Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
DONGYUE GROUP
HKEx Stock Code : 00189 
 
Corporate Profile
Principally engaged in the manufacture, distribution and sale of refrigerants, polymers, organic silicone and dichloromethane, polyvinyl chloride (¡§PVC¡¨) and liquid alkali and others.

Business Review - For the year ended December 31, 2012

2012 is the 25th anniversary for establishment of the Group. The year was twisted with all kinds of challenges and ordeals. Prices of fluorochemical raw materials and products surged up sharply in 2011 but dived to the bottom in 2012. The instability in the market, together with the bleak domestic and overseas economic environment, resulted in the substantial fluctuation in the Group's results. Under such a selective external environment, all dedicated members of the Group were connected with one mind and therefore attained progresses in the following aspects:

1. Continuous increase in sales and market share

In 2012, sales volumes of products under refrigerant business, polymer business and organic silicone business showed a year-on-year growth of 13.3%, 8.36% and 41.5% respectively. Refrigerant and PTFE products occupied significant market share in both the domestic and foreign markets. However, since the prices suffered a deep sink from the previous year, the Group's sales revenue declined to RMB7,050,822,000. Profit attributable to the shareholders of the Company was RMB713,056,000, and basic earnings per share were RMB0.34.

2. Application of new products, new technologies and new projects propelling the Group's innovative transformation and industrial park upgrade

In 2012, the Group carried out a total of 19 projects in relation to the technological revamp and comprehensive environmental protection, which not only reduced material and electrical consumption but also improved productivity and quality of our products. New construction and expansion of projects in respect of gaseous silica, R125, PTFE and tetrachloroethylene were completed to further expand production capacity of our advantageous products. The Group developed 6 new varieties, among which, the new product, DF series polymer, headed towards high-end polymer market. Chloralkali ionic membrane was used by more than ten chloralkali enterprises and exported overseas. It is worth mentioning that, under the intensified market competition, all officers and staff of the Group's organic silicone business, with their improved skills and at their best efforts, resolved 15 technical difficulties (including dimethyl tower transformation, renovation of D3 refining system, and renovation of desulfurization/denitrification low vacuum system), expanded production capacity of the 107 Silicone Rubber and launched deep processing projects like hydrogen silicone oils and gaseous silica, thereby reversing the substantial losses that continued for years and realizing profits since September. Throughout 2012, the Group's safety and environmental protection operated in a stable manner, without any major safety accident or pollution in the plants. Shandong Dongyue Organosilicon Material Co., Ltd., a wholly-owned subsidiary of the Group, was rewarded as a provincial-level advanced unit for safety culture building.

3. Further perfection of industrial chain

During the year, the Group successfully acquired exploration rights of two mines in Inner Mongolia of the PRC (namely fluorite, rare earth and iron ore mine and nickel mine) through Inner Mongolia Dongyue Fluorine Materials Co., Ltd. (¡§Dongyue Fluorine Materials¡¨), a wholly-owned subsidiary of the Group. Dongyue Fluorine Materials also obtained new mineral exploration licences for the two mines issued by the relevant governmental authorities of Inner Mongolia. Furthermore, in early 2013, the Group acquired 100% equity interests in Shandong Huaxia Shenzhou New Materials Company Limited (¡§Huaxia Shenzhou¡¨) through Shandong Dongyue Polymers Co., Ltd. (¡§Dongyue Polymers¡¨), a wholly-owned subsidiary of the Group. Huaxia Shenzhou is principally engaged in the business of production and sale of a variety of downstream fluoropolymer fine chemicals including VDF, PVDF, FKM and FEP. Viewed as ¡§new materials¡¨ in the PRC, these fluoropolymer fine chemicals have favourable characters which can be widely applied in various aspects such as electrical and electronics, automotive and painting industries. FEP is primarily used in wire's insulation layer and thin walled tube of photovoltaic products and electronic products, with a market share of more than 50%. PVDF is primarily used in fluorocarbon coatings. FKM is primarily used in production of confined pieces necessary for automobile and machinery manufacturing, with a market share of approximately 20%.

