CCM: Jilin GPRO: slight decline in revenue and net profit in H1 2016 09-23-2016

On 30 Aug., 2016, Jilin GPRO Titanium Industry Co., Ltd. (Jilin GPRO, stock code: 000545) released its H1 2016 financial report. Key figures were:

  • Revenue: USD50.46 million (RMB337 million), down 15.82% YoY
  • Net profit: USD5.05 million (RMB33.71 million), down 48.21% YoY



Source: Baidu


In H1 2016, Jilin GPRO produced 38,896 tonnes of TiO2 (all were first grade products) and sold 39,736 tonnes, making the proportion of products sold to available products reach 102%; the proportion of machinery in good operating condition reached 98.77% and the cash collection ratio was 98%.


“In H1 2016, the overall domestic TiO2 market was not as good as in the corresponding period of last year. In spite of this, our performance met expectation,” said Jilin GPRO, “Faced with tense market competition, we mainly rely on our advantages in terms of production technologies, supply chain, HES (health, environment and safety) management system and circular economy production mode.”

 

In H1 2016, the TiO2 price presented an upward trend in the Chinese market due to the recovery of the domestic real estate industry and supply-side structural reform. Yet, the market price was still lower than in H1 2015 (a YoY decline of about 10%), partly contributing to Jilin GPRO’s YoY drop in net profit in H1 2016.


However, such a significant drop (nearly 50%) in net profit was not only the result of depressed market. According Jilin GPRO’s financial reports, reduced return on investment was the main reason for the decline in net profit in H1 2016.


In H1 2015, Jilin GPRO reaped a net profit of USD9.75 million (RMB65.10 million), soaring dramatically by 204.87% YoY. The company attributed its huge success to the following two reasons:


  • Market demand for TiO2 recovered and gross profit margin went up to 3.68%, leading to an increase in operating profit
  • Return on investment from its spare capital increased significantly


In H1 2015, Jilin GPRO reaped a profit of as much as USD7.38 million (RMB49.28 million) by entrusting others to make investments for the company. However, income from this activity shrank to only USD2.49 million (RMB16.66 million) in H1 2016. CCM believes that it was this enormous disparity that led to a significant drop in Jilin GPRO’s H1 2016 net profit.

 



Nowadays, the huge profit era has been past and the Chinese TiO2 market is quite depressed. Jilin GPRO, a top 10 TiO2 company in China with a total TiO2 production capacity of 100,000 t/a, is transferring its major business from TiO2 to financial investment.


On 31 Aug., 2015, it set up a subsidiary named Nanjing GPRO Commercial Factoring Co., Ltd. to focus on the commercial factoring business, and provided the subsidiary a financial guarantee for a liquid capital loan of USD17.97 million (RMB120 million) in March 2016.


On 27 May, 2016, it announced that it would raise USD164.71 million (RMB1.10 billion) by private placement for its chemical supply chain management and service platform project, hoping to break into supply chain management, financial leasing and commercial factoring.


However, in stark contrast, Jilin GPRO has injected limited investment into its TiO2 business. Its subsidiary, Xuzhou Titanium Dioxide Chemical Co., Ltd., started construction of an 80,000 t/a TiO2 project as early as 2012 which was expected to be finished by the end of 2014. Having failed to achieve this, Jilin GPRO again put off the construction completion deadline until the end of this year. In addition, construction of its 5,000 t/a TiO2 project for denitration catalyst began in March 2014 has also not been completed or producing economic benefits so far according to its H1 2016 financial report.


According to analyst CCM, it is hard for the market price of TiO2 to recover to its peak level in 2011 because of the severe overcapacity of the industry and slow economic growth in China. For Jilin GPRO, a TiO2 company not at the top of the industry in terms of product quality, production scale and allocation of production lines, focusing on the financial market instead of the TiO2 market is a wise choice. In the future, Jilin GPRO’s financial performance will largely rely on its return on investment and its TiO2 business is expected to remain stable.

 

This article comes from Titanium Dioxide China Monthly Report 1609, CCM




About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.

 

Tag: Jilin GPRO  TiO2

 

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