical revenues increased 90% to $150.1m (2007Q2: $78.8m)
* Speciality chemical and biochemical revenues increased 37% to $25.8m (2007Q2:
$18.8m)
* Gross margin decreased to 2.4% (2007Q2: 8.6%)
* Loss after tax of $2.0m (2007Q2: profit of $4.5m)
* Loss after minority interests of $2.9m (2007Q2: profit of $3.3m)
As announced on 20 June 2008, the Company has decided that it will be moving to half
yearly reporting with effect from this
announcement.
Mr. Yang Xiaohong, Executive Chairman, said:
"I am pleased to present our results for the second quarter and the first half of 2008.While these results reflect the current
challenging market conditions that have been experienced by the Group, I would like to
highlight that these conditions are beginning to
improve. The price of crude oil is steadily dropping from its record high in July 2008 and we
have entered into a major production contract
with Sinopec Shandong Petroleum Branch, a subsidiary of one of the largest Chinese state-owned
oil companies, on 5 September 2008, I am
confident that this will have a positive impact on our margins going forward.
Despite these adverse conditions, we experienced a particularly strong performance in the
speciality chemical division over the first half,
which generated a pre tax profit of $6.6m, up 51% on the comparable period last year.
Recognising its potential, and until there is a significant improvement in the market
conditions being experienced in the petrochemical
sector, our focus going forward will be on the development of our speciality chemical
facilities and improving the flexibility and scale of
our petrochemical activities. This will ensure the Company continues to increase both its
speciality chemical sales and the manufacture of
the Company's high-margin products. This is expected to benefit overall margins and ultimately
profit."
For further information please contact:
HaiKe Johnson Lau, Chief Finance Officer +86 (0)
546 8289173
+852
37520631
Evolution Securities Limited Stuart Andrews +44 (0)
20 7071 4300
(Nominated adviser)
Evolution Securities China Barry Saint / Esther Lee +44 (0)
20 7220 4850
Limited
(Financial adviser and broker)
Cardew Group Rupert Pittman / Shan Shan Willenbrock / Catherine +44 (0)
20 7930 0777
Maitland
First Half 2008 Results
Operating profit decreased 52% from $11.4m in 2007H1 to $5.5m in 2008H1, and the loss
after tax was $1.0m (2007H1: profit after tax of
$8.4m). The gross margin dropped from 10.1% in 2007H1 to 3.6% in 2008H1.
Total revenue increased 85% from $171.4m in 2007H1 to $317.5m in 2008H1. On a segmental basis,
the sales of petrochemical products increased
from $134.9m in 2007H1 to $266.8m in 2008H1, as a result of an increased selling price and
sales volume, while sales of speciality chemicals
(including biochemical) grew from $36.6m in 2007H1 to $50.7m in 2008H1, due to increased
market demand.
Cost of sales increased from $154.1m in 2007H1 to $306.2m in 2008H1, reflecting the
significant increase of material costs and sales
volume. The incremental selling prices of the petrochemical products were lower than the
increases in material costs for the petrochemical
sector and this contributed to the lower gross margin and fall in profit in the first half.Conversely however, the shift towards the
higher-margin speciality chemical and biochemical products resulted in an improved gross
margin and profit for the chemical side of the
business, with profit before tax for the speciality chemical and biochemical businesses
increasing 51% to $6.6m (2007H1: $4.4m) and gross
margin for these divisions increasing from 19.3% to 20.1%. Nonetheless, the reduction in the
petrochemical margins still outweighed the
increases in speciality chemical and biochemical margins and the overall gross margin declined
to 3.6% in 2008H1 from 10.1% in 2007H1.
Sales and distribution expenses increased 44% from $1.5m in 2007H1 to $2.2m in 2008H1 as a
result of the increased freight charges and
promotion costs resulting from the significant increase in sales of the speciality chemical
products compared to the prior period. Other
administrative expenses increased slightly from $3.6m in 2007H1 to $4.5m in 2008H1 as a result
of additional personnel costs. Finance costs
increased 85% from $3.2m in 2007H1 to $6.0m in 2008H1 due to the increase of the average loan
balance and increase of the prime rate in
China from 6.57% to 7.47% during the period.
