Chinese automotive compounder China XD Plastics Co. Ltd. is sending a clear message of diversification, based on an interview with Plastics News at the recent NPE show and comments executives made on a May 11 earnings call.
At NPE, company Chief Operating Officer Ma Qingwei highlighted new projects in bioplastics and 3-D printing, as well as new end markets including high-speed rail, marine, airline, electronics, medical devices and food packaging.
While acknowledging that automotive will remain its core business, the company said it aims to diversify and reduce its exposure to a single industry or region, in order to achieve continued and sustainable growth.
The company is launching its first overseas production base in Dubai by the end of this quarter, said Chairman and CEO Han Jie, with an initial annual capacity of 2,500 metric tons. That number is dwarfed by the capacity at XD's headquarters in Harbin (390,000 metric tons) and its upcoming Sichuan facility (300,000 tons), and the company already plans to expand the Dubai capacity to 18,000 tons.
The Dubai site has secured some orders from South Korean customers and expects to attract more business from Germany and Russia. Its products are positioned as small batch, high-margin specialty plastics for use in functional auto components, high-end electronics, circuit boards, ships, and high-speed rail applications.
South Korea is XD's largest export market, accounting for 15.7 percent of total sales.
The Sichuan project is still under construction and is slated to open in early 2016.
According to Chief Financial Officer Taylor Zhang, the company expects the total capacity to be close to 500,000 metric tons by 2017 with utilization close to 80 or 85 percent.
In the first quarter of this year, sales came in at $221.9 million, down 0.8 percent from $223.6 million in the first quarter of 2014. The company attributed the slight sales decline to the 1 percent decrease in the average selling prices, partially offset by a 0.6 percent increase in sales volume.
Partly thanks to lower raw material that were the result of falling crude oil prices, gross margin gained 1 percentage point year-over-year to 21.9 percent. Net profit increased 15.5 percent to $25.4 million.