China's Sinochem 2010 chemicals profit falls 9.7% on high costs

28 February 2011 09:27  [Source: ICIS news]

GUANGZHOU (ICIS)--China’s leading chemical trader, Sinochem International, said on Monday that its chemical business had a 9.7% decline in gross profit in 2010 at (CNY) 227.2m ($34.5m) due to much higher costs.

The segment’s turnover surged 89.5% to CNY11.2bn but cost of goods sold ballooned to CNY10.9bn from just CNY56.4m in 2009, the company said in a statement.

“[The] purchase prices of chemicals, especially petrochemicals, rose heavily since the second half of 2010 amid strong crude oil,” said Qiu Ziyuan, analyst at Shenzhen-based brokerage China Merchants Securities.

Traders then have had to secure supply at much higher prices that they could not immediately pass on to clients as demand within China’s domestic market was not strong, Qiu said.

“Basically, supply increased faster than demand. Both domestic and overseas producers raised outputs of polyolefin. However, domestic demand didn’t grow in pace with that production increase, leaving markets in oversupply and [resale] prices failed to gain much,” said a sales manager at Sinochem.

Meanwhile, Sinochem’s agrochemical business posted a 28.6% increase in gross profits to CNY232.2m last year, while its rubber business more than doubled its gross profits to CNY1.1bn.

Sinochem reported an 8.1% rise in overall net profits for 2010, with operating revenue up 74.5% to CNY39.7bn.
Its operating profit increased 37.4% to CNY1.2bn, the company said.

($1 = CNY6.58)

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By: Fanny Zhang
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