Result of AGM and Trading Update

HaiKe Chemical Group Limited

Result of AGM and trading update

HaiKe Chemical Group Ltd ("HaiKe"), the AIM quoted (AIM: HAIK) petrochemical, speciality chemical and biochemical business based in China, is pleased to announce that at its Annual General Meeting held earlier today, all the resolutions as set out in the Notice of the Annual General Meeting were passed.

The trading environment in both global and domestic markets remained weak in Q2. The European debt crisis continues to impact the world economy; the Chinese government has loosened its monetary policies in response to concerns over a weakening Chinese economy. The NDRC lowered the refined products retail prices twice in Q2 with a total cut of CNY820-860 per ton (circa 10%) for diesel and gasoline respectively which has almost offset the price increase of CNY900 per ton in Q1. Nevertheless, the price cut was unable to turn around and stimulate sales due to weakened demand caused by a slowing domestic economy.

For the first five months in the current year, the sales volume of HaiKe's major products (diesel, gasoline, dimethyl carbonate and caustic soda) declined by between 50-70% due to weak market demand and closure of the refineries for planned maintenance occurring earlier than in 2011. The average realised price movement varied for different reasons: diesel and gasoline prices grew by 12% and 26% year-on-year respectively pushed up by feedstock costs; chemical product price fluctuations were mainly driven by the varying market demand. As a result, turnover decreased by 13% year-on-year and the accumulated loss increased for the first five months of this year.

The management has taken several measures to improve earnings performance in H2: (1) to further reduce costs by technical innovation and improvement; (2) to cut interest cost by introducing alternative financing sources with lower interest rates; (3) to evaluate and implement hedging for the price fluctuation of refined products; and (4) to proactively promote better sales and marketing initiatives.

The next trading update based on a preview of the interim results is expected to be released in late July.

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