Haike Chemical Group Regulatory News (HAIK)

23 Jul 2009 07:00



HaiKe Chemical Group Ltd.

Trading Update

HaiKe Chemical Group Ltd ("HaiKe" or the "Company"), the AIM quoted (AIM: HAIK) petrochemical, speciality chemical and biochemical business based in China, is pleased to provide an update on current trading. 

Following a volatile 2008, trading conditions for the first six months of 2009 were more favourable, which resulted HaiKe returning to profitability in the period. The recovery in profitability was largely driven by significantly increased margins in the petrochemical business. 

In the first half of 2009, the Company experienced more stable market conditions, particularly in the petrochemical sector. Global crude oil prices only fluctuated within a small band, stabilising the overall margin and profitability of the Company's petrochemical business. As a result, the division delivered a strong performance and returned to profitability for the first half of 2009. The PRC National Development and Reform Commission ("NDRC') announced on 8 May 2009 that the Chinese government would implement more flexible pricing mechanism for certain refined products. In the first six months we have already seen three upward price adjustments which have had a positive effect on the Company. Prices for gasoline and diesel have increased by RMB1, 150 and RMB1, 020 per tonne respectively since the end of last year.

In April 2009, the Company announced a joint venture with two local investors for a new refinery to be built in the new Dongying Port Development Area. This area is located three miles from the Dongying Port providing easy access to cheap and efficient transportation. Following the announcement, the construction for the new refinery site is on schedule and the Company expects to complete the site construction by the end of this year. Our continuing investment in the refinery business will enable the Company to continue to take advantage of the expected high level of future demand for refined products in China. The speciality chemical sector has been suffering from lower demand globally due to financial crisis. As a result, the Company's specialty chemical production was running under the break-even point during the first half. However, following the PRC Government's implementation of various stimulus plans earlier this year, we have seen demand for specialty chemical products start to recover and we anticipate a stronger performance in the second half. 

HaiKe's biochemical business has been growing fast in terms of both sales volume and profitability. Construction of the facility to manufacture an injectable version of heparin is also on track and it is expected that the new plant will be ready for Chinese and overseas food and drug administration certification by the end of 2009.

Mr. Yang Xiao Hong, Executive Chairman, said:

"Our first half performance strongly reflects the more stable market conditions in the petrochemical sector. We welcome the latest announcement by the NDRC on the pricing mechanism for refined products and believe that it will have a positive impact, improve margins and profitability for the petrochemical business and the Company as a whole. When the new refinery facility at Dongying Port is completed, HaiKe will be in an even stronger position to benefit from increases in selling prices, and with production facilities now predominantly focused on higher margin products, we expect to see further growth in revenue and profit going forward.

The biochemical business remains encouraging and again, we are concentrating our efforts on the production of high marginal products. We look forward to being able to meet the increasing demand for our speciality chemical products as a result of the current government economic stimulus measures and we are confident that this part of our business will make a significant contribution going forward."

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