Nearly 60% of China's Chemical Industry in 2014

There is little room for improving overall profitability in the second half of the year

Statistics show that the performance of the chemical industry in the first half of the year was bleak. Up to now, a total of 180 listed companies in the chemical industry have released pre-announcements and performance reports for semi-annual reports. Among them, there are 83 pre-hired companies and 93 early warnings, accounting for 53% of the total.

Among the early-warning companies, the net profit of Hongda New Materials was RMB 160 million to RMB 180 million, which was a significant drop of 2262% year-on-year and ranked “pre-loss” for listed companies in the chemical industry. The data shows that in the first half of the year, the company's net profit fell by more than 100% over 20 companies.

Analysts believe that the downstream demand of the chemical industry in the first half of 2013 was sluggish. Product prices experienced a brief rebound at the beginning of the year and returned to the quagmire. At the same time, overcapacity lingered and corporate profits fell significantly. In the second half of the year, the domestic economy still takes the structural adjustment as its main line, and the demand for downstream industries such as real estate, automobiles, home appliances, and textiles and garments is unlikely to recover sharply. The excess capacity of the chemical industry in the early period still needs time to be digested. In terms of costs, although coal prices have fallen year-on-year, the prices of crude oil and natural gas have been high, and there is little room for improvement in the profitability of listed companies.

Honda New Materials stated that because the full-scale production of Jiangsu Lihong Silicon Material Co., Ltd. failed to meet expectations, it was necessary to make provision for 83.656 million yuan for asset impairment. At the same time, downstream silicone rubber is affected by the global economic crisis and overcapacity in the organic silicon industry. The price is in a long-term depressed state and benefits are generally low.

It is noteworthy that there are 15 listed companies with the first loss, and the net profit has fallen by more than 100% year-on-year. Among them, Shanxi three-dimensional net profit is expected to be about 127 million yuan in the first half, down 1525.46% year-on-year. Hengtian Swan expects its net profit for the first half of the year to be approximately RMB47 million to RMB40 million, a year-on-year decrease of 1210%. Nanfeng Chemical expects to report a net profit loss of RMB46 million to RMB44 million, a decrease of 724% year-on-year.

Of the 83 companies that were pre-graded, 21 had pre-increase, 34 had slightly increased, 13 had turned losses, and 15 companies had continued to grow.