China Sunsine clarifies cheaper raw materials led to lower cost of sales

SPECIALITY rubber chemicals producer China Sunsine Chemical Holdings on Tuesday clarified that despite the increase in overall sales volume last year, its cost of sales had decreased mainly due to lower raw material cost.

Cost of sales fell 11.1 per cent to 1.91 billion yuan (S$390.6 million) for the year ended Dec 31, 2019, contrasting with a 10.5 per cent increase in sales volume to 167,455 tonnes.

Prices of its main raw material, Aniline, declined more than 30 per cent last year due to oversupply in the market, mainboard-listed China Sunsine said in response to queries from the Singapore Exchange (SGX).

The oversupply came about after a major supplier in China stopped its 200,000-tonne Aniline production line for a year till the fourth quarter of 2018, due to an accident. The stoppage resulted in a shortage of Aniline in 2018 and led to higher prices that year, before the production line resumed in November 2018 and thus pushed market prices down for 2019, China Sunsine said.

Other than raw material cost, other costs of sales increased as a result of higher sales volume, it added.

In response to another query from SGX, the company also disclosed that it received higher interest income on bank deposits last year, which was the main reason for the increase in its other operating income.

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The group had placed more of its cash into fixed deposits in 2019, China Sunsine said on Tuesday.

Other operating income had surged 20 per cent or 7.8 million yuan to 46.5 million yuan last year, compared to 38.7 million yuan in 2018.

Meanwhile, foreign exchange gain - another component of other operating income - increased by 6.4 per cent to 21.4 million yuan, mainly arising from the appreciation of the US dollar and Singapore dollar against the yuan, China Sunsine clarified.

Separately, the company also replied to SGX that three of its projects which cost a total of 480 million yuan will all be funded internally.

In its results released on Feb 28, China Sunsine had stated that it will construct the first phase of a 30,000 tonne per annum plant at the Shanxian Chemical Zone costing 270 million yuan; the second phase of a 20,000 tonne per annum project at its existing production line, which will cost 60 million yuan; and a 30,000 tonne per annum plant in Shanxian with a budget of about 150 million yuan.

Shares of China Sunsine Chemical were up 0.5 Singapore cent or 1.8 per cent to 29 cents as at 9.06am on Wednesday.