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China's Kingfa fighting domestic slowdown

By: Nina Ying Sun

September 10, 2012

GUANGZHOU, CHINA (Sept. 10, 5 p.m. ET) — Guangzhou-based Kingfa Science & Technology Co. Ltd., ranked as China’s largest plastic compounder, reported mixed results for the first half of the fiscal year. The company cited a notable slowdown among its major end markets, including automotive, appliances and electronics, though automotive materials sales managed to grow at a double-digit pace.

In the half-year report, the company said operating income grew 2.4 percent year-on-year to 6 billion yuan. Net profit dipped 30 percent to 398 million yuan, mainly because the company received 215 million yuan in revenue through the sale of its shares in a real estate company in the first half of 2011. With that factor excluded, net profit grew 7.4 percent year-on-year. Consolidated gross profit margin came in at 17.3 percent, about the same level as last year.

The company sold a total of 442,200 metric tons of products during the first half, including its trading business, registering 11.3 percent year-on-year growth. Excluding the trading business, it sold 321,300 tons of plastic compound materials, about 4 percent higher than the same period last year.

Thanks to aggressive technological and marketing pushes, sales of automotive materials rose 12 percent, while car sales in China only increased by 3 percent during the same period, the company said.

Sales picked up in the second quarter, growing 20.5 percent compared to the first quarter. Net profit in the second quarter soar by 63.8 percent compared to the first three months of the year.

Kingfa said it’s on track with its eight ongoing expansion projects. Two of them, the 200,000-ton automotive material project in Guangzhou and the 150,000-ton recycled plastics project, have started generating revenue. The company plans to improve its product and capacity structure during the second half and stay ahead of the market.

It aims to reach 1.2 million tons of compounding capacity by 2015.

Geographically, operating income rose 11.4 percent in overseas market, while domestic growth was 1.6 percent during the first half.

Kingfa’s new materials business, including biodegradable resin, carbon fiber material, wood-plastic composites, and specialized engineering resins are making slow progress. Biodegradable materials are not expected to cast a positive impact on 2012 performance, the company noted, due to the shutdown of its facility in Zhuhai for maintenance.