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Shandong Rike eyes factory, products to fight slowdown

By: Steve Toloken

October 28, 2013

DÜSSELDORF, GERMANY — Chinese additive maker Shandong Rike Chemical Co. Ltd. is hoping that a new facility making acrylic chlorinated polyethylene modifiers and other new products it launched at K 2013 can help it overcome softness in China's construction market that dented earnings in the first half of the year.

Rike opened a 50,000-metric-ton facility for making acrylonitrile modifier in Shandong province earlier this year. It was using the K fair to tout those ACMs, a new processing aid it developed for injection molded pipe fittings to replace plasticizers, and new products among its capstocks and other offerings.

Chairman Zhao Dongri said the slowdown in China's real estate sector and less lending by banks have hurt the market. Additives for PVC building materials are a big part of Rike's business.

The publicly traded company told the Shenzhen Stock Exchange in August that sales fell 5.8 percent in the first half of the year, to 484.8 million Chinese yuan ($79.4 million) and net profit dropped 48 percent, to 33.7 million yuan ($5.52 million), compared to the same period in 2012.

"The China market and the Asian market have been tough but we continue to position for growth," said Thomas Saloom, senior vice president of research and development at Rike, and an executive vice president at Performance Additives Inc., Rike's Yardley, Pa.-based partner in North America. "There has been a slowdown in the housing market in China."

Still, Rike has seen sales generally growing, from 738.8 million yuan ($121.1 million) in 2010 to 1.047 billion yuan ($171.6 million) last year.

The company said it wants to focus on innovation and continues to see opportunities in the global market as some of the large traditional players scale back.

Performance Additive President Arthur Van Nostrand noted that Dow Chemical Co., for example, had put its additives business on the selling block but then withdrew that last month, with Dow executives saying they preferred to manage it for cash. He said that creates opportunities for companies focused on innovation.

"We are very committed to the PVC market to grow and produce innovation," said Van Nostrand, adding the K show is a chance for the company to continue its globalization push in the United States and Europe.

About 30 percent of the company's products are exported, and Zhao said he's projecting more growth in exports than in China's domestic market in the near term. He said the company wants to focus on providing solutions rather than selling products.

Rike and Performance Additives have also changed their business relationship. Previously, Performance Additives had an ownership interest in Rike but it divested that, Saloom said.

He declined to offer more details, but said the two companies have signed a 15-year cooperation agreement and have strong links.