As a result of the above, operating profit decreased by $5.9m to $5.5m in 2008H1 from
$11.4m in 2007H1. Profit before income tax also
decreased from $8.4m in 2007H1 to a loss of $0.2m in 2008H1.
The two-year full income tax exemptions granted to three operating subsidiaries, Hi-Tech
Chemical, Hi-Tech Spring and Hi-Tech Shengli,
expired in January 2008. These three operating subsidiaries now remain entitled to a
three-year 50% income tax exemption from January 2008
to December 2010. This change in tax exemptions resulted in an income tax increase to $0.7m in
2008H1 from $0.1m in 2007H1.
The loss attributable to the shareholders of HaiKe in 2008H1 was $2.9m compared with a profit
of $5.9m in 2007H1.
Basic and diluted loss per share were both US 7.5 cents in 2008H1, as compared with
earnings per share of US 17 cents and US 16 cents in
2007H1, respectively.
Capital expenditure
Investment in property, plant and equipment increased from $19.0m in 2007H1 to $28.6m in
2008H1, mainly due to the construction works
for the capacity expansion projects of dimethyl carbonate and caustic soda (in the speciality
chemical segment). The Company incurred costs
of $18.1m on the construction of the heavy oil catalytic cracking facility in 2007H1, which
was completed in November 2007.
Cash flows
In 2008H1, cash used for operating activities amounted to $2.5m whereas the cash generated
from operating activities amounted to $20.6m
in 2007H1 in line with the decrease in operating profit.
The capital expenditure of $28.6m was mainly funded from the increase in bank borrowings,
from $86.1m as at 31 December 2007 to $147.4m
as at 30 June 2008. Within the Chinese banking system, it is common to provide bank borrowings
on a short-term renewal basis to most
non-government controlled enterprises. It is expected that the facilities will be renewed when
they fall due.
Cash and cash equivalents increased from $24.3m as at 31 December 2007 to $42.9m as at 30
June 2008.
Liquidity and financial risk
We believe that the Company has sufficient funds to meet foreseeable business requirements
due to a number of factors including the
entry into a major production contract with Sinopec Shandong Petroleum Branch on 5 September
2008, the fact that raw material costs are
currently dropping, resulting in an anticipated improvement in market conditions in the
petrochemical sector and the unutilised banking
facilities of approximately $3m. Any surplus funds may be used for further investments,
although we will not undertake any speculative
treasury transactions.
Operational Review
During the first half of 2008, the petrochemical sector continued to experience
challenging market conditions, with crude oil prices
rising across the globe. The ongoing rise in oil prices continued to put pressure on the
Company's residual oil and petrolatum oil feedstock
and had a direct negative impact on overall petrochemical margins and profit. Unfortunately,
in the first half, these reductions were not
offset by increases in the selling prices of diesel products.
The Board believes that there will be further changes in the domestic oil pricing policy
by the Chinese government. These changes were
partially carried out on 19 June 2008 when the guiding prices of refined products were
increased by an average of 18%. It is expected that
further changes, as and when they occur, will allow the Company to sell certain refined
products at higher prices, which will help to offset
the reduction in margins and profit.
As a result of the ongoing challenging market conditions within the petrochemical sector,
the Company is increasing its focus on the
speciality chemical sector. Despite the petrochemical business being the largest contributor
to group revenue, the speciality chemical
business is now the largest contributor to group profit. The focus for the Company going
forward is therefore to increase speciality
chemical production with selective production of petrochemical products, mainly focusing on
higher-margin products to enhance profit.
