25th Sep 2015 07:37
LONDON (Alliance News) - China-based HaiKe Chemical Group Ltd on Friday said the low crude oil price in the first half hit sales of the majority of its specialty chemicals products, pushing both its pretax profit and revenue sharply lower.
HaiKe said its pretax profit for the six months to the end of June was CNY666,000, less than half the CNY1.4 million it made a year earlier, as revenue fell to CNY385.4 million from CNY460.0 million.
Despite improvements seen in product mix and cost controls for the company in the half, the sharp fall in the crude oil price compared to the first half of 2014 depressed selling prices for downstream derivative products and had an effect on the majority of HaiKe's specialty chemicals products.
The problems also took a bite of of HaiKe's margins in the half, with the tougher conditions creating lower selling prices and more competition within a very price-sensitive market, particularly for mid and lower-end specialty chemicals products.
The first half also saw the group shut down its principal production facility for planned maintenance work and to carry out upgrades to counteract the increased competition.
HaiKe reiterated that due to the pricing pressures on its key products, particularly dimethyl carbonate and isopropyl alcohol, it is at risk of posting a loss for the full year and is considering its options on how to mitigate the challenges it faces.
"The group has delivered a modest profit despite facing a number of challenges in the period, many of which are outside our control. The weak crude oil price reduced our selling prices which, in turn, eroded our margins and we faced stiff competition for our mid to lower-end products. During the period, we shut down our major production facility for essential maintenance and upgrade works in order to ensure we retain our competitive advantage against a difficult backdrop," said Executive Chairman Xiaohong Yang.
"Looking forward, we are focused on increasing our sales and marketing campaigns and tightening costs further, as well as improving our product mix and formulating a sustainable earnings model in the long run. In light of difficult market conditions, the board is evaluating options to optimise performance and will announce more detailed plans on this in due course," Yang added.
Shares in HaiKe were untraded early Friday, having last traded at 6.58 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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