Monday, November 30, 2020
 
Columnist
Martin Hennecke
 
SHANGHAI TONVA
HKEx Stock Code : 01103 
 
Corporate Profile
Principally engaged in trading of asphalt, trading of fuel oil, provision of logistic services and road and bridge construction in the People's Republic of China (¡§PRC¡¨). The Group offers ¡§one-stop¡¨ solutions to customers ranging from procurement, storage and delivery of asphalt and fuel oil. In addition, the Company will transfer the listing from GEM to the Main Board of the Stock Exchange of Hong Kong. Dealings will commence on 16 July 2012.

Business Review - For the year ended December 31, 2012

In 2012, facing severe international economic environment and the central government's moderate tightening measures, the Group realigned part of its business structure in a timely and effectively manner in response to changes in market demand and further optimized the resource allocation for its major business segments, which resulted in improvement of its overall profitability. Despite the sluggish economic environment, the Group still managed to achieve steady business growth during the year. For the twelve months ended 31 December 2012, turnover, gross profit and net profit of the Group were approximately RMB4,422,014,000, RMB247,428,000 and RMB130,594,000, respectively, representing an increase of approximately 37.3%, 28.9% and 45.9% when compared with last year. During the year, the Group proceeded steadily with the construction of various road and bridge projects, meanwhile the Group also actively participated in market competition and won the bidding of several large road and bridge projects. During the year, the petrochemical product supply chain service business generated excellent synergies with both fuel oil trading business and asphalt trading business having recorded encouraging growth in their results. The fuel oil trading business grew rapidly. With diversified types of fuel oil, broader customer base and enhanced competitive edge, the business became the growth engine for the Group which drove the overall earnings of the Group. Turnover of the fuel oil trading business was approximately RMB3,079,498,000, representing a significant increase of approximately 67.6% over last year, and gross profit was approximately RMB129,993,000, representing a significant increase of approximately 11 8.1% over last year. The rapid growth of the business was mainly attributable to the fact that the Group developed new fuel oil, proactively sought for major premier customers and further explored overseas trade market during the period under review, which helped continuously increase the market share of our products. As to the asphalt trading business, the Group maintained stable sales and maximized the profit during the year under review, which was mainly due to the strengthening of the Group's cooperation with powerful large suppliers and timely and accurate understanding of market trends of asphalt price, as well as the Group's selectively increasing supply volume to clients with high margins in its sale process. Moreover, with the commencement of construction for the Shanghai Disneyland project, the growth of Shanghai's demand for asphalt will also contribute to better earning expectation of the Group's asphalt trading business for the next year.

Business Operations

The Group is a conglomerate incorporating the road and bridge construction and the petrochemical product supply chain services. The road and bridge construction business mainly comprises the construction of highways and municipal roads in the PRC. The petrochemical product supply chain service business mainly comprises the provision of one-stop services including purchase, storage and transportation to the Group's customers based on its well-established logistics system, covering fuel oil trading business, asphalt trading business and the auxiliary logistics services provided for fuel oil trading business and asphalt trading business.

Road and Bridge Construction Business

For the year ended 31 December 2012, turnover for the Group's road and bridge construction business was approximately RMB859,076,000 (2011 : approximately RMB920,354,000), down by approximately 6.7% as compared with that of last year, which was mainly due to the difference in concentration of completion schedule of construction projects. Turnover of the road and bridge construction business accounted for approximately 19.4% of the Group's total turnover.

For the year ended 31 December 2012, gross profit of the Group's road and bridge construction business was approximately RMB82,027,000 (2011 : approximately RMB91,618,000), representing a decrease of approximately 10.5% from last year, whereas gross margin decreased from approximately 10.0% last year to approximately 9.5% in the reporting period.

Turnover and gross profit of the business decreased over last year, which was mainly due to Nantong Road and Bridge's proactive exploration on the structural adjustment of construction projects in 2012, including (i) gradually disposed of some ordinary projects with low efficiency and difficulty in collection of payment; (ii) kept strengthening the internal control and management and considered the cost control, refined management and collection of receivables as key indicators to assess the efficiency of the projects under construction; and (iii) undertook new projects more prudently and scientifically instead of simply seeking scale expansion.

For the year ended 31 December 2012, the backlog of bid-winning construction contracts not yet recognized as revenue amounted to approximately RMB444 million, most of which will be completed within the next 12 to 14 months.

Petrochemical Product Supply Chain Service Business

The business arm comprises the provision of one-stop services including purchase, storage and transportation to the Group's customers based on its well-established logistics service system, covering fuel oil trading business and asphalt trading business. With sound business footholds in place, the Group has extended its presence from Shanghai to Jiangsu, Jiangxi, Anhui, Zhejiang, Hubei and Henan and even to overseas market during the year under review. Turnover from the petrochemical product supply chain service business for the year was approximately RMB3,562,938,000 (2011 : approximately RMB2,300,331,000), accounting for approximately 80.6% of the Group's total turnover.

This business arm is summarised by segments as follow:

Fuel Oil Trading Business

For the year ended 31 December 2012, turnover of the Group's fuel oil trading business was approximately RMB3,079,498,000 (2011 : approximately RMB1,837,160,000), representing a significant increase of approximately 67.6% over last year and accounting for approximately 69.6% of the Group's total turnover.