The testing phase of the dimethyl carbonate and caustic soda expansion projects was
completed in July 2008 and these facilities are
expected to become fully operational during the third quarter. These facilities are expected
to increase the percentage of sales coming from
the speciality chemical business and increase the proportion of sales coming from high-margin
products.
The biochemical business, being part of the speciality chemical segment, remains the
Company's smallest contributor to group revenue and
profit, although revenue increased by 65% (from $1.3m to $2.2m) and gross profit increased by
62% (from $0.3m to $0.5m) compared to 2007H1.Although its results do not have a significant impact on the Group's overall results, the
biochemical market is still a market where good
gross margins can be achieved. In February 2008, there were several fatalities resulting from
contaminated heparin-based products, which
were being exported from China to the United States and Germany. Although HaiKe's products
were not involved in these fatalities, . the
Chinese government imposed a temporary restriction on the export of heparin-based products for
the entire biochemical industry, which
resulted in our lower than expected biochemical sales for 2008Q1. The temporary restriction
applied to all exporters, even though our
products did not breach any safety standards. The Company subsequently passed all quality
assurance testing and the restriction was lifted in April 2008. Despite this temporary
restriction, demand for
our biochemical products was strong for the rest of the period during 2008H1.
Outlook
Market conditions for the petrochemical sector remain difficult but demand for our
products continues to increase. As a result of
consistently high oil prices, and in the absence of further price adjustment notices for the
refined oil products in China, the margins of
the petrochemical side of the business reduced to a level at which those operations were not
profitable. We therefore determined to carry
out the essential maintenance of the refinery facilities in July and August 2008, which
involved a complete shut-down of the refining
operations to help reduce the Company's exposure to further risk.
Given that raw material costs are currently decreasing and the award of a major new
contract with Sinopec Shandong Petroleum Branch, a
subsidiary of one of the largest Chinese state-owned oil companies, on 5 September 2008, we
reopened the refinery facilities on 4 September
2008.
The speciality chemical business is showing strong improvements on the comparable period
last year and, again, we are continuing to
experience increasing demand for our products.
The focus for the second half of 2008 is to continue the expansion of the dimethyl
carbonate and caustic soda production facilities
whereby the new facilities will be completed in the third quarter of 2008. We continue to
explore a number of other capacity expansion
projects, in particular within the speciality chemical sector, together with other potential
applications and revenue streams both in our
existing and related new markets.
We are confident of achieving further growth in revenues for the remainder of 2008 despite
the high oil prices. We anticipate that this
growth will be driven by our existing areas of business, including the speciality chemical
business, and will be supported by increased
domestic demand for all our products. In addition, we will continue to explore opportunities
in the oil refinery business to ensure that we
are operating with positive margins.
CONSOLIDATED INCOME STATEMENT
Three months ended Three months ended Six months
ended 30 Six months ended 30 Jun 2007
30 Jun 2008 30 Jun 2007 Jun
2008
US$'000 US$'000
US$'000 US$'000
(Restated)
Unaudited Unaudited
Unaudited Unaudited
Revenue 175,820 97,558
317,524 171,428
Cost of sales (171,550) (89,168)
(306,230) (154,133)
Gross profit 4,270 8,390
11,294 17,295
Other operating income 680 650
924 996
Selling and distribution (903) (928)
(2,195) (1,520)
expenses
AIM admission expenses - -
- (1,772)
