Haike Chemical Group Regulatory News (HAIK)

HaiKe Chemical Group Ltd

Trading Update

HaiKe Chemical Group Limited ("HaiKe" or the "Company" or the "Group") (AIM: HAIK), the AIM quoted petrochemical, speciality chemical and biochemical business based in China, today provides an update on trading ahead of its final results for the twelve month period ended 31 December 2013.

The refining business remained volatile throughout H2 with the demand for gasoline recovering in Q3 but then falling in Q4. A contributing factor for this mixed second half was due to the government action regarding environmental concerns about the haze emitted from automobile exhausts. Conversely, the market for diesel picked up slowly in Q4 on the back of rising demand from both industrial and heating use.

The relaxation of the pricing mechanism has had an immaterial impact on the refineries, and overall the move towards a freer operating environment remains encouraging. The Company has adapted operating strategies in order to compensate for the volume shortfall and improve overall margins, for example making continued improvement to the product mix in order to focus on the more profitable high-end products, through the development of niche products for specific areas and by increasing trading activity which has low but stable margins.

The speciality chemicals business remained profitable in H2. Specifically, High-tech Spring has overcome the difficulties of volume decrease and margin squeeze and made a modest profit in H2. Hebang generated a small profit in Q4 but this was not sufficient to cover the prior losses. The Group has taken certain actions to adapt to the changing environment and further develop the speciality chemical division. These include making best use of its existing resources by, for example, increasing exposure to trading and implementing more efficient tax planning.

There was no significant change to the biochemicals business which made comparative earnings in H2.

On the financial side, the Group recorded a total turnover of CNY36.8 billion for the first 11 months of 2013, up 140% year-on-year. Accumulated net loss after tax for the period was CNY359.8 million, compared to a loss of CNY186.9 million for the same period in 2012. Net borrowings (short/long term borrowing minus bank deposit) amounted CNY7.4 billion at end-Nov, compared to CNY6.2 billion at beginning of the year.

Against this background the Group continues to explore its restructuring options in order to try to realise value for all stakeholders. 

Mr Xiaohong Yang, Executive Chairman, said:

"We are disappointed by the performance especially in the refinery division. Given the difficult operating environment, we've carried out several measures to compensate for the shortfall in the refinery as well as further development of speciality chemicals. Meanwhile, the Company continues to examine various options for the best interest of our shareholders."

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