Last year was not a great year for Nasdaq-listed compounder China XD Plastics Co. Ltd., and the decline is across the board for 2015 on sale volume, sales, gross margin, gross profit and net profit.
Specifically, on a year-over-year basis, total shipped volume dropped 2.7 percent to 332,144 metric tons, sales went down 10 percent to $999.2 million, gross profit margin lost 180 basis points to 18.2 percent, gross profit decreased 18.4 percent to $181.4 million, and net profit tumbled 30.7 percent to $80.7 million.
In addition to the dip in sales volume, a 5.5 percent decrease in the average RMB selling price also impacted both topline and bottom line.
The automotive compounder attributed the weak financials to a combination of general market conditions and the delayed payment of a South Korean customer.
“Challenging macroeconomic conditions in China has impeded the growth of the domestic automotive market, which stalled our record of steady growth for the first time last year,” said Chairman and CEO Han Jie. “Because of the challenging operating conditions, our domestic market experienced a 1 percent decrease in sales volume and a 1.4 percent decrease in the average selling price of our products in fiscal 2015 as compared to fiscal 2014.”
“With the slowing domestic economy, vehicle sales in China grew by only 4.7 percent in 2015, the slowest rate in 25 years, and both the automotive and automotive parts industries in China have experienced pricing pressure,” he said.
As for the South Korean customer, even though China XD was able to collect the outstanding balance by the end of year, total sales to that customer is down, compressing China XD's overall overseas sales ratio from 12 percent to 7 percent, CFO Taylor Zhang explained in the March 15 earnings call.
The company added that it has been looking for new prospects in South Korea, Germany and Russia and is “confident” to secure new overseas orders this year.
In the domestic market in China, the company's largest end customer FAW Group — which indirectly represents more than 40 percent of China XD's 2015 sales — was struggling with product competitiveness and internal restructuring in 2015. “Last year was indeed a rough year,” Zhang said, “FAW [had] a historical low year since Audi model was introduced in China.”
Zhang added that FAW implemented some promising new initiatives in the fourth last year and “will continue to be a major player in the auto industry.”
Looking forward, the company said its Sichuan production base will launch in the second half of 2016 with 60,000 metric tons of annual capacity. Its new Dubai facility, currently with 2,500 tonnes of “high end products” in annual capacity, will be expanded with an additional 14,000 metric tons by the beginning of 2017.