Other administrative expenses (2,629) (1,865)
(4,527) (3,587)
Total administrative expenses (2,629) (1,865)
(4,527) (5,359)
Profit from operations 1,418 6,247
5,496 11,412
Finance income 213 151
406 191
Finance costs (3,231) (2,012)
(5,983) (3,231)
Share of results of associate (24) 45
(135) 45
(Loss)/profit before income (1,624) 4,431
(216) 8,417
tax
Income tax benefit (expense) (326) 41
(736) (1)
(Loss)/profit for the period (1,950) 4,472
(952) 8,416
Attributable to:
Equity holders of the parent (2,857) 3,274
(2,975) 5,862
Minority interest 907 1,198
2,023 2,554
(1,950) 4,472
(952) 8,416
(Loss)/earnings per share
Basic $(0.075) $0.088
$(0.078) $0.170
Diluted $(0.075) $0.079
$(0.078) $0.160
CONSOLIDATED BALANCE SHEET
30 Jun 2008 30 Jun 2007 31 Dec 2007
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 131,090 71,152 105,162
Intangible assets 4,455 2,651 3,099
Investments in equity-accounted
associates 187 171 354
Available-for-sale investments 544 644 496
Deferred tax assets 734 1,100 661
137,010 75,718 109,772
Current assets
Inventories 67,941 19,850 44,858
Trade and other receivables 33,183 22,623 30,169
Amounts due from related parties - 2,384 -
Financial assets at fair value
through profit or loss - 1,576 274
Cash and cash equivalents 42,943 36,840 24,319
144,067 83,273 99,620
Total assets 281,077 158,991 209,392
LIABILITIES
Current liabilities
Short-term loan 144,529 71,266 86,093
Trade and other payables 63,808 37,164 56,763
Deferred income 146 131 185
Income tax payable 2,124 2,351 1,630
Amounts due to related parties 7,532 194 7,223
218,139 111,106 151,894
Non-current liabilities
Long-term loan 2,916 2,705 -
Deferred income 1,264 1,006 1,412
4,180 3,711 1,412
Total liabilities 222,319 114,817 153,306
CONSOLIDATED BALANCE SHEET continued
30 Jun 2008 30 Jun 2007 31 Dec 2007
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
CAPITAL AND RESERVES
Share capital 77 77 77
Share premium 18,338 18,338 18,338
Consolidation reserve 4,259 4,259 4,259
Share option reserve 251 251 251
Statutory reserves 3,996 2,351 3,996
Foreign currency translation
reserve 6,116 1,147 2,911
Retained earnings 13,221 11,015 16,196
Equity attributable to equity holders of the
parent 46,258 37,438 46,028
Minority interest 12,500 6,736 10,058
Total equity 58,758 44,174 56,086
Total liabilities and equity 281,077 158,991 209,392
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the parent
Share capital
Share premium
Other reserves
Statutory reserve
Retained earnings
Foreign currency translation reserve
Total
Minority interests
Total equity
(Restated)
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Unaudited
Balance as at 1 January 2007 (Audited)
50
-
4,259
2,351
5,105
433
12,198
4,358
16,556
Foreign currency translation
-
-
-
-
-
714
714
150
864
Net income recognised directly in equity
-
-
-
-
-
714
714
150
864
Net profit for the financial period as restated
-
-
-
-
5,862
-
5,862
2,554
8,416
Total recognised income and expense for the financial period
-
-
-
-
5,862
714
6,576
2,704
9,280
Dividend paid this year
-
-
-
-
-
-
-
(278)
(278)
Issue of share capital
27
20,154
-
-
-
-
20,181
-
20,181
Share issue costs
-
(1,816)
-
-
-
-
(1,816)
-
(1,816)
Expenses of flotation
-
-
251
-
-
-
251
-
251
Transfer from minority interest
-
-
-
-
48
-
48
(48)
-
Balance as at 30 June 2007 (unaudited )
77
18,338
4,510
2,351
11,015
1,147
37,438
6,736
44,174
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - continued
Attributable to equity holders of the parent
Share capital
Share premium
Other reserves
Statutory reserve
Retained earnings
Foreign currency translation reserve
Total
Minority interests
Total equity
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Unaudited
Balance as at 1 January 2008
77
18,338
4,510
3,996
16,196
2,911
46,028
10,058
56,086
Foreign currency translation
-
-
-
-
-
3,205
3,205
419
3,624
Net income recognised directly in equity
-
-
-
-
-
3,205
3,205
419
3,624
Net loss for the financial period
-
-
-
-
(2,975)
-
(2,975)
2,023
(952)
Total recognised income and expense for the financial period
-
-
-
-
(2,975)
-
(2,975)
2,023
