Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
SINO DRAGON
HKEx Stock Code : 00395 
 
Corporate Profile
Principally engaged in (i) the research, development, manufacture and sale of a wide range of zirconium chemicals, new energy materials and rechargeable batteries; and (ii) petrochemicals storage and wholesale business.

Business Review - For the year ended December 31, 2012

During the year, the extended effect of the Europe debt crisis hit hardly on the global economy. Exports of US and Japan were unfavorably affected by the poor economic performance in the Euro zone. The underperformance of exports trade held back the recovery of the economy in these two countries. Facing the uncertainties and unstable environment in these major export markets, the Group''''s zirconium chemicals business was unable to continue the growth as in prior year and reported a decrease in sales volume in 2012. The Group's sales income was further impacted by the unexpected drop in the market selling price of various zirconium chemical products.

Furthermore, the Group has to deal with the challenges on the production side. The profitability of the Group was further driven down by the under-capacity production in both the Yixing and Binhai zirconium production plants. The low production of Yixing plant in the fourth quarter of 2012 was a result of the local government's temporary restrictions on industrial production activities near the riverbank in order to keep the river water clean for local people's consumption. This was because of the drought in Northern China in recent years which kept the water volume in reservoirs at near record lows. Certain cities, including Yixing city, had to use river water for daily consumption including drinking and cooking. Since the Group's zirconium production plant was located near the upstream of the river in Yixing, its production was also subject to the local government's temporary restriction measures. On the other hand, the license approval process for Binhai zirconium production plant was processing slowlyIn the year under review, the rechargeable batteries business reported a sales drop by 2% and continued to generate a net profit. It is expected that the batteries segment will continue to contribute positively to the Group's sales and cashflow in the years to come.

During the current year, the Group continues to suspend the operation of its zircon processing plant in Indonesia as there was minimal progress in the joint venture''''s attempt in acquiring mining rights in Kalimantan area. Given the unstable political environment in Indonesia, the negotiation process is expected to be lengthy and difficult. Once the mineral supply (raw material for the zircon processing plant) is secured, the Group will consider resuming the operation of the zircon processing plant.

The Group's petrochemicals storage and trading businesses were also facing a challenging year in 2012. Due to the decrease in domestic oil price in China resulted from various external factors, demand for petrochemical storage facilities had decreased because most of the market participants were worrying that the oil price would keep dropping and thus were unwilling to keep too much stock of petrochemical products. Furthermore, the Group''''s petrochemicals storage facilities were under major repair and maintenance works in current year. Such works would need to be carried out every three to five years. As a result, certain oil tanks were emptied for the carrying out of maintenance works which led to a reduction in petrochemical storage income in current year. The operating profit of petrochemical storage and trading business had also dropped as compared to last year. The repair and maintenance works on some oil tanks had been completed in the first quarter of 2013 and leases of these tanks are expected to resuAt an extraordinary general meeting held by the Company on 30 July 2012, the shareholders of the Company passed the special resolutions to approve, among others, the deed of settlement (the "Deed of Settlement") dated 25 May 2012 and the transactions contemplated therein. Upon the Deed of Settlement took effect on 30 July 2012, the Company cancelled a total of 129,606,099 ordinary shares which were surrendered by Mr. Wang Xiaoping Peter at nil consideration payable by the Company. The acquisition of Haney Holdings Limited was cancelled with effect from 30 July 2012.

Business Outlook - For the year ended December 31, 2012

2012 was another challenging year for manufacturing industry and it is anticipated that the global economy would at least take another few years to recover. As the world financial system is fully connected now, the Euro zone crisis has far-reaching consequences that extend beyond their borders to the world as a whole. The fundamental problem of high government debt in the European region remains in place. As a result, the chance of a further economic shock to the Euro zone, and the world economy as a whole, is still a possibility and it is expected to remain so for several years. Facing the unstableness and uncertainties in the global market as well as the slow economic growth in the countries where the Group''''s major export markets are located, the Board expected that the operating environment will continue to be challenging and difficult in the years to come. The management of the Group will remain prudent and cautious in executing its business strategies. As always, we will continue to be on the lookout for lucrative opportunities to further expand and diversify our business, with the ultimate aim of bringing greater value to our shareholders in the long run.

Source: Sino Dragon (00395) Annual Results Announcement
Chairman Yang Xin Min Issued Capital (shares) 2,454M
Par Value HKD 0.05 Market Capitalisation (HKD) 260M
 
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