Chairman's Message

On behalf of the Board of Directors of China Sunsine Chemical Holdings Ltd. (“China Sunsine” or “the Company”, together with its subsidiaries, collectively the “Group”), I am pleased to present the annual report for the financial year ended 31 December 2021 (“FY2021”).

Although the global economy is still affected by the COVID-19 pandemic, it is gradually recovering from the devastating consequences from 2020. According to the forecast made in January 2022 by the International Monetary Fund (IMF), the global economy grew by 5.9% in 2021. However, China’s economy strongly rebounded thanks to its success in effectively containing the pandemic. It grew by 8.1% for the whole year, making it the fastest growing major economy in the world in 2021.

The global tyre business picked up in 2021; in particular, some overseas tyre manufacturers had further increased production capacity. Coupled with the volatility of raw material prices which had seen sharp rises after September last year, leading to an increase in the sales price of rubber chemicals, the industry’s overall profitability level has increased significantly.

In the face of volatile raw material prices and an increasingly competitive business environment, guided by the strategy of “Higher sales volume leading to higher production, which in turn stimulates even higher sales”, the Group’s expansion projects have gradually seen returns, providing great support to the sales team. The Group also continued to improve its internal management to improve efficiency and cost savings. Leveraging its competitive advantages in scale, capital, brand, product quality, environmental protection and technology, the Group reached another new record high in sales volume and achieved the second highest net profit ever.

The Group’s revenue in FY2021 increased by 60% from the financial year ended 31 December 2020 (“FY2020”) to RMB 3,725.2 million. This was mainly due to the increase in both average selling price (“ASP”) and sales volume. ASP increased by 39% as compared to that in FY2020. Sales volume increased by 15% from the preceding year, marking the 14th consecutive year of growth since our initial public offering. Net profit surged 131% to RMB 506.3 million from FY2020.

We are pleased to see a high overall capacity utilisation rate of above 95 percent in FY2021; in particular, the insoluble sulphur (“IS”) and antioxidants facilities operated above their designated capacities. Each expansion project is also underway and gradually gaining steam.

The Group’s earnings per share for FY2021 was RMB 52.20 cents and net assets per share as at 31 December 2021 was RMB 327.3 cents. The Group’s financial position strengthened further with cash and bank deposits amounting to RMB 1,377.3 million, and no borrowings.

In 2021, being the world’s largest rubber accelerator producer and China’s largest rubber chemicals enterprise, the Group’s market share further increased. We have pulled ahead of our competitors, and have become more competitive.

To execute the “Sales and Production Equilibrium” strategy and meet the increasing demand for our products, we have established a range of expansion plans in recent years. Here is an update on the progress of the expansion projects carried out in 2021:

• • Phase I 30,000-tonne per annum IS project – Commercial production commenced in December 2021.
  • 30,000-tonne per annum Anti-oxidant TMQ project – Construction and installation had been completed; the project is now pending the Government’s approval for trial run. We expect the trial run to start in 2Q2022 and commercial production to begin in 2H2022.
  • Controlled Landfill Projects
    The Phase 1, 50,000-tonne capacity Controlled Landfill Project has been completed and has started commercial operation. The Group has started the construction of Phase 2 of another 50,000-tonne capacity Controlled Landfill Project. The Phase 2 project occupies a land area of approximately 15 mu (approximately 10,000 square metres) with a budget of RMB 35 million. The Phase 2 Project is expected to be completed by 1H2022.

We can now see signs of the global economy recovering, but volatile geopolitical and global affairs have brought about great uncertainty in the world economy. Rising pressure on cost of living has exacerbated concerns about future prospects. Compounded by the reemergence of the pandemic in China, the Chinese government’s prevention efforts will have some impact on our production.

Currently, the China’s economic development is facing three-pronged pressures from shrinking demand, supply shocks and weakening expectations. Many uncertainties remain in the tyre market. First of all is the overcapacity situation; the domestic consumption market does not look optimistic. Secondly energy supply remains tight, which to a certain extent affects the further release of production capacity and raises production costs. On a brighter note, the export market remains optimistic; with the relaxation of pandemic measures overseas and the gradual recovery of the market, a period of intensive growth can be expected for rubber chemical exportation.

While there has been a mix of positive and negative factors in the tyre market, the overall trend in the tyre industry remains positive. Replacement tyres account for 70% of tyre consumption and tyres for new cars account for approximately 30%. According to data from the China Association of Automobile Manufacturers (CAAM), 2021 sales of new automobiles in China has increased by 3.8% from last year and is steadily picking up. New Energy Vehicle sales volume has soared by 160% and is the new driving force of automobile sales. Hence, we expect the Rubber Chemicals industry to maintain a slight growth rate, while the export volume is relatively higher.

It is also clear to us that the rubber chemicals industry is increasingly concentrated and consolidated; Advantages in brand and scale of leading companies have become more distinct. The projects initiated by the Group have led to an increase in our production capacity and we are ready to meet the increased market demand for our products. With the Group’s market share further increased, our competitive advantages will become even more pronounced. At the same time, the Group will continue to explore new expansion projects to lay a solid foundation for further long-term sustainable development. Thus, we have complete faith in the development of the Group.

In consideration of the Group’s earnings performance and future expansion requirements, the Board of Directors recommends a final one-tier tax exempt dividend of SGD0.01 per ordinary share, plus a final special dividend of SGD0.01 per ordinary share, in appreciation of the support from our shareholders. This proposal will be discussed at the upcoming Annual General Meeting.

The Group built on the momentum from FY2021 and has achieved satisfactory results mainly due to the collective efforts of all our staff. Their humility, patience, dedication, and strive for excellence are commendable.

At the same time, I would like to thank our customers, business associates, suppliers, and the community at large for their long-standing and unwavering support for the Group. Their trust is what keeps us going. Finally, on behalf of the Board of Directors, I would also like to express my sincere gratitude to our shareholders for their trust, understanding, and support over the years.

The road ahead is full of challenges. We have planned for rainy days, and we have weathered storms together to build a resilient and dynamic enterprise. Through decades of struggle and hard work, the Group has continued to strengthen, and its core competitiveness has also greatly increased. We strive to be peopleoriented and establish shared values. Let’s forge ahead to give back to society and our shareholders!