(952)
Balance as at 30 June 2008 (unaudited)
77
18,338
4,510
3,996
13,221
6,116
46,258
12,500
58,758
Other reserves comprise the consolidation reserves and the options issued. CONSOLIDATED
CASH FLOW STATEMENTS
Note Three months ended Three months ended Six
months ended 30 Six months ended 30
30 Jun 2008 30 Jun 2007
Jun 2008 Jun 2007
US$'000 US$'000
US$'000 US$'000
(Restated)
Unaudited Unaudited
Unaudited Unaudited
Cash flow from operating (15,916) 14,929
(2,495) 20,565
activities a
Cash flow from investing
activities
Purchase of property, plant (14,469) (12,730)
(28,579) (19,071)
and equipment
Purchase of intangible assets (14) (851)
(1,153) (851)
Purchase of investment - (268)
- (1,558)
securities
Sales of financial assets held 285 -
285 -
for trading
Purchase of shares in - (15)
- (15)
subsidiary from minorities
Proceeds from disposal of 27 (9)
27 49
property, plant and equipment
Dividend income 71 -
71 -
Cash flow used in investing (14,100) (13,873)
(29,349) (21,446)
activities
Cash flow from financing
activities
Issuance of ordinary shares - -
- 20,181
for public offering
Share issue expenses - -
- (1,816)
Proceeds of short-term loan 73,247 29,288
116,858 56,318
Repayment in short-term loan (32,363) (20,952)
(62,376) (36,381)
Interest paid (3,231) (2,012)
(5,983) (3,231)
Dividends paid to minorities - (278)
- (278)
Cash flow from financing 37,653 6,046
48,499 34,793
activities
Net increase in cash and cash 7,637 7,102 16,655 33,912
equivalents
Cash at beginning of period 34,402 29,393 24,319 2,528
Foreign currency translation 904 345 1,969 400
differences
Cash at end of period 42,943 36,840 42,943 36,840
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS
(a) Cash flow from operating activities
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months
ended 30 Jun months ended
2008 30
Jun 2007
US$'000 US$'000
US$'000 US$'000
(Restated)
Unaudited Unaudited
Unaudited Unaudited
(Loss)/profit before income (1,624) 4,431
(216) 8,417
tax
Adjustments for:
Amortisation of intangible 31 73
84 142
assets
Allowance for doubtful trade (86) (18)
(4) 21
receivables
Allowance for non-trade 81 84
121 (216)
receivables
Depreciation of property, 2,936 1,723
5,594 3,525
plant and equipment
Loss/(gain) on disposal of 6 (27)
6 4
property, plant and equipment
Amortisation of deferred (35) (33)
(71) (65)
capital grants
Share-based payment - -
- 439
Gain from debt restructuring - (378)
- (378)
Share of results of associates 24 (45)
135 (45)
Dividend income from (71) -
(71)
investment securities
Finance Income (213) (151)
(406) (191)
Finance expense 3,231 2,012
5,983 3,231
Operating cash flows before 4,280 7,671
11,155 14,884
working capital changes
Working capital changes:
(Increase)/decrease in:
Inventories (7,534) 639 (19,706) (2,367)
Trade and other receivables (4,063) 5,515 (1,390) (165)
Amounts due from related - 4,645 - (1,461)
parties
Increase/(decrease) in:
Trade and other payables 2,368 (2,897) 7,693 10,278
Amounts due to related parties (10,684) - (157) -
Cash (used for)/generated from (15,633) 15,573 (2,405) 21,169
operations
Interest received 213 151 406 191
Income tax paid (496) (795) (496) (795)
Net cash (used for)/generated (15,916) 14,929 (2,495) 20,565
from operating activities
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION
* BASIS OF PREPARATION AND ACCOUNTING POLICIES
This unaudited consolidated interim financial information has been prepared using the
recognition and measurement principles of
International Accounting Standards, International Financial Reporting Standards and
Interpretations adopted for use in the European Union
(collectively "IFRSs"). The principal accounting policies used in preparing the interim
results are unchanged from those disclosed in the
Company's annual report for the year ended 31 December 2007. While the financial information
included in this interim financial information
has been prepared in accordance with the recognition and measurement criteria of IFRSs, this
interim financial information does not itself
contain sufficient information to comply fully with IFRSs.
