Friday, November 27, 2020
 
Columnist
Martin Hennecke
 
WISON ENGRG
HKEx Stock Code : 02236 
 
Corporate Profile
The Group is a private sector chemical engineering, procurement and construction management, or EPC, service provider in China. The Group provides a broad range of integrated services spanning the project lifecycle from feasibility studies, consulting services, provision of proprietary technologies, design, engineering, raw materials and equipment procurement and construction management to maintenance and after-sale technical support.

Business Review - For the year ended December 31, 2012

Petrochemicals

During the Year under Review, revenue from the Group's petrochemicals business segment was RMB455.7 million, down 71.9% from the previous year and accounting for 9.3% of total revenue. During the year, major projects, namely the PetroChina Sichuan LLDPE Plant Project, PetroChina Sichuan Ethylene Plant Project and PetroChina Fushun Ethylene Plant Project, were successfully completed and delivered on schedule, while work on the Chongqing BASF MDI Complex Project proceeded as scheduled. However, principal construction of the two projects in Sichuan Plant and the Ethylene Plant Project in Fushun was completed by the end of 2011, resulting in lower revenue contribution for 2012. Furthermore, gross profi t margin in the petrochemicals business segment slightly decreased to 24.9% from 2011; the small change was primarily attribute to the model and mix of service provided during the year.

Despite intensifying competition, the Group secured satisfactory contract value by leveraging its proprietary technology and experience in the petrochemicals industry, its outstanding project execution capability and well-established network of business partners. During the Year under Review, backlog in the petrochemicals segment amounted to RMB5,534.0 million. New contract value, net of estimated VAT, amounted to 623.9 million. In particular, the Group entered into an EPC contract with a Saudi Arabian company for the Saudi Benzene Mitigation Project, which started in May 2012 and is slated for completion in December 2013.

The Group continued to provide EPC services to petrochemicals producers in China. During the Year under Review, the Group took part in ten major ethylene production facility construction projects for petrochemicals producers in the PRC and provided EPC services to PetroChina, BASF-YPC and SECCO. As one of the six companies in the world that possesses proprietary commercial ethylene cracking furnace technologies, and with its technological leadership, the Group undertook design, revamp and construction work on 26 ethylene cracking furnaces during the period.

The Group actively expanded its EPC services into the broader petrochemicals industry. Major projects include the Chongqing BASF MDI Complex Project. In June 2011, under an E+PsCM contract, the Group and Daelim Industrial Co., Ltd. commenced work on the building of the BASF MDI Complex in Chongqing, China, for BASF, which consisted of: (i) a MNB plant, (ii) an aniline plant, (iii) a CMDI plant, (iv) a MMDI plant, (v) tank farm/logistics and (vi) certain utility systems. The project is expected to be completed in around May 2014.

Oil refi neries

While reinforcing its competitive advantage in the petrochemicals sector, the Group expanded into the coal-to-chemicals and oil refinery industries to diversify the scope of its business. During the Year under Review, revenue from the Group's oil refi neries business was RMB301.6 million, down 87.7% from 2011 and accounting for 6.2% of total revenue. The decrease was mainly because the principal construction phases of major refi nery projects during the Year under Review namely PetroChina Sichuan Continuous Reforming Plant and PX Plant Project, PetroChina Sichuan Gasoil Hydrocracking Plant Project, PetroChina Sichuan Sulfur Recovery Plant Project and PetroChina Sichuan Refinery and Petrochemical Complex Utilities Project were completed by the end of 2011. Gross profit margin increase to 25.0%, up 2.3% from 2011. The increase was mainly due to the successful claims of certain projects from owners during the Year under Review, while most relevant costs has been recognized in previous years.

