Trading Statement

HaiKe Chemical Group Ltd

Trading Update

HaiKe Chemical Group Limited ("HaiKe" or the "Company" or the "Group"), the AIM quoted (AIM: HAIK) specialty chemical business based in Shandong Province, China, today provides an update on trading ahead of its Final Results for the twelve-month period ended 31 December 2015.

Despite a slowdown in Q3 2015, overall profitability recovered slightly in the final quarter, and the Group is expected to report a moderate profit for its continuing operations for the full year. While overall sales volumes were comparable to FY2014, for the 12 months ended 31 December 2015, unaudited total turnover decreased 25% to CNY728 million (c. £73 million) (2014: CNY973 million (c. £98 million)). This decrease was mainly attributable to the significant reduction in the average realized selling price of the Company's specialty chemical products as a result of depressed oil prices.

Gross margin for FY2015 rose slightly to 11.6% (2014: 10.7%) due to our continuing efforts to focus on more profitable, higher-end products.

As indicated in our interim results, High-Tech Spring, the manufacturing arm of the Company which produces and sells specialty chemicals products, has faced severe competition for one of its major products, Isopropyl Alcohol (IPA), from other producers who are using cheaper alternative feedstock and newer technology, to deliver a higher standard of product specification. In light of this and to better position the business to withstand such competition, the Company has accelerated its efforts to move to more profitable, higher-end products to try to maintain the overall margins.

Interest expense decreased sharply by 73% year-on-year as a result of a significant decrease in the average borrowing balance. Short-term borrowings balance as at end of 2015 decreased 89% to CNY80 million (c. £8 million) (2014: CNY702.8 (c. £70 million)), principally reflecting the scaled down trading activities of HaiKe Trading, the trading arm of the Company, in 2015.

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