24th May 2007 07:00
HaiKe Chemical Group Ltd.24 May 2007 HaiKe Chemical Group Ltd. UNAUDITED RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2007 HaiKe Chemical Group Ltd ("HaiKe" or the "Company"), the AIM quoted (AIM:HAIK) petrochemical and speciality chemical business based in China, is pleasedto announce its unaudited results for the first quarter ended 31 March 2007 ("2007Q1"). The results for the first quarter ended 31 March 2006 ("2006Q1"), which areset out below, are those of the combined results of the Company and itssubsidiaries. First Quarter 2007 Highlights - Total revenues increased by 28% to US$ (or "$") 73.9m (2006Q1: $57.9m) - Petrochemical revenues increased by 15% to $56.1m (2006Q1: $48.6m) - Speciality chemical revenues increased by 87% to $17.0m (2006Q1: $9.1m) - Biochemical revenues increased by 300% to $0.8m (2006Q1: $0.2m) - Gross margin improved to 12.1% (2006Q1: 7.2%) to $8.9m (2006Q1: $4.1m) - Net profit after tax increased by 625% to $5.8m (2006Q1: $0.8m) - Net profit (after minority interests) increased by 650% to $4.5m (2006Q1: $0.6m) - Basic and diluted earnings per share increased 600% from US 2 cents to US 14 cents - Successful admission to AIM in February 2007 ("Admission") raising approximately $17m net of costs and expenses - Expansion of heavy oil catalytic cracking and isopropyl alcohol production facilities commenced Mr. Yang Xiaohong, Executive Chairman, said: "During the first quarter of 2007, we continued to see strong growth to bothrevenues and profits. In order to continue this growth, and as outlined at thetime of our IPO, the construction of the heavy oil catalytic crackingfacilities, together with the expansion of the isopropyl alcohol plant, hascommenced; both are on schedule. We are confident that the increased capacitybrought by these projects will enhance further our growth in the near future.In addition, we will continue to focus on the high-margin areas of specialitychemical and biochemical businesses, where we see considerable opportunity todeliver further growth and value." For further information please contact: HaiKe Johnson Lau, Chief Financial Officer +86 546 8289173HansonWesthouse Tim Metcalfe / Anita Ghanekar +44 (0) 20 7601 6100Cardew Group Rupert Pittman / Shan Shan Willenbrock +44 (0) 20 7930 0777 First Quarter 2007 Results Total revenue increased by 28% from $57.9m to $73.9m in 2007Q1, when comparedwith the same period for the previous year. On a segmental basis, the sales ofpetrochemical products in 2007Q1 increased by 15% from $48.6m to $56.1m, as aresult of improved operating efficiencies. The sales of speciality chemicals in2007Q1 grew by 87% from $9.1m to $17.0m due to increased market demand. Thegrowth in biochemical revenue is significant in percentage terms, if not yet inoverall terms, having increased by 300% from $0.2m to $0.8m in 2007 comparedwith the same period for the previous year. Cost of sales increased by 21% from $53.7m in 2006Q1 to $65.0m in 2007Q1, due toincreased sales volume. The incremental selling prices of the petrochemicalproducts were higher and this contributed to an improved gross margin in thefirst quarter. In addition, the increased weighting of sales towards thehigh-margin speciality chemical and biochemical products contributed to theimproved gross margin of 12.1%. Sales and distribution expenses fell by 17% from$0.7m in 2006Q1 to $0.6m in 2007Q1 as a result of the tightened control overfreight charges and promotion costs for speciality chemical products.Administrative expenses increased by 33% from $1.2m in 2006Q1 to $1.6m in2007Q1. The increase included a non-recurring share-based (non-cash) payment fora director which amounted to $0.2m. Furthermore, additional administrative costswere incurred as a result of the Company becoming publicly listed on AIM inFebruary 2007. Operating profit increased by 169% ($4.4m) from $2.6m in 2006Q1 to $7.0m in2007Q1, which is in line with the growth in the profit before income tax of$4.0m or 222%. The gross margin improved from 7.2% in 2006Q1 to 12.1% in 2007Q1. Tax exemptions were granted for three subsidiaries, Hi-Tech Chemical, Hi-TechSpring and Hi-Tech Shengli, following the restructuring of the Company into aforeign owned entity in late 2006. This resulted in income tax falling by 91%from $1.1m in 2006Q1 to $0.1m in 2007Q1. Net profit (after minority interests) attributable to equity holders increasedby 650% ($3.9m) from $0.6m in 2006Q1 to $4.5m in 2007Q1. Basic and diluted