The Group was active in expanding its oil refi neries business. During the Year under Review, the backlog of the Group was about RMB5,909.4 million, representing an increase of 3,556.8% over the last year, and the new contract value, net of estimated VAT, was about RMB6,054.9 million. In June 2012, the Group, as one of the Party, and PDVSA Petroleo, S.A., entered into an EPC contract involving environmental units, auxiliary units and renovation of the atmospheric distillation units with respect to the Deep Conversion Project at the Puerto La Cruz Refi nery in Venezuela. The project is expected to be completed in February 2016.

Leveraging its in-depth knowledge of the petrochemicals industry in the PRC and outstanding EPC project execution capability, the Group completed construction of the PetroChina Sichuan Integrated Refi nery and Petrochemical Complex in Sichuan Province, China, under several PC contracts, in December 2012. This has been the Group's largest project in terms of project revenue recognized, and marked its first project undertaken by Group to build an integrated aromatics unit, the main unit of a refi nery project.

Coal-to-chemicals

During the Year under Review, revenue from the Group's coal-to-chemicals business amounted to RMB3,173.2 million, representing an increase of 234.1% compared to the previous year, accounting for approximately 64.9% of total revenue. During the Year under Review, the Group made steady progress in various major projects, including the Baoji Methanol Project of Xuzhou Coal Mining Group, the Erdos Guotai Chemical Coal-to-Methanol Project, and the Pucheng Polyethylene Plant Project in Shaanxi that kicked off construction in March 2012. The big revenue boost exactly aligns the long-term development strategy of the Group in expanding coal-to-chemicals business. To support this strategy, the Group adopted a more aggressive approach in project bidding during the Year under Review, such as for PuCheng Project to gain more market share. As a result, overall gross profit margin of the business fell 1.5 percentage points to 23.8% compared to the previous year.

The Group recorded backlog and new contract value, net of estimated VAT, of approximately RMB15,516.5 million and RMB12,755.4 million, respectively during the year. These results were made possible by leveraging its proprietary technologies in the areas of coal-to-olefins, energysaving coal-to-methanol and coal-to-dimethyl ether; as well as its one-stop services encompassing consulting services, transfer of proprietary technologies, design, procurement construction and commission of coal-to-chemicals plants.

In March and August 2012, the Group entered into an EPC contract with Pucheng Clean Energy Chemical Co. Ltd. to build a polyethylene plant and the PE/PP packaging warehouse, as well as an EM+PC contract for public utility and ancillary facilities in a 700 kta coal to olefins project in Shaanxi. Both projects are slated for completion around December 2013.

In May 2012, the Group entered into a contract and a master design contract with Jiangsu Sailboat PetroChemical Co., Ltd. to provide design and EPC services for its Alcohol Based Cogeneration Project (Phase I). This comprised the overall design of the project, an EPC overall contract for 600 kta MTO plant (including MTO reaction units, olefin conversion units, olefin separation units and butadiene units), an EPC contract for public utilities and ancillary facilities for Phase I, an EM+PC contract for a 350 kta EVA plant (including 250 kta tubular production line and a 100 kta caldron production line), an EM+PC contract for a 260 kta acrylonitrile plant, and an EM+PC contract for an 80 kta MMA plant (including sulfur waste recycling units). Jiangsu Sailboat Alcohol Based Cogeneration Project, marked the Group's largest project in terms of contract value. It is expected to be completed for delivery by the end of July 2015.

In August 2012, the Group signed a technology license, process design package compilation and technology service contract and an engineering design contract on both basic design and detailed design with Shandong Yang Coal Hengtong Chemical Co., Ltd for the olefin separation unit in its 300 kta methanol plant. The design work of this project is expected to be completed by the end of October 2013.

In September 2012, the Group signed a technology license, a technology service contract and an engineering design contract on overall design and basic design with Shenhua Coal to Liquid and Chemical Co., Ltd. for their 680 kta new coal-based materials project in Xinjiang, China. The basic design of the project is expected to be completed in May 2013.

The Group's proprietary olefin separation technologies were adopted in the PuCheng Clean Energy coal-to-olefins Project in Shaanxi, the Shandong Yang Coal Hengtong MTO Project and Shenhua Xinjiang Olefin Separation Unit Project.

