by winston » Wed Nov 12, 2008 9:45 pm
LI HENG’S NINE MONTHS NET PROFIT UP BY 19.2% TO RMB823.2 MILLION DESPITE CHALLENGING TEXTILE LANDSCAPE
• Revenue up over 42% and gross profit grew over 37% for both 3Q08 and 9M08
• Declares special dividend for 3Q08 of S$0.015 per ordinary share
Singapore, 12 November 2008 – Mainboard-listed Li Heng Chemical Fibre Technologies Limited (力æ’化纤科 技有é™å…¬å¸) (“Li Hengâ€, or together with its subsidiaries, “the Groupâ€), a leading manufacturer of high-end nylon fibres, today announced that its nine months’ revenue ended 30 September 2008 (“9M08â€) rose 42.0% to RMB2,996.8 million from RMB2,110.8 million in the previous corresponding financial period (“9M07â€).
Net profit for 9M08 increased 19.2% to RMB823.2 million from RMB690.7 million in 9M07. For this financial reporting
quarter, Li Heng also declared a special dividend of S$0.015 per ordinary share.
The Group’s topline and bottomline growth in 3Q08 as compared to 3Q07 was the result of an increase in sales volume of products with the expansion of annual production capacity of 74,800 metric tonnes that came on stream with the commencement of Liheng Phase II and Liyuan Phase III production facilities in February and March 2008 respectively as well as an enlarged customer base from 178 at the end of June 2008 to 182 at the end of September 2008.
Revenue for 3Q08 increased 53.7% to RMB1,024.8 million while gross profit grew 39.4% to RMB318.0 million. Gross profit margin inched down to 31.0% from 34.2% from 3Q07 due to a general decrease of average selling prices (“ASPsâ€) of the nylon yarn products in all of the product segments. The overall decline in ASPs of the nylon yarn products was attributed to a change in product mix which saw a stronger demand of a different variety of lower ASPs nylon FDY and DTY products of lower gross profit margins.
In addition, the slow-down in the global economy, which inevitably also affected China’s textile and garment industry, has led to pressure on upstream manufacturers. Prices of global commodities, including nylon chips, have fallen sharply recently, particularly in September 2008. The overall ASP of the Group’s nylon products dropped by 5.7% to RMB 30,900 per mt as compared to July and August 2008 due to the drastic drop in nylon chip prices. While the Group procures its nylon chips approximately 3 months in advance of its production schedule, the Group prices its nylon yarn products based on current nylon chip prices. Hence, the sharp drop impacted the Group’s gross profit margins severely.
Commenting on the Group’s results, Mr Chen Jianlong (陈建龙), Executive Chairman of Li Heng said, “It has been a particularly challenging time for us, especially in the month of September, where the economic slowdown has accelerated pressure on all textile manufacturers in the textile chain. Our effort to provide a large variety of quality nylon products and thoroughly looking after our customers’ needs had paid off as demand for our products is strong even as we encountered a general decline in our selling prices. Despite such a trying time, we managed to secure 4 new customers.
Moving forward, the Group expects that in light of the unstable global economic outlook, ASPs of nylon products in China will fall in the coming quarter and may continue to do so in 2009 with the weak demand from the consumer products market. To stimulate Chinese domestic consumption, the PRC government has recently implemented measures to benefit the textile and garment industry.
The Group is on track with its Liheng (PRC) Phase III development, which includes the construction of additional production capacity, a polyamide chip plant, as well as a self-contained R&D centre. Li Heng commenced construction of its polyamide chip plant, which has a designed daily production capacity of 200 metric tonnes of high quality textile grade polyamide chips, in July 2008. With the expected completion of Liheng (PRC) Phase III in 3Q09, the Group’s production capacity will increase by approximately 90,000 metric tonnes to 257,000 metric tonnes. As part of the Group’s plans to expand its sales and marketing network and enhance its customer services, Li Heng is currently in the planning stages of establishing service centres in the major textile cities in the PRC.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"