Final Results

HaiKe Chemical Group Limited

Audited results for the year ended 31 December 2014

HaiKe Chemical Group Ltd ("HaiKe" or the "Company", together with its subsidiaries as the "Group" or "HaiKe Group"), the AIM quoted (AIM: HAIK) specialty chemical business based in Shandong Province, China, today announces its audited results for the year ended 31 December 2014. The full Annual Report and Accounts will be available on the Company's website, www.haikechemical.com, and posted to shareholders shortly.

Financial Highlights

· Turnover for the Continuing Operations of CNY973.3 million (2013: CNY981.5 million)

· Profit for the year from the Continuing Operations of CNY7.6 million (2013: loss of CNY11.0 million)

· Loss for the year from the Discontinuing Operations was CNY326.9 million (2013: loss of CNY784.2 million)

· Total loss attributable to the Group was CNY323.0 million (2013: loss of CNY709.5 million)

· Loss per share* was CNY8.5 (2013: loss of CNY18.5)

· Cash and cash equivalents balance as at 31 December 2014 was CNY39.4 million (2013: 125.2 million)

· Total loan balance at 31 December 2014 was CNY702.9 million (2013: CNY393.3 million). As previously indicated, the increase in loan balance was mainly due to a short-term increase in working capital in connection with the trading activities of the Hong Kong subsidiary

· The Board does not recommend a final dividend

* including effect of Discontinuing Operations

Operational Highlights

· A major restructuring was successfully completed in H1 2014 and resulted in the disposal of the lossmaking Discontinuing Operations. As a result, the Company is no longer negatively impacted by the performance of the refinery business

· The Continuing Operations, including producing and trading of specialty chemical products, remained profitable

· Short-term debts increased for working capital requirements; expected to substantially reduce in the near-term

Outlook

· We are formulating a sustainable long-term strategy for specialty chemicals

· Profitability of the current product lines of specialty chemicals is expected to be stable, however growth potential is limited without the addition of further facilities

· New products and businesses are under evaluation

· Continued focus on cost control and product mix optimisation

· Profitable start to 2015

Mr Xiaohong Yang, Executive Chairman, said:

"2014 was a significant transitional year for the Group. We completed a major restructuring and have strategically moved towards the higher margin, more profitable specialty chemical business, in line with our strategy of developing a sustainable business and improving profitability.  

Going forward, the Company is evaluating new business prospects and looking for further opportunities in the specialty chemicals business. We intend to achieve sustainable growth and formulate an appropriate business strategy and earnings model in the medium to long-term."  

For further information please contact: 

CNY/GBP exchange rate approximately 9.36 as at 30 April 2015

Chairman's Statement

Review of 2014 Performance

In 2014, the domestic economy in mainland China continued to slow down while market conditions for specialty chemicals remained sluggish. Under such negative economic conditions, the Group maintained its profitability by improving product mix to focus more on higher margin products. As a result, sales volumes decreased but overall margins were maintained. 

The specialty chemical products recorded an average 2.3% volume decrease, however the average price gained by 0.5% year-on-year. Specifically, the sales volume of DiMethyl Carbonate ("DMC") and Isopropyl Alcohol ("IPA") decreased by 2.2% and 4.4% y-o-y respectively; the price of Diisopropyl Ether ("DIPE") decreased by 9.1% y-o-y while Propylene Glycol ("PG") increased by 10.7% y-o-y.

Sales turnover decreased slightly by 0.8% year-on-year to CNY973.3 million. Profit for the Continuing Operations was CNY7.6 million, compared with a loss of CNY11.0 million in 2013. 

Restructuring

The major restructuring which was successfully completed in H1 2014 has proved beneficial to shareholders. As a result, the Company no longer suffers from the fluctuation and uncertainties associated with the refinery business.

Following completion of the restructuring, the Group can now focus on the long-held ambition of achieving sustainable profitability through the strategic move towards specialty chemicals.

Outlook

HaiKe recorded an unaudited turnover of CNY199.5 million for the first three months of 2015, compared with CNY257.7 million in the corresponding period in 2014. Net profit was CNY0.5 million, compared with a loss of CNY1.3 million in the first three months of 2014. The improvement in profitability was mainly attributable to the continued improvement in product mix and cost saving initiatives during the period. Elsewhere, the unaudited total loan balance reduced to CNY493.2 million at end of March 2015.