Additionally, the Group completed successful delivery of a 600 kta coal-to-methanol project in December 2012 for Erdos Jinchengtai Chemical Co., Ltd in Erdos, Inner Mongolia, China, under an E+PM+C contract signed in April 2009.

Fuelled by the growth momentum in orders in 2012, the Group continues to win new orders in 2013.

In March 2013, the Group entered into an engineering, procurement and construction contract with Shanxi Lu'an Mining (Group) ( 山西潞安礦業(集團)有限責任公司) for the gasification plant of the high sulfur coal to liquid, chemical, heat and power integration project in Shanxi Province.

Other products and services

The Group also provides EPC and PC services to other industries such as steel and marine engineering projects. Futhermore, Wison (Yangzhou) Chemical Machinery Co., Ltd. (“Wison Yangzhou”), a wholly-owned subsidiary of the Group, supplies heat-resistant alloy tubes and fittings to third party purchasers, primarily in the petrochemicals industry. The Group has actively sought to forge long-term relationships with the affiliates of industry leaders in the PRC petrochemicals market by providing tailor-made technologies and services to meet customers' overall business needs and the unique technical requirements of their projects.

During the Year, revenue from other products and services of the Group amounted to RMB961.4 million, representing an increase of 6,057.0% compared to 2011, mainly attributable to the revenue contribution from the construction of the fabrication yard of Zhoushan Wison Offshore & Marine Co., Ltd. which commenced in May 2012. In addition, revenue from sales of heat-resistant alloy tubes and fittings, excluding inter-segment sales, amounted to RMB24.9 million, an increase of 69.6%.

During the year, the Group entered into its first major EPC contract outside of China with a Saudi Arabian company for the Saudi De-Bottlenecking (DBN) Project, pursuant to which the Group provided services within and outside of Saudi Arabia. The project commenced construction in May 2012 and is expected to be completed in around September 2013.

Business Outlook - For the year ended December 31, 2012

Looking forward into 2013, the global economy will recover slowly, while remaining sluggish, as China's economy will continue to grow constantly despite a fl uctuant situation. The application of sophisticated large-scale exploitation technology in the North American shale gas market and the PRC government's supportive measures on the exploitation of coal-bed methane gas will bring more opportunities for the industry in which the Group operates. As the largest private chemical EPC service provider in China, the Group will take full advantage of its advanced technology and high quality services to enhance the development of its petrochemicals and oil refinery businesses, as well as strengthen coal-to-chemicals business. Meanwhile, it will also expand its client base, accelerate the expansion in overseas markets and diversify its business scope. The Group will focus on the following the development strategies to achieve its business goals:

1. Establishing diversified customer base, geographic market presence and business scopes

The Group will implement a comprehensive development strategy for business growth by diversifying its customer base, regional market and business scope, and by the driving power of its innovative technologies, in orders to offset the volatile nature of the business and ensure a stable business growth.

In 2013, the Group plans to establish sales and marketings operations in Xinjiang, Inner Mongolia, Shanxi, Shaanxi, Yunnan and Guizhou Provinces to establish a more effective marketing network via establishing close proximity to its customers, actively expanding its domestic petrochemicals and coal-to-chemicals client base and optimizing its client structure. Furthermore, it will also strengthen its key account management system so as to establish longterm and mutually beneficiary cooperative relationships with them.

In addition, the Group will actively expand into overseas markets to diversify its clientele in the regional markets. The Group has established subsidiaries or branch offices in Singapore, Saudi Arabia, Indonesia and Venezuela. Furthermore, the Group has accumulated execution experience by working on international projects in China managed by multinational giants such as BASF and Shell. The Group will capitalize on its experience in milestone projects in the domestic market to expand into international markets. It expects to achieve sustained growth in regional sales by exploring business opportunities in emerging markets such as Southeast Asia, the Middle East, West Africa and Latin America, where there is growing demand for petrochemical products.

