Chinese results season: Good news for TiO2 and soda ash, but refractories lose ground

By Albert Li
Published: Friday, 09 June 2017

TiO2 producers hike price again; Profits surge in Q1; Refractory producers record steep loses

Lomon Billions Group Co. adjusted its TiO2 prices upwards with immediate effect on April 25 due to short supply in China.

The company raised the domestic price of both sulphuric acid route and chloride route TiO2 by Chinese renminbi 700/tonne and moved exports prices up by $150/tonne.

On the same day the company said it expected its H1 net profit to surge year-on-year.

The price increase announcement is the first so far in Q2 after the company raised prices four time in Q1 alone.

Lomon saw sales turnover rise 27% in Q1 to Rmb 2.37bn while net profit rose to Rmb 585m up 3440.83% y-o-y.

While much of this dramatic increase in profit resulted from the merger of Billions and Lomon last year the increase in TiO2 prices during the quarter was also a contributing factor, the company said.

Other TiO2 producer results

Jilin GPRO Titanium Industry Co. announced its Q1 sales turnover was up 177.31% y-o-y to Rmb 465.2m while net profit rose 239.4% y-o-y to Rmb 53.27m. For H1, the company expects net profit to increase by 150-180% y-o-y to Rmb 84.28-94.36m.

Annada Titanium Dioxide Co.’s Q1 results showed that turnover rose by 46.64% y-o-y in Q1 to Rmb 251.3m while net profit surged 310.85% y-o-y to Rmb 31.96m. For H1, Annada also expects net profit to increase substantially (by 1669.48%-1915.24% y-o-y) due to the much higher TiO2 prices and the accordingly higher gross profit rate. 

Higher soda ash prices boost Q1 profits

Jiangsu Jingshen Salt & Chemical Industry Co. saw Q1 sales turnover increase 14.35% year-on-year to Rmb 594.77m ($86.87m).

The company attributed the increase to higher prices achieved on its main products including soda ash. Soda ash prices rose Rmb 506.73/tonne during the quarter, boosting sales turnover by Rmb 56.22m.

Net profit surged 405% y-o-y to Rmb 28.44m, while gross profit for soda ash increased Rmb 14.62m. Though the cost of source materials like coal rose during the quarter, it wasn’t enough to impact performance due to the sales price increases, the company said.

Shandong Haihua Co., a leading soda ash producer in China, also expects Q1 net profit to surge with the company forecasting a profit of Rmb 276m, up substantially from the same period last year. This comes as Shandong Haihua expects sales turnover to increase by 83.54% y-o-y to Rmb 1.1bn on the back of higher sales volumes and prices. 

Tangshan Sanyou Chemical Industries Co., another leading soda ash producer in China announced that Q1 sales turnover increased by 15.06% y-o-y to Rmb 15.76bn, and net profit increased by 84.89% y-o-y to Rmb 762.86m. 

Tangshan’s soda ash output increased by 0.18% y-o-y to 3.48m tonnes in Q1, with a fully utilised capacity of 3.4m tpa. Sales volumes for the quarter were reported at 3.46m tonnes, according to the company. 

Soda ash accounted for 26.69% of the company’s total turnover, having reached a gross profit rate of 35.35%, up 7.83% y-o-y. 

Puyang Refractories reports steep loss in 2016

Puyang Refractories Group Co., one of the leading refractories manufacturers in China, posted a 17% drop in 2016 full year turnover to Rmb 2.34bn ($265.37m), while net profit plummeted 378% year-on-year (y-o-y) to a loss of Rmb 188.26m.

Puyang has two refractory divisions, one supplying the steels sector and the other selling to cement makers, as well as a source materials business.

Puyang’s steel division (selling refractory materials to steelmakers) saw its sales fall 9% y-o-y
to Rmb 2.07bn. The five largest customers are all steel companies in China, but new orders came in also from large steelmakers in Kazakhstan, Azerbaijan and Poland.

Turnover in the cement division was down 49% y-o-y to Rmb 272.62m. This was due to a number of factors affecting the performance of the cement industry in 2016, namely the consolidation push, closing of obsolete capacities and limitation on new capacities installed.

The source material division performed better, with a 7% increase in sales to Rmb 106.09m. In 2016 Puyang established a purchasing centre of magnesia source materials by combining the purchasing functions of all of its subsidiaries.

This helped to push down purchasing prices, leading to stable production of sintered magnesia, higher-than-forecast alumina production, and an increase in magnesia trade. Gross profit rate in the division exceeded the forecast rate by 5%.

The company flagged several risks to business that affected operations during the past year.

Risk related to accounts receivable has been rising, the company said, due to the inconsistent performance of the downstream steel and cement industries. Competition between domestic players is also becoming more aggressive. Downstream demand remains weak, because the refractory industry is still small-sized and scattered – which in turns puts pressure on purchase prices and payment delays.

Other risks the company sees at the moment include higher costs related to China’s environmental policies and fluctuations in exchange rates.

Although steel prices have recovered partially since Q2 2016, production increased only slightly, having minimal effect on refractory demand.

Sales of functional refractories, shaped and unshaped refractory products accounted for 30%, 37% and 27% respectively, with a remaining 6% of other products.

Domestic sales accounted for 84% of business, with exports accounting for the remaining 16%.

All conversions made in May 2017