4. Full supports from the government and continuous improvement in brand awareness and social status

During the year under review, municipal government held business conference at the Group for the third time to help resolve practical problems in the Group's development and create a better development environment for the Company. Mr. Zhang Jianhong, the Chairman of the board of Directors (the ¡§Board¡¨), was elected as the Vice Chairman of China Federation of Industry & Commerce. Dr. Zhang Yongming (±i¥Ã©ú³Õ¤h) of the Company was rewarded the Ho Leung Ho Lee Prize in Advances in Science and Technology, and Mr.

Liu Yandong, a member of the Political Bureau of the CPC Central Committee and the State Councilor, granted the prize to Dr. Zhang in person. The Ho Leung Ho Lee Prize is known as the Chinese ¡§Nobel Prize¡¨ in the world. The ionic membrane technology won the ¡§State Technological Invention Award¡¨. Dongyue Polymers won the Governor Quality Award and was ranked the first among the five award winners. Accreditation of such award was not only a complete recognition of the Company's production safety, self innovation, quality improvement, environmental protection, energy conservation, and management innovation but also an urge and supervision on the Group's management.

Business Outlook - For the year ended December 31, 2012

Looking into 2013, macroeconomic environment is still entangled with many complications and uncertainties, global economic growth sees lots of obstacles and, for fluorosilica industry, the coming year is another year of difficulties and challenges. Under this backdrop, the Group will center on the main line of innovative transformation and internal improvement, leverage the Group's advantages in research, innovation, brand and scale, continuously adhere to the development direction of science and technology, environmental protection and internationalization, operate prudently and improve its competitiveness and profitability by adoption of the following measures:

1. To focus on technology progress and product upgrade, improve development quality and product competitiveness, and create a ¡§blue ocean¡¨ market for the Group

The Group will proactively explore the market of products for new uses and with customized specifications and vigorously promote its new products, such as modified dispersion resins and modified emulsions. The Group will also upgrade facilities for projects in relation to Gross Rubber and gaseous silica, with a view to enrich the variety of products and increase their added value.

2. To carry out new construction, reconstruction and expansion and the construction of technological innovation, energy saving and emission reduction projects

The Group will construct the production facilities of refrigerants such as R125 and R32; polymers such as PTFE; and other products such as tetrachloroethylene, hydroxyl silicone oils, 107 Silicone Rubber and gaseous silica. The Group will also complete the construction works of technological renovation, energy saving and emission reduction projects to facilitate product consumption reduction revamp, tail gas recovery, comprehensive utilization of byproducts, and production techniques optimization etc.

3. To emphasize management reform, employee training and introduction of senior professionals

The Group will consolidate its departments, downsize its staff and merge its positions. In the meantime, it will propel a comprehensive planning and budget control. The Group will also improve the quality of its staff and provide them with prominent training, to create highquality, high-value and high-end products with its high-caliber staff.

4. To consistently emphasize cost control, improve operation quality and create cost competitiveness and cost effectiveness

The Group will continue perfection and improvement on procurement, energy saving, consumption reduction, cost saving, and labor saving, optimize the cost control system, improve production efficiency and reduce unnecessary wastes and expenditures.

5. To promote conversion of research results and complete project research and development and patent application

The Group will do its best to promote marketing of its research results, including chloralkali ionic membrane, hydroxyl silicone oils and ETFE resins, to complete the research and development of its projects, including the third generation chloralkali ionic membrane, fuel and battery membrane, lithium battery membrane, vanadium battery membrane, water treatment membrane and solar cell packaging membrane, and to file application for such research and development patents in time. The Group's state-level functional membrane research and development center (including relevant real estate facilities) was prepared for construction at the end of the year under review.

Source: Dongyue Group (00189) Annual Results Announcement
Chairman ZHANG Jianhong Issued Capital (shares) 2,119M
Par Value HKD 0.1 Market Capitalisation (HKD) 6,951M
 
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