The financial information for the three and six month periods ended 30 June 2008 and 30
June 2007 is unreviewed and unaudited and does
not constitute the Company's statutory financial statements for those periods. The comparative
financial information for the full year ended
31 December 2007 has, however, been derived from the audited financial statements for that
period. The auditors' report on those accounts
was unqualified and did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying
their report.
The results for the first quarter 2007 have been restated to show certain listing fees as
an expense. Previously these fees had been
capitalised. The adjustment reduced reported profits by $1,880,000. This adjustment was made
in 2007Q2 and so no adjustment has been
necessary to subsequent income statements or balance sheets.
2. TAXATION
Major components of income tax expense
The major components of income tax expense are as follows:
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months
ended 30 Jun months ended 30 Jun
2008 2007
US$'000 US$'000
US$'000 US$'000
Unaudited Unaudited
Unaudited Unaudited
Current income tax 325 -
765 -
Deferred income tax:
Origination and reversal of
temporary differences 1 (41)
(29) (1)
Income tax recognised in
income statement 326 (41)
736 (1)
Relationship between tax expense and accounting profit
A reconciliation between tax expense and the accounting profit multiplied by the
applicable corporate tax rate is as follows:
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months
ended 30 Jun months ended 30 Jun
2008 2007
US$'000 US$'000
US$'000 US$'000
(Restated)
Unaudited Unaudited
Unaudited Unaudited
Accounting (loss)/profit
before income tax (1,624) 4,431
(216) 8,417
Tax at respective companies'
domestic income tax rate (371) 1,186
(54) 2,143
Effect of partial tax (566) (1,240)
(1,006) (2,638)
exemption
Tax effect of expenses not
deductible for taxation 540 (6)
583 496
purposes
Unrecognised tax loss 760 -
1,266 -
Utilisation of previously
unrecognised tax loss (37) 19
(53) -
Income tax expense recognised
in income statement 326 (41)
736 1
Deferred tax assets
Deferred income tax assets relates to the following:
30 Jun 2008 30 Jun 2007 31 Dec 2007
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Provision for doubtful debts 704 1,065 632
Allowance for long-term 30 22 29
investment
Pre-trading expenses - 13 -
734 1,100 661
Unrecognised tax losses
As at 30 June 2008, the Group has tax losses of approximately $5,761,000 (30 June 2007:
$1,593,000; 31 December 2007: $1,425,000) that
are available to offset against future taxable profits of the companies in which the losses
arose and for which no deferred tax asset is
recognised due to uncertainty of its recoverability. The use of these tax losses is subject to
the agreement of the tax authorities and
compliance with certain provisions of the tax legislation of China.
3. SEGMENTAL ANALYSIS
(a) Business segments
The following table presents information about the Company's revenues and results by
business segment for the three and six month
periods ended 30 June 2008 and 2007, respectively.
