A payment delay from a South Korean customer, coupled with overall market slowdown, is pressuring a Chinese compounder to adjust its financial guidance.
Nasdaq-listed China XD Plastics Co. Ltd. announced this week that it expects its full-year 2015 revenue to be in the $900 million to $1 billion range, down from the $960 million to $1.06 billion range it forecasted last month in the mid-year report.
The company also cut its net income forecast from the $100 million to $120 million range to $80 million to $100 million, a double-digit percentage adjustment.
China XD attributed the revision to two reasons — an export payment collection issue and domestic pricing and margin pressure.
The company said it has experienced a delayed payment from a South Korean customer and has implemented a one-time cease-supply for 60 days. Both parties are actively negotiating pricing and payment terms, it said.
“The primary cause for the revision is a likely reduction in business from a relatively new overseas customer attributable to payment collection issues. We view this as a one-time event and we are taking steps to resolve this matter,” Chairman Han Jie said in a statement.
In the meantime, the Harbin-based automotive compounder reported mounting pricing and margin pressure from its domestic customers, due to the continuing slowdown of China's auto sector and the upstream supply chain.
“The company estimates that approximately 89 percent of the revision to its full year 2015 net income guidance range is attributable to the overseas customer situation addressed above, while approximately 11 percent of the revision is attributable to China's macroeconomic environment.”
Han, however, reassured investors of the company's long term growth potential with continued expansion projects.
“Our long term growth strategy remains intact. Our Phase 2 expansion in Dubai is on track for completion by the end of 2015, and we expect the new facility to fulfill orders from new customers in South Korea and Europe in early 2016. In addition, our Sichuan campus is on schedule to be operational in the first half of 2016.”