Dear Shareholders,

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 2020 (“FY2020”).

The global economy was ravaged by the unprecedented crisis brought about by the COVID-19 pandemic in 2020. According to the forecast made in January 2021 by the International Monetary Fund (IMF), the global economy contracted 3.5% in 2020. However, China’s economy rebounded strongly in the second half of the year after practically stalling in the first half. Thanks to its success in largely containing the pandemic, China’s economy grew by 2.3% for the whole year, making it the first and only major economy in the world to achieve economic growth in 2020.

In the first half of 2020, a massive lockdown to control the spread of the COVID-19 virus led to sharp declines in factory operating rates of tire companies, which dragged down the demand for rubber chemicals correspondingly. Coupled with lower raw material prices, the average selling price (“ASP”) of our rubber chemical products came under pressure and hovered at low levels. ASP began to rise after September 2020 as raw material prices rebounded, and on account of rising demand from tire companies, the market finally saw a wave of upward trajectory after a long period of depression.

In response to the pandemic, the Group reinforced its flexible pricing strategy to improve sales. Leveraging its competitive advantages in scale, capital, brand, product quality, environmental protection and technology, the Group achieved a new record high in sales volume in 2020, and expanded its market share further. At the same time, the Group executed the expansion projects in an orderly manner as scheduled.

In response to the pandemic, the Group reinforced its flexible pricing strategy to improve sales. Leveraging its competitive advantages in scale, capital, brand, product quality, environmental protection and technology, the Group achieved a new record high in sales volume in 2020, and expanded its market share further. At the same time, the Group executed the expansion projects in an orderly manner as scheduled.
The Year Under Review

The Group’s revenue in FY2020 declined 13% from the year before to RMB 2,333.7 million. This was mainly due to the lower ASP, which decreased by 15% as compared to that in FY2019. Sales volume increased marginally by 1.4% from the preceding year, marking the 13th consecutive year of growth since our initial public offering. Net profit dropped 44% to RMB 218.8 million from FY2019.

Achieving the results amid the COVID-19 pandemic and various unfavourable external factors was no easy task. The results exceeded our projections in early 2020. Guided by the strategy of “Higher sales volume leading to higher production, which in turn stimulates even higher sales”, and coupled with flexible pricing, our objective was clear — maximising output from production capacity to increase sales volume and market share. We are pleased to see a high overall capacity utilisation rate of above 90 percent in 2020; in particular, the insoluble sulfur (“IS”) and antioxidant facilities operated above their designed capacities.

As at 31 December 2020, the Group’s earnings per share for FY2020 was RMB 22.50 cents; net assets per share as at end-2020 was RMB 280.28 cents. The Group’s financial position strengthened further with cash and bank deposits amounting to RMB 1,326.2 million, and no borrowings. In 2020, the Group continued to be the world’s largest rubber accelerator producer and China’s largest rubber chemicals enterprise.

In July 2020, the Group’s major subsidiary – Shandong Sunsine, acquired Heze Yongshun Environmental Protection Technology Co., Ltd (“Yongshun”) for a total consideration of RMB 43 million. With a land area of 215 mu, Yongshun treats dangerous waste generated from the production of rubber chemicals. This not only reduces environmental risks and waste treatment cost as the Group embarks on longterm growth, but also helps the Group to achieve sustainable growth. Moreover, Yongshun can treat third parties’ wastes which will bring additional income to the Group.

Capacity Expansion Plan

To 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 2020:

  • Phase II 20,000-tonne high-end accelerator TBBS started commercial production in May 2020. We firmly believe that our scale advantage in TBBS will be enhanced with the new capacity.
  • The construction and machinery installation of Phase I 30,000-tonne IS project had been completed in 2020. Trial-run is in progress. Commercial production is expected to commence in the second half of this year.
  • 30,000-tonne Anti-oxidant TMQ project is expected to be completed by the first half of 2021 and commercial production will begin in the second half year.
  • Phase I 50,000-tonne capacity Controlled Landfill Project

To complement Yongshun’s wastes treatment and to cope with the increasingly dangerous wastes generated in the Heze area, the Group decided to carry out a controlled landfill project in Shanxian with a total capacity of 700,000-tonne at a total cost of RMB 600 million, to be carried out in several phases.

The Phase 1 50,000-tonne controlled landfill project occupies a land area of 50 mu, and will be completed in 2021. The budget for this Phase 1 project is approximately RMB 80 million. Implementation of subsequent phases will carried out progressively over time, depending on the market conditions and our scale of production in the next few years.

Outlook and Prospects

The outlook for our business is mixed. The world economy is still fraught with great uncertainty as the pandemic is still not effectively under control in many parts of the world. It CHINA SUNSINE CHEMICAL HOLDINGS LTD. 7 ANNUAL REPORT 2020 1 Source: “Tire Market: Global Industry Trends, Shares, Size, Growth, Opportunity and Forecast 2020-2025” on is unlikely that things will return to its pre-COVID-19 level anytime soon.

On the plus side, the global economy is recovering, with the implementation of mass COVID-19 vaccination across various countries, as well as economic revitalization initiatives by the world’s major economies. China’s economy, in particular, has shown strong vitality and resilience.

The overall trend in the tire industry remains positive. The global tires market is projected to grow at a compound annual growth rate (CAGR) of around 4% from 2021 to 2026, according to a new report by IMARC Group. Rising incomes and living standards around the world (especially in emerging economies) will lead to an increase in the number of vehicles in use, thus spurring the growth of the tire industry. Segment-wise, the replacement tire market accounts for about 70% of the tire market, whilst the OEM (original equipment manufacturer) tires for new cars accounts for about 30%. New car sales are picking up as the global ecomony continues to recover. After falling in 2018 and 2019, China’s new car sales began to ramp up from April 2020, registering nine consecutive months of growth.

Rubber chemical prices are supported by improving demand from the downstream industry and the expectation of rising raw material prices. We are witnessing the rise of an industry consolidation. Leading manufacturers’ advantages in brand and scale are becoming more prominent. Two of the three production capacity expansions that we planned for during the economic downturn last year are nearly completed, and the output from the increased capacities in the second half of this year will be in time to meet market demand. The expansion projects have also laid a solid foundation for further growth in market share and long-term sustainable development.

Proposed Dividend

To reward shareholders’ support and considering the Group’s medium and long term expansion plans, the Board of Directors is recommending that a final one tier tax-exempt dividend of 1 Singapore cent per share is maintained for FY2020, despite the net profit for FY2020 being 44% lower than that for FY2019. This proposal will be discussed and approved at the upcoming Annual General Meeting.


The satisfactory results achieved under the severe conditions last year are mainly attributed to the collective efforts of all our staff. Their dedication and strive for excellence are commendable.

At the same time, I would like to thank our customers, business associates, suppliers and the community for their long-standing and unwavering support to the Group. 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.

Our goal is, by establishing shared values, to create the maximum value for customers, employees, shareholders and society through the long-term and sustainable growth of the Group. Let’s work together and forge ahead to achieve our goal!

Xu Cheng Qiu
Executive Chairman
March 2021