For the year ended 31 December 2012, gross profit of the Group's fuel oil trading business was approximately RMB129,993,000 (2011 : approximately RMB59,591,000), representing a significant increase of approximately 11 8.1% over last year, whereas gross margin also increased from 3.2% to 4.2%. The surge in gross margin was mainly attributable to the fact that the Group developed new fuel oil and proactively sought for major premier customers, which helped continuously increase the market share of our products. Meanwhile, the Group kept optimizing its customer portfolio by developing major premier customers and improved the quality of its products and services so as to maintain stable growth of the gross margin.

Asphalt Trading Business

For the year ended 31 December 2012, turnover of the Group's asphalt trading business was approximately RMB444,879,000 (2011 : approximately RMB403,412,000), representing an increase of approximately 10.3% over the corresponding period of last year and accounting for approximately 10.1% of the Group's total turnover.

Gross margin of the asphalt trading business was approximately 7.4%, similar to that of last year. Gross margin maintained stable growth, mainly due to the Company's reasonable control of inventory level and strengthening market analysis and forecast to reasonably avoid the risk rising from the price fluctuation of asphalt.

For the year ended 31 December 2012, gross profit of the Group's asphalt trading business was approximately RMB32,767,000 (2011 : approximately RMB29,692,000), representing an increase of approximately 10.4% over last year. The increase was mainly because the Group maintained stable sales and maximized the profit during the year under review, which was mainly due to the strengthening of the Group's cooperation with powerful large suppliers and timely and accurate understanding of market trends of asphalt price, as well as the Group's selectively increasing supply volume to clients with high margins in its sale process. Moreover, with the commencement of construction for the Shanghai Disneyland project, the growth of Shanghai's demand for asphalt will also contribute to better earning expectation of the Company's asphalt trading business for the next year.

Logistics Business

Logistics business mainly comprises the provision of auxiliary services to fuel oil trading and asphalt trading businesses to enable the Group to provide one-stop supply chain services to its customers. For the twelve months ended 31 December 2012, turnover of the Group's logistics business was approximately RMB38,561,000 (2011 : approximately RMB59,759,000), representing a decrease of approximately 35.5% from last year. The decrease was mainly attributable to a decrease in revenue from storage resulting from the less storage of asphalt and fuel oil to reduce risks from volatile asphalt and fuel oil prices, as well as a drop in revenue from transportation business due to the adoption of direct sales (i.e., skipping the handling through the Company's oil tanks) for certain business and the self-collection of products by some customers of our petrochemical product supply chain service business, for which the transportation costs were also borne by themselves. Logistics business is aimed to enable the Group to provide one-stop services to its customers and remains one of the main supports to maintain our competitive edge.

Business Outlook - For the year ended December 31, 2012

The ¡§Twelfth Five-Year Plan¡¨ of China has successfully entered into its second year. Driven by the Twelfth Five- Year Development Plan for Comprehensive Traffic and Transportation System, the Group's road and bridge business succeeded in bidding for a number of road and bridge projects during the year. It is expected that the Group's road and bridge construction business will continue to benefit from the national public transportation policy with steady growth. For the year ended 31 December 2012, the construction contracts of the Group signed but not yet recognized as revenue amounted to approximately RMB444 million, most of which will be completed within the next 12 to 14 months. With the commencement of construction for projects such as Shanghai Disneyland Park and the coastal development projects in Northern Jiangsu province, we are confident to win the bidding for more projects. The Group has confidence in achieving good development in road and bridge construction business in the coming year.

As to the petrochemical product supply chain service business, the Group will continue to utilize the advantages of ¡§one-stop¡¨ logistic management and make full use of the synergies of the logistics service systems, fuel oil trading and asphalt trading businesses. The Group will also continue to develop new fuel oil and seek further expansion of overseas market for fuel oil trading business while consolidating its existing trade relationship and maintaining key client relationships. With the gradual enhancement of bargaining power and continuous expansion of business scale of the Group, we believe that the business will maintain sustainable growth. Looking forward, the Group will continue to actively explore markets in Shanghai and the neighboring provinces and cities and overseas market to expand our customer base and improve our market competitiveness as well as to explore and achieve additional potential market shares, so as to be better positioned for the Group's future developments. Driven by the State's ¡§Twelfth Five-Year Plan¡¨, it is expected that the domestic demand for asphalt will rise continuously on the increase in infrastructure projects. Also with the launch of the Shanghai Disneyland project, the Group believes that the asphalt trading business will maintain steady growth. Meanwhile, leveraging on the existing scale of business, the Group will also continue to expand its customer base and enhance its market competitiveness to increase the profit contribution to the Group.

Looking forward, the Group will adjust its operation strategies of each business segment in a timely manner in line with the market demand to maximize the synergies among the business segments, so as to promote overall steady growth of its profitability. Meanwhile, the Group will continue to optimize its capital allocation to improve its overall profitability, so as to bring long-term and more fruitful return for the shareholders who have been paying close attention to the development of the Group.

Source: Shanghai Tonva (01103) Annual Results Announcement
Chairman Qian Wenhua Issued Capital (shares) 456M
Par Value RMB 0.1 Market Capitalisation (HKD) 360M
 
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