On behalf of the Board of Directors of China Sunsine Chemical Holdings Ltd. (“China Sunsine”, together with its subsidiaries, collectively the “Group”), I am pleased to report that China Sunsine has produced a resounding performance for the financial year ended 31 December 2016 (“FY2016”).
New Record Profit Year
FY2016 was a challenging year due to the uncertainty of the global economic environment and China’s GDP experiencing the lowest growth rate since 2009. We continue to operate in an industry which is tightly regulated by very stringent environmental protection laws in China, and are subject to volatile raw material costs and intense competition. Despite these challenges, the Group was still able to deliver an outstanding scorecard and stand out from the intense competition, which demonstrate the Group’s solid all- round strengths, including successfully implementing stringent environmental protection measures over the years.
Our brand name is widely known and accepted by our customers. In 2016, the Company’s main subsidiary, Shandong Sunsine Chemical Co., Ltd, was listed in the First Batch of the National Champion Manufacturing Enterprises by the Ministry of Industry and Information Technology of the PRC. This has resulted in greater awareness and influence of our brand name in China.
During the year, the Group achieved a new record net profit of RMB221.7 million. This was due to the adoption of our strategy – higher production leads to higher sales volume, and higher sales volume stimulates higher production, thereby achieving equilibrium in production and sales volume. Underpinned by our strong brand name and environmental protection measures, our sales volume in FY2016 reached a new record high.
In FY2016, we did very well in all aspects. The Group’s revenue rose 10% to RMB2,036.9 million from the previous year, largely due to the increase in both overall average selling price (“ASP”) and sales volume. ASP for all products increased by 3%, whilst total sales volume grew 19% year-on-year to another record high of 135,791 tons. This was the 8th consecutive year of sales volume growth since IPO in 2007. The gross profit grew 10% to RMB540.4 million, while the overall gross profit margin (“GPM”) for FY2016 remained the same as the previous year at 26.5%.
The Group’s earnings per share in FY2016 was RMB47.66 cents and net assets value per share was RMB293.42 as at 31 December 2016. Our balance sheet is healthy and strong, with net cash of RMB275.9 million and zero bank loans (the Group having repaid all outstanding bank loans in FY2016).
The Group has over 1,000 customers, and continues to serve 65% of the world’s top 75 tire-makers. Our accelerators’ market share continued to grow to 31% in the PRC and 18% in the global market. In 2016, China’s auto sales ranked No. 1 in the world for 8 consecutive years as it continued to grow with a 13.7% year-on- year growth to a record high of 28.03 million units in 2016 (source: China Association of Automobile Manufacturers). Being the world’s largest auto market and with the increasing purchasing power of the Chinese population, we believe China’s auto market will remain robust over the next few years.
Organic Growth Driven by Demand
To cope with the rising demand for rubber accelerator TBBS due to the increase in production of radial tires, the Group has started construction of a 30,000-ton annual capacity plant in Shanxian, to be split into 2 phases. The construction and installation of machineries for the Phase I, 10,000-ton TBBS production line was completed at the end of 2016, and we expect the commercial production to commerce in the second half of 2017.
Another 10,000-ton production line of Insoluble Sulphur will also be added to our Dingtao plant by end of 2017, boosting our total capacity of Insoluble Sulphur to 30,000-ton per annum.
In addition, Guangshun heating plant has started its expansion to add one boiler and one electricity generator in order to cope with the higher demand for steam.
Through expanding our production capacity, we will further strengthen our market leadership position.
The Group expects the current year to remain challenging.
China’s economy will continue to experience a slower growth rate, the global economic situation has become even more uncertain, and international crude oil prices have remained volatile, which may result in the fluctuation of our raw material prices and consequently, our gross profit margin may come under pressure.
In China, safety and environmental protection regulations are getting more and more stringent. The Group will continue to invest further in safety and environmental protection, and will step up technological innovation to achieve sustainable growth.
The Group remains confident of its performance and outlook for the future.
In consideration of the Group’s FY2016 results, the Board of Directors has recommended a total dividend of 1.5 Singapore cents per share (same as FY2015). This proposed quantum comprises a final one-tier tax exempt dividend of 1 Singapore cent per share plus a special one-tier tax exempt dividend of 0.5 Singapore cents per share, subject to shareholders’ approval at the forthcoming Annual General Meeting.
In July this year, we will celebrate the 10th anniversary of our listing on the SGX-ST. Our fast growth over these years would not have been possible without the generous support from various parties. On behalf of the Board, I wish to express my sincere gratitude to our customers, business partners and suppliers for their continued support. I also would like to thank all of my fellow directors, management and staff for their ongoing dedication and commitment to the operations of the Group itself. Their drive and professionalism provide a strong foundation for our continued success.
Last but not least, I would like to thank you, our faithful shareholders, for being with us, and for your continuous support and confidence in us. I am confident that we are well-positioned to write our next growth story and create even more value through long-term sustainable growth.
Xu Cheng Qiu