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months
ended 30 Jun months ended 30 Jun
2008 2007
US$'000 US$'000
US$'000 US$'000
(Restated)
Unaudited Unaudited
Unaudited Unaudited
Sales to external customers
Petrochemical 150,055 78,796
266,840 134,873
Speciality chemical 25,765 18,762
50,684 36,555
175,820 97,558
317,524 171,428
(Loss)/profit for the period
Petrochemical (4,128) 2,337
(6,235) 6,229
Speciality chemical 2,952 2,231
6,618 4,385
Unallocated expenses (448) (137)
(599) (2,197)
(Loss)/profit from operation before
(1,624) 4,431
(216) 8,417
income tax
Income tax benefit (expense) (326) 41
(736) (1)
(Loss)/profit for the period (1,950) 4,472
(952) 8,416
30 Jun 2008 30 Jun 2007 31 Dec 2007
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Segment assets
Petrochemical 222,772 110,122 163,205
Investment in associate 187 171 179
222,959 110,293 163,384
Speciality chemical 107,798 62,758 81,368
Unallocated assets 706 8,951 1,206
Elimination (50,386) (23,011) (36,566)
281,077 158,991 209,392
Segment liabilities
Petrochemical 182,271 83,905 133,981
Speciality chemical 86,606 50,501 52,322
Unallocated liabilities 3,828 3,422 3,569
Elimination (50,386) (23,011) (36,566)
222,319 114,817 153,306
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months
ended 30 Jun months ended 30 Jun
2008 2007
US$'000 US$'000
US$'000 US$'000
Unaudited Unaudited
Unaudited Unaudited
Other segment information
Capital expenditure on
property, plant and equipment
and intangible assets
Petrochemical 3,555 17,209
3,687 18,070
Speciality chemical 20,247 260
21,807 1,852
23,802 17,469
25,494 19,922
Depreciation and amortisation
Petrochemical 1,571 584
3,223 1,217
Speciality chemical 1,396 1,212
2,455 2,450
2,967 1,796
5,678 3,667
(b) Geographical segments
The following table provides an analysis of the Company's sales by geographical market.
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months ended
30 Jun months ended 30 Jun
2008 2007
US$'000 US$'000
US$'000 US$'000
Unaudited Unaudited
Unaudited Unaudited
Sales to external customers
People's Republic of China 170,724 95,040
310,653 166,077
Exports 5,096 2,518
6,871 5,351
175,820 97,558
317,524 171,428
4. (LOSS) EARNING PER SHARE
Earnings for the purpose of basic and diluted earnings per share are the net (loss)/profit
for the three and six months attributable to
equity holders of the parent of $(2,857,000) and $(2,975,000) (2007: $3,274,000 and
$5,862,000), respectively.
The weighted average number of ordinary shares used in the calculation of earnings per
share has been derived as follows:
Three months ended Three months ended
Six Six
30 Jun 2008 30 Jun 2007 months
ended 30 Jun months ended 30 Jun
2008 2007
Unaudited Unaudited
Unaudited Unaudited
Weighted average number of 38,353,571 38,353,571
38,353,571 35,228,946
ordinary shares-basic
Dilutive effect of share 160,622 360,213
160,622 360,213
options
Weighted average number of 38,514,193 38,713,784
38,514,193 35,589,159
ordinary shares-diluted
A total of 767,072 share options have not been included in the calculation of diluted
earnings per share because the Group has a net
loss this period and they are anti-dilutive. The existence of these share options could dilute
the earnings per share in the future.
5. CONTINGENCIES
As at 30 June 2008, as a warrantor, the Group has guaranteed the bank loans of third
parties to an aggregate amount of $49,952,000 (30
June 2007: $39,561,000; 31 December 2007: $33,580,000). As the financial statements of the
warrantees indicate that the debtors are able to
pay their debts as they mature, the Company's risk of bearing significant warranty liabilities
is considered low.
6. SUBSEQUENT EVENTS
On 23 July 2008, the Company temporarily shut down its oil refinery facilities for a major
overhaul in response to rising oil prices and
the fact that, in the absence of further price adjustment notices for the refined oil products
in China, the margins of the petrochemical
side of the business had reduced to a level at which operations were not profitable.
On 4 September 2008, the Company has resumed the oil refinery operations as a result of
the drop in the crude oil price and entry into a
new contract with Sinopec Shandong Petroleum Branch, a subsidiary of one of the largest
Chinese state-owned oil companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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