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Ye's chemical announced that the mid-term performance sales in 2020 reached HK $4.47 billion

Ye's chemical announced that the mid-term performance sales in 2020 reached HK $4.47 billion

August 26, 2020


the net profit attributable to shareholders of the company, excluding the one-time expenditure due to the planned spin off of the ink business for independent listing, decreased slightly compared with the same period last year

the use of the group's funds continued to improve, and the loan ratio dropped to 29.2%

the board of directors decided to distribute an interim dividend of HK $6 per share to actively repay shareholders

the Group continues to focus on China's domestic demand market, closely follows the pulse of the market, and meets the challenges and opportunities in the second half of the year

Ye's chemical group all our experimental machines are workable limited companies (share No.: 00408) ("Ye's chemical" or "group") announced their interim results for the six months ended June 30, 2020 (the "review period")

during the review period, COVID-19 broke out and quickly swept the world, which had a serious impact on China and the global economy. The Group recorded sales of about HK $4.47 billion, a year-on-year decrease of 9.6%, while the overall sales reached about 662000 tons, a year-on-year increase of 5.4%. Net profit attributable to shareholders amounted to HK $58.8 million, a year-on-year decrease of 33.5%. This is due to the decline in sales, the depreciation of RMB by nearly 2% during the period, and the exchange loss recorded. In addition, the group is preparing to spin off its ink business and carry out corporate restructuring, resulting in a one-time professional fee of HK $21million. The group further optimized the use of funds, and the loan ratio decreased to 29.2%, a year-on-year decrease of 18.4 percentage points. The board of directors decided to distribute an interim dividend of HK $6 per share (the same period in 2019: HK $7 per share) to actively repay shareholders

"Mr. yezhicheng, chairman of Yeshi chemical industry, said: "The COVID-19 has led to the closure of many areas in the mainland for nearly two months, and economic activities have almost stopped. The group's business in the mainland has inevitably been affected. We have actively taken various countermeasures, including strengthening financial strength, controlling operating expenses and developing more products and services, to enhance our competitive advantage. Through flexible business strategies and risk management, the group has built its business foundation in a challenging business environment Still solid and in a sound financial position. "

Business Review and outlook


during the review period, the sales volume of solvent business increased by 7.5% year-on-year to about 540000 tons, and the sales volume decreased by 6.1% year-on-year to about 3.2 billion Hong Kong dollars due to the simultaneous decline of raw material prices and product prices. Benefiting from the strategy of purchasing overseas raw materials and operational improvement during the review period, the gross profit margin increased by 2.5 percentage points to 10%. Operating profit recorded about HK $151million, a year-on-year increase of 47.3%. Affected by the epidemic situation, the export volume of solvent business has decreased significantly since the second quarter of this year. However, domestic demand has maintained a growth momentum, and the overall sales of solvent business are still dominated by the mainland market

as the new Taixing production line in East China was successfully put into operation in the third quarter of last year, the output of solvent business in East China was consolidated and helped the sales team actively expand the market in East China. As for the development of the South China market, the group has made great progress in its plan to build a new plant in South China. It has decided to select Gaolan Port, Zhuhai, to build a new production plant, and has completed the land purchase procedures. All aspects of approval, design and construction are proceeding in an orderly manner. It is expected that the new plant will be completed and put into operation at the end of next year


the coating business was greatly affected by the epidemic during the review period, and the sales decreased by 22.7% year-on-year to about HK $629million, mainly due to the suspension of various large and small construction projects during the epidemic period, and the Bauhinia Flower and camel paint sales stores were unable to operate normally in the first quarter, resulting in a significant decrease in sales. At the same time, the orders of some furniture and toys customers that depend on export are affected by the need to replace oil pipes with higher strength, which has reduced the sales of relevant industrial coatings. Although the gross profit margin remained at the level of last year, reaching 29.3%, due to the decline in sales, the fixed costs were not fully shared, and the operating profit recorded about HK $1.9 million, a year-on-year decrease of about HK $31.8 million