We expect earnings in the remaining months to stabilise following an improvement in the economic environment and continued development of our product mix towards higher margin products. It is expected that the Chinese government will ease its monetary policies which should boost commodity prices, including specialty chemicals. On the other hand, feedstock prices are more dependent on the global market and as a result, there will be niches for manufacturers and traders to arbitrage therein.

We expect the specialty chemical business to stabilise in the coming months, however with existing facilities and resources the upside potential is limited. The Company is evaluating new business opportunities, as well as formulating an appropriate business strategy and earnings model, in order to achieve sustainable growth in the medium to long-term. 

People

It has been a transformational year for the business and on behalf of the Board, I would like to thank all of our employees for their hard work, dedication and commitment. We intend to increase the voting power of the independent directors to further enhance the corporate governance and transparency of the Company. The Board will evaluate the situation and looks forward to updating shareholders in due course.

Dividend

In view of the overall lossmaking position in 2014, the Board does not recommend any dividend for 2014.

AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31DECEMBER 2014

AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014

AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014

NOTES TO THE SUMMARISED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

1. General information

HaiKe Chemical Group Ltd. (the "Company") was incorporated on 20 June 2006. The address of the registered office is at Scotia Center 4th Floor, P.O. Box 2804, George Town, Grand Cayman, Cayman Islands. The principal activity of the Company is that of investment holding. The Company's ultimate parent company is Hi-Tech Chemical Investment Limited, a company incorporated in the British Virgin Islands.

The principal activities of the Group were manufacturing and sale of petrochemical and chemical products during the reporting period. Following the trading update announced in December 2013, Board of Directors decided a major restructuring plan by disposing of all investments except for Spring Chemical and HaiKe Trading. The proposal of restructuring was approved in shareholder's meeting on 15 May 2014. The restructuring was completed in June 2014. The principal place of business of the Company is West of Boxin Road, Shikou County, Dongying City, Shandong Province, China.

The financial statements present information about the Company and its subsidiaries (the "Group") as a consolidated group of companies.

2. Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with those International Financial Reporting Standards and Interpretations in force ("IFRS"), which comprise standards and interpretations issued by the International Accounting Standards Board ("IASB"), and International Accounting Standards ("IASs") and Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRICs") that remain in effect, as adopted by the European Union. The parent company's statement of comprehensive income is not required to be presented under the laws of the Cayman Islands.

The Company's functional and presentational currency is the Chinese Yuan ("CNY").All values are rounded to the nearest thousand (CNY'000) except when otherwise indicated.

The preparation of financial statements requires an assessment on the validity of the going concern assumption. The validity of the going concern assumption is dependent on finance being available for the continuing working capital requirements of the Group.

As at 31 December 2014, the Group had net assets of CNY99.8 million (2013: CNY272.2 million) and net current liabilities of CNY46.0 million (2013: net current assets CNY122.8 million).

The Directors have reviewed forecasts and budgets for the period ended 31 December 2015, which have been drawn up with appropriate regard for the current economic environment and the particular industry in which the Group operates. These were prepared with reference to historical and current industry knowledge, taking group restructuring and future strategy of the Group into account.

The continuing operations are funded through a mixture of cash generative operations and new short term bank loans (net proceeds of CNY309.6 million).

The Directors consider that the Group and the subsidiaries remaining after group restructure have adequate resources and committed borrowing facilities to continue in operational existence for the foreseeable future.

However, the Group is reliant on the renewal of the short term bank loans. Although the Directors believe that the Group will be able to renew their facilities due to the Group's relationships with its banks, there is the risk that in the future, the Group, may not be a going concern if the Group is unable to meet its debts as they fall due.

In approving the financial statements, the Board has recognized that these circumstances create a level of uncertainty. However, having made enquiries and considered the uncertainties outlined above, the directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. Accordingly, the Board believes it is appropriate to adopt the going concern basis in the preparation of the financial statements.

The directors do not propose a final dividend in respect of the year ended 31 December 2014 (2013: nil).

Copies of this financial information will be available on the Company's website.

3. Revenue

4. Taxation

The major components of income tax expense are as follows:

5. Loss per share

Loss per share was calculated by dividing the net loss for the year ended 31 December 2014 attributable to equity shareholders of the parent by the weighted average number of ordinary shares.

The loss for the financial year attributable to equity holders of the parent was as follows:

The weighted average number of ordinary shares used in the calculation of earnings per share has been derived as follows: