Haike Chemical profiting from higher-margin focus after tough 2015

HaiKe Chemical remained profitable despite selling prices being ravaged by industry oversupply last year and its focus on higher margin products in the fourth quarter has produced encouraging results that have flowed into the new financial year.

Tough trading conditions from continued depressed oil prices which put pressure on selling prices and led to strong competition for HaiKe's major products, especially isopropyl alcohol.

Specialty chemical products recorded an average 1.0% volume decrease and the average price fell by 23.9% year-on-year.

Turnover fell by just over a quarter to ¥727.5m (£76.3m) in the calendar year, which was converted into a ¥5.8m pre-tax profit and a ¥4.1m profit from continuing operations.

After the previous year's loss, earnings per share moved marginally into the black with a tiny ¥0.1.

Total borrowings were cut from the equivalent of £69.4m to £8.4m.

In the third quarter, management adjusted the product mix to focus on higher margins, which involved investment in new product development and new cost controls.

"This began to deliver an improved performance in Q4 which has satisfactorily continued into the first four months of 2016," said executive chairman Xiaohong Yang.

Although the weak operating environment is expected to continue, HaiKe said the first four months of 2016 generated unaudited turnover of the equivalent of £24.2m, compared to £30.1m the previous year, with an unaudited net profit of £0.8m versus the previous £0.2m loss.

"Looking forward, we expect the operating environment to remain challenging and our focus therefore is to continue to innovate new specialty chemical products and evolve our product mix in order to optimize our performance," said Xiaohong.