looking forward to the second half of 2020, as the domestic epidemic is gradually under control, the economic recovery in the mainland will drive the demand for civil and engineering architectural coatings and industrial coatings for domestic demand, and the export of industrial coatings will continue to be challenged. The group will vigorously promote measures to expand sales and is cautiously optimistic about the sales growth in the second half of the year


the sales of the ink business during the review period reached about HK $525million, a year-on-year decrease of 12.0%. The sales volume was nearly 25000 tons, a year-on-year decrease of 5.0%. Operating profit decreased by 61.3% to about HK $17million, mainly due to the one-time exchange losses, special taxes and professional fees totalling about HK $21million caused by the corporate restructuring in preparation for spin off and listing. If the impact of the one-time expenses (excluding taxes) is excluded, the operating profit actually decreases by about 27%. The group effectively controlled the operating costs, and the gross profit margin only slightly decreased by 1.7 percentage points to 20.7%. As the second half of 2020 enters the traditional peak season of ink business, the Group expects that the business will have a higher chance of achieving the annual sales target

in July this year, the group announced that it had been approved by the Hong Kong stock exchange to spin off the ink business for independent listing. The ink business is aiming to submit a listing application to the relevant domestic regulators early next year. If the proposed A-share listing is approved and carried out, it is expected to be listed on the Shenzhen stock exchange around the end of 2021. The spin off plan can provide capital for the operation and expansion of the ink business, enable the business to face the debt and equity capital markets, and establish an independent financing platform. At the same time, it can fully reflect the development potential of the group's business, which is conducive to the release of enterprise value

lubricating oil

affected by the epidemic, the demand of local car owners for automobile maintenance has decreased. In addition, the limited operation of automobile repair shops in the first quarter of 2020 has led to the reduction of the use of automobile lubricating oil. During the review period, the sales volume of lubricating oil business reached about HK $81.4 million, a year-on-year decrease of 25.0%. The gross profit margin reached 26.5%, similar to that of last year, mainly due to the relatively low price of raw materials. In the first half of the year, some customers delayed payment collection due to the epidemic, resulting in a provision for bad debts of more than HK $7.3 million. The management actively improved plant efficiency and effectively controlled costs. As a whole, it recorded an operating loss of about HK $9.3 million, a decline compared with the operating profit of HK $6.8 million in the same period last year

the Group expects that with the recovery of the mainland economy in the second half of 2020, the use of automotive lubricants will gradually rise. The management will focus on developing more dealer channels and accelerating the expansion of sales network

other businesses

the Group continues to develop towards "environmental protection", "terminal" and "service" 7.2 inspection items, and actively explore business opportunities related to "home" and "car". At the beginning of 2020, the group completed the capital increase of Damu car maintenance, and the shareholding ratio increased to 61%, becoming the largest single controlling shareholder of Damu car maintenance. By the end of June, 2020, Damao has set up 92 service points in Shandong, Guangdong, Hebei, Hunan and Jiangsu. With the recovery of economic activities in the mainland, the demand for car maintenance services is expected to gradually pick up. Meanwhile, Damao car maintenance will continue to expand its store network in the current provinces through direct sales and franchising, so as to promote the development of the main uses and scope of application of industrial bending testing machines

in terms of property classification, the rental income during the review period mainly came from the lease of Zhangjiang scientific research building in Shanghai. The group is actively seeking tenants for the former Yip's chemical headquarters building in Fanling, and plans to convert some floors into private use to enhance the return on property assets

Mr. yezixuan, chief executive officer of Yeshi chemical, summarized: "Despite the adverse business environment such as repeated epidemics, the group still believes that the economy of mainland China can maintain overall growth. At present, more than 85% of the group's business is focused on the domestic demand market, so it is expected that sales will maintain a steady or slight growth. Following the good momentum of the group's core businesses in optimizing customer quality last year, the group will implement an aggressive and steady strategy, keep close to the pulse of the market, and do a good job at the same time And risk management to meet the challenges and opportunities in the second half of the year. "

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