04/29 09:49 Beijing Yanhua <0325.HK>
confident of profit rise
By Carrie Lee
HONG KONG, April 29 (Reuters) - Beijing Yanhua Petrochemical Co Ltd
<BYH.N> said on Thursday it expected higher profits this year over 1998
thanks to an improving market environment.
"We are very confident that our profit in 1999 will be better than in 1998,"
chairman Cao Xianghong told a news conference, referring to both gross and
net earnings.
Net profit of the major Chinese petrochemical producer dived 84.1 percent to
115.8 million yuan ($13.99 million).
Cao attributed the plunge to the Asian financial crisis, and to product price
falls in the mainland Chinese market in the first half of 1998 under pressure
from lower-priced imports from neighbouring countries and "unprecedented"
illegal imports.
The weighted average price of the company's eight principal products
declined 20.9 percent last year over 1997. Operating margin skidded to 4.3
percent in 1998 from 17.6 percent a year ago. Net margin sank to 2.2
percent from 11.6 percent.
But prices rebounded notably in April, although they still stood lower than the
levels of the beginning of last year.
"With continued efforts by the PRC (Chinese) governemnt to curb illegal
imports, we believe domestic product prices will continue to stabilise," Cao
said.
He said China's economic development should sustain the growth in demand
for petrochemical products in the country.
"Currently, the domestic petrochemical production capacity is only able to
meet approximately 50 percent of total domestic demand. In the foreseeable
future, the domestic petrochemical market is expected to continue to
experience a shortage of domestic supply," he said.
Cao said production of the company's main products was expected to rise to
1.03 million tonnes this year from 870,000 in 1998, giving rise to a reduction
in unit production cost.
The firm's capital expenditure was expected to total 1.4 billion yuan this year,
2.0 billion yuan next year and 1.7 billion yuan in 2001, compared with 950
million in 1998.
The sums would be used for capacity expansion and technological
development to improve economies of scale, cost efficiency, products mix
and profit margin, Cao said.
About 40 percent of the expenses would be funded by internal resources and
the remaining 60 percent by bank loans.
"Our gearing ratio will rise as our capital expenditure rises," Cao said. He
forecast the net debt/net assets ratio to rise to about 55 or 56 percent this
year, possibly 71 percent in 2000, and possibly almost 80 percent in 2001.
But he added it should fall back to about 50 percent around 2004 and 2005
as new projects came into operation.
The firm, whose gearing rose to 47.1 percent in 1998 from about 31 percent a
year ago, expected bank loans to total 438.50 million yuan this year. ((Hong
Kong Newsroom +852 2843-6590, Fax +852 2845-0636
hongkong.newsroom@reuters.com)) ($1=8.279 Chinese yuan)
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