China’s Yizheng Chem '08 loss at $240m, triples capex in '09

01 April 2009 11:07  [Source: ICIS news]

SHANGHAI (ICIS news)--Sinopec Yizheng Chemical Fibre Company Limited, plans to increase its capital expenditure by almost three times this year despite incurring a yuan (CNY)1.64bn ($240m) net loss in 2008, the company said in a report to the Hong Kong Stock Exchange late on Tuesday.

The company’s capital expenditure for 2009 is expected to be approximately CNY753.7m compared to CNY258.6m last year, the release said without giving a specific breakdown. The world's largest one-site polyester producer plans to spend on reducing energy consumption, enhancinng safety and environment protection and some new projects.

The heavy loss in 2008, compared to a profit of CNY22.3m in 2007, was attributed to the marked fluctuations of crude oil and raw material prices, a significant decrease in the demand from downstream industries and high fuel costs. Turnover of the company dropped to CNY15.2bn from CNY17.2bn in 2007, according to the report.

Domestic polyester prices rose in the first half of last year and dropped in the second half, resulting in the drastic fall of profits margins in polyester products’ amid an extremely difficult business environment, the company said.

There were no signs of improvement in the oversupply situation while domestic polyester production capacity increased sharply during the year. New capacities in the year amounted to almost 2m tonnes, taking China's total polyester production capacity to 25m tonnes.

Meanwhile, the company’s production volume of polyester products totalled 2.05m tonnes, down 3.9% from 2.13m tonnes in 2007 while the total production of purified terephthalic acid (PTA) was 987,894 tonnes in 2008, down 3.6% from 1.02m tonnes in 2007.

It said the short supply of polyester raw materials in 2009 is likely to be eased as domestic new facilities for polyester raw materials come on stream. Polyester producers will be in a better position to negotiate for the purchase prices of raw materials.

However, domestic polyester producers will continue to face a difficult business environment of slowing demand growth on polyester products from downstream textile companies, it added.

To meet the targeted 100% sales-to-production ratio, the company plans to sell 1.69m tonnes of polyester products in 2009 with the planned production of polyester products at 2.22m tonnes and self-consumption volume at 530,000 tonnes. The planned production of PTA is 1m tonnes.

It said the construction of the 300 tonne/year high performance polyethylene project was completed at the end of 2008 and was put into trial operation in early 2009 while the 100 tonne/year aramid fibre project was also put into trial operation in February 2009.

Sinopec holds a controlling 42 percent stake in the company, which is located in Yizheng, eastern Jiangsu province.

($1 = CNY6.83)

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By: Judith Wang
+65 6780 4359



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