earnings per share increased 600% from US 2 cents in 2006Q1 toUS 14 cents in 2007Q1. Business Highlights In the first quarter, we completed Admission to AIM and successfully raisedapproximately $17m (net of costs and expenses) for our planned expansion inpetrochemical and speciality chemical businesses. Our successful IPO has notonly enhanced the future prospects of the Company but has also provided theopportunity to diversify the product range, particularly within the specialitychemical business. During the first quarter, we have also acquired additional inventories and haveincreased prepayments to secure the sources of crude oil and other materials,which have resulted in a temporary increase in short-term loans. We have commenced construction phases of the previously detailed expansionprojects. It is expected that the construction and testing phases will becompleted by the end of 2007 and these facilities are expected to generatefurther revenues and profits to the Company in 2008. Outlook for Second Quarter 2007 Trading in April is in line with our expectations, and on a like for like basis,the performance of both the petrochemical and speciality chemical businesses areshowing improvements on the comparable period last year. We are confident of achieving further growth in both revenues and profits in theremainder of 2007. We anticipate that this growth will be driven principally byour existing areas of business supported by increased domestic demand for ourproducts. CONSOLIDATED INCOME STATEMENT Three months Three months ended 31 Mar ended 31 Mar 2007 2006 --------- --------- US$'000 US$'000 Unaudited Unaudited Revenue 73,870 57,880Cost of sales (64,965) (53,738) --------- ---------Gross profit 8,905 4,142Other operating income 346 578Selling and distribution expenses (592) (703)Administrative expenses (1,582) (1,223)Other operating expenses (32) (176) --------- ---------Profit from operations 7,045 2,618Finance income 40 39Finance costs (1,219) (834) --------- ---------Profit before income tax 5,866 1,823Income tax expense (42) (1,063) --------- ---------Profit for the period 5,824 760 --------- --------- Attributable to:Equity holders of the parent 4,468 574Minority interest 1,356 186 --------- --------- 5,824 760 --------- --------- Earnings per shareBasic $0.14 $0.02 --------- ---------Diluted $0.14 $0.02 --------- --------- CONSOLIDATED BALANCE SHEET 31 Mar 2007 31 Dec 2006 ---------- ---------- US$'000 US$'000 Unaudited AuditedASSETSNon-current assetsProperty, plant and equipment 55,047 54,220Intangible assets 1,835 1,886Investments in associates 190 188Other investments 634 628Deferred tax assets 1,043 1,074 ---------- ---------- 58,749 57,996 ---------- ----------Current assetsInventories 20,202 17,024Trade and other receivables 30,428 25,344Amounts due from related parties 7,020 839Short-term investment 1,293 -Cash and cash equivalents 29,393 2,528 ---------- ---------- 88,336 45,735 ---------- ----------Total assets 147,085 103,731 ---------- ---------- LIABILITIESCurrent liabilitiesShort-term loan 61,954 49,836Trade and other payables 38,727 30,260Deferred income 129 128Income tax payable 3,108 3,078Amounts due to related parties 191 189 ---------- ---------- 104,109 83,491 ---------- ----------Non-current liabilitiesLong-term loan 2,663 2,638Deferred income 1,024 1,046 ---------- ---------- 3,687 3,684 ---------- ----------Total liabilities 107,796 87,175 ---------- ---------- CAPITAL AND RESERVESShare capital 77 50Share premium 16,581 -Other reserves 4,387 4,259Statutory reserves 2,351 2,351Foreign currency translation reserve 547 433Retained earnings 9,573 5,105 ---------- ----------Equity attributable to equity holders of the parent 33,516 12,198Minority interest 5,773 4,358 ---------- ----------Total equity 39,289 16,556 ---------- ----------Total liabilities and equity 147,085 103,731 ---------- ---------- CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the parent Foreign currency Share Share Other Statutory Retained translation Minority Total capital premium reserves reserve earnings reserve interests equity ------ ------- ------- ------ ------- ------- ------- ------ US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000Balance as at 1January 2006(audited) - - 4,259 1,319 (816) 113 2,915 7,790Share issued in thefinancial year 50 - - - - - - 50Net profit for the financial year - - - - 8,109 - 2,202 10,311Transfer to statutoryreserves - - - 1,032 (1,032) - - -Transfer from minorityinterest - - - - 197 - (197) -Dividend paid toshareholders - - - - (1,353) - (703) (2,056)Foreign currencytranslation - - - - - 320 141 461 ------ ------- ------- ------ ------- ------- ------- ------Balance as at 31December 2006(audited) 50 - 4,259 2,351 5,105 433 4,358 16,556Share issued in thefinancial period 27 20,153 - - - - - 20,180Share issue expenses - (3,444) - - - - - (3,444)Net profit for thefinancial period - - - - 4,468 - 1,356 5,824Share based paymentexpense - (128) 128 - - - - -Foreign currencytranslation - - - - - 114 59 173 ------ ------- ------- ------ ------- ------- ------- ------Balance as at 31 March 2007 (unaudited) 77 16,581 4,387 2,351 9,573 547 5,773 39,289 ------ ------- ------- ------ ------- ------- ------- ------ Other reserves comprise the consolidation reserves and the options issued. CONSOLIDATED CASH FLOW STATEMENTS Note Three months Three months ended 31 Mar ended 31 Mar 2007 2006 --------- ----------- US$'000 US$'000 Unaudited Unaudited Cash flow from operating activities a 7,257 2,762Cash flow from investing activitiesPurchase of property, plant andequipment (6,341) (1,327)Purchase of short-term investment (1,290) -Proceeds from disposal of short-terminvestment - 42Proceeds from disposal of property,plant and equipment 58 159 --------- -----------Cash flow used in investing activities (7,573) (1,126) --------- ----------- Cash flow from financing activitiesIssuance of ordinary shares 16,556 -Increase in long-term loan - 2,562Increase in/(repayment of) short-termloan 11,601 (2,758)Interest paid (1,219) (834)Dividends paid to shareholders - (1,095)Dividends paid to minorities - (353) --------- -----------Cash flow from financing activities 26,938 (2,478) --------- ----------- Net increase/(decrease) in cash andcash equivalents 26,622 (842)Cash at beginning of period 2,528 4,203Foreign currency translationdifferences 243 26 --------- -----------Cash at end of period 29,393 3,387 --------- ----------- NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS (a) Cash from operating activities Three months Three months ended 31 Mar ended 31 Mar 2007 2006 ----------- ---------- US$'000 US$'000 Unaudited Unaudited Profit before income tax 5,866 1,823Adjustments for:Amortization of intangible assets 69 62Allowance for doubtful trade receivables 39 -Allowance for non-trade receivables (300) 35Share-based payment 180 -Depreciation of property, plant and equipment 1,802 1,377Loss/(gain) on disposal of property, plantand equipment 31 (4)Amortization of deferred capital grants 32 -(Gain)/loss on disposal of short-terminvestment - (17)Interest Income (40) (39)Interest expense 1,219 834 ----------- ----------Operating cash flows before workingcapital changes 8,898 4,071 Working capital changes:(Increase)/decrease in:Inventories (3,006) (5,998)Trade and other receivables (5,680) (1,380)Amounts due from related parties (6,106) (1,765)Increase/(decrease) in:Trade and other payables 13,111 7,690Amounts due to related parties - 246 ----------- ---------- 7,217 2,864Cash generated from/(used in) operationsInterest received 40 39Income tax paid - (141) ----------- ----------Net cash generated from operatingactivities 7,257 2,762 ----------- ---------- NOTES TO THE FINANCIAL STATEMENTS 1. Basis of Preparation and Accounting Policies The financial information comprises the unaudited consolidated results for thethree month periods ended 31 March 2007 and 2006 and the consolidated balancesheets at 31 March 2007 (unaudited) and 31 December 2006 (audited). The Company's published financial statements for the year ended 31 December 2006 have been reported on by the Company's auditors. The auditors' report on thosefinancial statements was unqualified. The financial information has been prepared in accordance with the basis ofpreparation and accounting policies set out in the full financial statements forthe year ended 31 December 2006. Full details of the basis of preparation andaccounting policies are available in our annual report issued on 27 April 2007. 2. Taxation The tax charge for the period is nil due to the tax exemptions and availabilityof tax losses. The income tax expense shown in the income statement is arisingfrom the recognition of deferred tax assets. 