Moreover, the Group will expand business scope and deepen market penetration by further developing upstream and downstream business in petrochemicals, oil refinery, and coalto- chemicals, such as the ethylene and fine chemical production units. The Group will also enlarge project management service portfolio by providing customers with value-added services spanning from the preliminary project planning and consultation to the whole project life cycle. In addition to maintaining its leading position in petrochemical area, the Group will endeavour to secure more project orders by capitalizing on its strong project execution capabilities, technological innovation, outstanding track record, extensive network of suppliers and subcontractors as well as its strong relationships with customers so as to expand business scope and its market share.

2. Strengthening technology acquisition and innovation capabilities

The Group will boost its future business growth by exploring new business opportunities and strengthening its development and competitive edges in the core technologies. In 2013, the Group will continue to step up its efforts in research and development through various approaches, such as expanding its R&D team, establishing R&D centers in Shanghai and a R&D engineering center in Beijing. In order to fortify its R&D capabilities, the Group will upgrade its existing core technologies by establishing cooperation or alliances with domestic and overseas professional research and development institutions. Furthermore, the Group's market development and technology innovation will be mutually driven and promoted. For example, it is developing new hybrid gasification technology through cooperation with Shell Global Solutions in order to transform low-cost feedstock such as coal into high value-added products. Meanwhile, the Group will commence a research project on the full set of butene oxidation and dehydrogenation technologies in a quick response to market demands, and will strengthen its market promotion for commercial applications in order to support the business growth of the Group. In addition, the Group will also develop new technologies, mainly on shale gas and oil gas pre-processing as well as LNG modularization, so as to diversify its revenues sources.

3. Enhancing operations management

By making reference to the leading international players, the Group will steadily establish operating mechanism and management system that meet international standards to standardize, regulate and streamline our project management and to improve resource integration. Furthermore, it will expand its overseas project execution team to strengthen overseas project management and risk control capabilities, as well as improve the overall EPC capacity and build its brand for overseas projects, so as to set up a good platform for the Group to fortify its overseas expansion.

In 2013, with the commencement of the principal construction phase of various projects, including the Saudi De-Bottlenecking (DBN) Project, Yanpet Benzene Mitigation Project, Chongqing BASF MDI Complex Project, Guotai 400 kta Methanol Project, Pucheng Polyethylene Plant Project and Auxiliary Utilities Project, the Group will further strengthen its comprehensive project management capabilities to ensure the projects will be completed in high quality and timely manner, while reaching key performance indicators.

4. Nurturing talents and strengthening the information system management

In the area of talent development, the Group is committed to cultivating a diversifi ed corporate culture and creating a favorable internal and external working environment. It continues to recruit and retain talent in the field by offering competitive remuneration and promising career prospects. By boosting manpower and executive recruitment, the Group will be able to strengthen its advantage in human resources. It will establish a comprehensive recruitment network in the PRC and overseas to diversify its talent pool to enlarge its overseas project execution, engineering and R&D team. Internal resources will be further integrated in a systematic manner. Furthermore, the Group will establish an effective incentive mechanism and improve its training and team building system.

As for information management, the Group will improve and optimize its online project management platform and enhance the integration of application software used in project management to eliminate any information isolation. It will improve efficiency and quality in project management and reduce operational risks.

In addition, the Group will continue to improve the effectiveness and efficiency of its corporate governance structure and internal control system from the perspective of the overall operation so as to meet the standards for an international public company.

As a leading EPC service provider in the petrochemicals, oil refinery and coal-to-chemicals industries, the Group will continue to consolidate its market position and enhance its strengths through the above measures. We will also closely monitor the development trend of the industry, to seize the tremendous opportunities arising in the domestic and overseas markets and strive for a sustainable business development.

Source: Wison Engineering (02236) Annual Results Announcement
Chairman Hua Bangsong Issued Capital (shares) 4,065M
Par Value HKD 0.1 Market Capitalisation (HKD) 12,966M
 
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