On the surface, China's largest plastics compounder Kingfa Science and Technology Co. Ltd. seems to have had just another good half-year, with net profit surging more than 30 percent.
But the first half results really marks some significant watershed moments for the industry-leading player.
Its operating sales growth came in at a mere 2.05 percent, dwarfed by 12.08 percent growth in the first half of 2014, 11.56 percent in the full year of 2014, 17.86 percent in 2013, and 6 percent in 2012.
Thanks to China's macroeconomic slowdown, Kingfa's domestic sales growth stood at 1.74 percent, a fraction of already modest overseas growth rate of 5.25 percent. In the past, domestic growth has mostly outpaced export growth, with the ratio at 12.34 percent/3.55 percent in 2014, 19.09 percent/6.16 percent in 2013, and 5.74 percent/6.09 percent in 2012.
On the bright side, lower feedstock prices have lifted the company's gross profit margin to 16.46 percent. That's a nice recovery after years of steady decline — from 17.56 percent in 2012, to 14.83 percent in 2013, and to 14.11 percent in 2014.
Even though the domestic market still makes up for 91.13 percent of its overall business, Kingfa has seen some notable progress in overseas market development.
The Guangzhou-based company established a wholly owned subsidiary in the United States in February, in Ann Arbor, Mich., hoping to improve its service to global clients and grab some market share in the booming U.S. automotive market.
Also, Kingfa's India subsidiary, Hydro S&S Industries Ltd., has stopped bleeding and turned green, reporting a net profit of 703,663.56 yuan ($111,202), compared to a loss of 3,857,801.20 yuan ($601,000) in the first half of 2014, a loss of 7,089,598.66 yuan ($1.1 million) in 2014, and a loss of 3,939,169.80 yuan ($616,909) in 2013.
Kingfa acquired controlling stakes (82.8 percent) in Hydro S&S in May 2013 and currently holds a 75 percent share.
In the domestic market, Kingfa made a smart move into supply chain management in the first half of this year. The company formed a supply chain management subsidiary in Zhuhai in March to lower its own procurement costs as well as to add another profitable business.