3. Segmental Analysis a) Business segments The following table presents information about the Company's revenues andresults by business segment for the three month periods ended 31 March 2007 and2006, respectively. Three months Three months ended 31 Mar ended 31 Mar 2007 2006 ---------- --------- US$'000 US$'000 Unaudited UnauditedSales to external customersPetrochemical 56,077 48,628Chemical products 17,793 9,252 ---------- --------- 73,870 57,880 ---------- ---------Profit for the periodPetrochemical 3,892 1,537Chemical products 2,154 286Unallocated expenses (180) - ---------- ---------Profit from operation before income tax 5,866 1,823Income tax expense (42) (1,063) ---------- ---------Profit for the period 5,824 760 ---------- --------- 31 Mar 2007 31 Mar 2006 -------- --------- US$'000 US$'000 Unaudited UnauditedSegment assetsPetrochemical 93,390 79,183Investment in associate 190 135 -------- --------- 93,580 79,318Chemical products 58,781 41,731Unallocated assets 6,553 -Elimination (11,829) (17,318) -------- --------- 147,085 103,731 -------- ---------Segment liabilitiesPetrochemical 70,497 75,095Chemical products 49,128 29,398Elimination (11,829) (17,318) -------- --------- 107,796 87,175 -------- ---------Other segment informationCapital expenditure on property, plant and equipment and intangible assetsPetrochemical 861 1,286Chemical products 1,592 1,557 -------- --------- 2,453 2,843 -------- ---------Depreciation and amortizationPetrochemical 633 485Chemical products 1,238 954 -------- --------- 1,871 1,439 -------- --------- b) Geographical segments The following table provides an analysis of the Company's sales by geographicalmarket. Three months Three months ended 31 Mar ended 31 Mar 2007 2006 --------- ---------- US$'000 US$'000 Unaudited UnauditedSales to external customersPeople's Republic of China 71,037 56,218Exports 2,833 1,662 --------- ---------- 73,870 57,880 --------- ---------- 4. Earnings Per Share Earnings for the purpose of basic and diluted earnings per share are the netprofit for the period attributable to equity holders of the parent ofUS$4,468,000 (2006: US$574,000). The weighted average number of ordinary shares used in the calculation ofearnings per share has been derived as follows: Three months Three months ended 31 Mar ended 31 Mar 2007 2006 ---------- ------------ Unaudited Unaudited Weighted average number of ordinaryshares-basic 31,751,806 25,000,000Dilutive effect of share options 285,351 - ---------- ------------Weighted average number of ordinaryshares-diluted 32,037,157 25,000,000 ---------- ------------ 5. Share Capital The Company was incorporated on 20 June 2006 with an authorized share capital of50,000 US$1 ordinary shares. One US$1 ordinary share was issued at par onincorporation, and a further 49,999 US$1 ordinary shares were issued on the sameday as the acquisition of the Company's interest in the Group. Details of changes in share capital during the three month period ended 31 March2007 are as follows: - On 14 February 2007, the authorized share capital was increased to $51,000 by the creation of an additional 1,000 US$1 ordinary shares, and the 51,000 authorized ordinary shares were subdivided into 25,500,000 ordinary shares of US$0.002 each. - On 14 February 2007, the authorized share capital of the Company was further increased from US$51,000 to US$86,100 by the creation of an additional 17,550,000 ordinary shares of US$0.002 each. - On 14 February 2007, 12,738,854 ordinary shares of US$0.002 each were issued on the Company's Admission to AIM. - On 14 February 2007, the Company issued 114,717 ordinary shares of US$0.002 each to JSL Consulting Co., a company controlled by Mr. Johnson Lau, as part of Mr. Lau's renumeration. Pursuant to the option agreements dated 5 February 2007, Hanson WesthouseLimited and Shanghai Riemann Investment Advisory Ltd., have each been grantedoptions to subscribe for up to 383,536 ordinary shares of US$0.002 each within24 months of the Admission to AIM, exercisable at the admission price ofUS$1.57. The fair value attributed to these options in accordance with IFRS 2is US$128,000 ($0.17per option), which has been included within issue costs uponthe Admission. 6. Contingencies Up to 31 March 2007, as a warrantor, the Group has guaranteed the bank loans ofthird parties to an aggregate amount of US$23,959,000 (31 December 2006:US$25,010,000). The latest available financial statements of the warranteesindicate that the debtors are able to pay their debts as they mature, and thedirectors are of the view that no material losses will arise in respect of theguarantees at the date of these financial statements. ENDS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Haike Chemical Group