China Sunsine Q2 net profit falls 35% on lower average selling price

SPECIALTY rubber chemicals producer China Sunsine Chemical Holdings on Tuesday posted a net profit of 155.8 million yuan (S$31 million) in the second quarter, down 35 per cent from the same period a year earlier.

Revenue in the three months ended June 30 fell 17 per cent to 727 million yuan as a lower average selling price (ASP) offset a rise in sales volume.

ASP in the second quarter slipped by 29 per cent from the same period a year earlier to 16,633 yuan per tonne. On a quarter-on-quarter basis, ASP fell 6 per cent.

The decrease in ASP was due mainly to a fall in the price of raw materials, in particular, Aniline, the group said. A high base effect was also at play. The ASP in the second quarter last year was at a high level as a result of a rubber chemicals supply shortage, the group said.

Total sales volume in the second quarter rose by 15 per cent to 43,363 tonnes. This was attributed to the addition of two production lines - 10,000-tonne high-end accelerator TBBS and 10,000-tonne Insoluble Sulphur - which started operations from January 2019 and December 2018 respectively.

Gross profit margin narrowed to 34.7 per cent from the peak of 36.7 per cent in the second quarter last year.

The group said in its results filing: "China's economic growth is continuing to slow down. Raw material prices are still hovering at low levels, and as such, the group's ASP for rubber chemicals is under pressure.

"In addition, the utilisation rate for the Chinese tire makers is not high, and some players whose operations were previously affected by environmental issues may have resumed their operations. As such, competition may become more intense, which will further challenge our ASP."

China Sunsine said it would try its best to increase its sales volume and maintain its strategy that "higher production leads to higher sales volume, which in turn stimulates even higher production".

Earnings per share was 31.77 fen, down 35 per cent from 48.75 fen in the same period a year earlier.

Net asset value per share was 499.60 fen as at June 30.

China Sunsine shares closed flat at S$1.07 on Tuesday before the results were released.