On behalf of the Board of Directors of China Sunsine Chemical Holdings Ltd. (“China Sunsine”, together with its subsidiaries, collectively the “Group”), I am pleased to report that in the financial year ended 31 December 2017(“FY2017”) China Sunsine achieved impressive results that surpassed the performance of all previous years.
2017 is a joyous and meaningful yearfor the Group. We celebrated the 40th anniversary of the founding of oursubsidiary, Shandong Sunsine ChemicalCo., Ltd., and the 10th anniversary oflisting of China Sunsine on the mainboardof the Singapore Exchange (“SGX”). After 40 years of endeavour, the Group has become a strong and sizeable entity. The listing, on 5 July 2007, opened a new chapter for China Sunsine to accelerate growth on steady and sustainable basis,and has led to adoption of good corporate governance practices that facilitate the pursuit of process standardisation and internationalisation.
In the last 10 years, the Group’s revenue,sales volume and net profit all increasedby approximately 3.5 times. Production capacity increased from 32,000-ton p.a. in 2007 to 152,000-ton p.a.,spread among five production facilitiesbases, namely, Shandong Sunsine,Weifang Sunsine, Sheng Tao Chemical,Guangshun Heating plant and Yongshun New District. From the single productgroup of rubber accelerators that was first introduced in 1994, our product range expanded to include insoluble sulphur, anti-oxidants and master batch. Both domestic and overseas markets have been expanding year after year. We now have more than 1,000 customers inover 40 countries and regions in Europe, America, and the Asia Pacific. We have forged strong strategic partnerships with 2/3 of the world’s top 75 tyre makers. For many years, we have been the world’slargest rubber accelerators producer and PRC’s leading insoluble sulphur producer.“Sunsine” brand is widely acclaimedby our customers, as well as the rubberchemicals industry.
The Group continuously increases its investment in production technology, placing emphasis on integrating production, learning and research. A research centre was established to induct and nurture talented staff. We also focus on growing the enterpriseon a sustainable, long-term basis,with environmental protection and workplace safety as priority. Advances in technology in these two areas are closely monitored. We have set a long term plan to continuously invest in “Green Production” and environmental protection. All these efforts have enabled us to maintain market leadership amid intense competition and the stringentenvironmental protection requirementsset by the government.
Group’s revenue in FY2017 grew 34% to RMB2,738.4 million.
In 2017, Chinese government continuedto implement stringent environmentalprotection regulations, and furtherstrengthened the enforcementnationwide, which had led to stricter control on the Chinese chemical industry.The Group has proactively upgraded our technology and introduced innovationto ensure compliance. We had not only achieved a good balance in production and sales, but also achieved substantial growths.
The Group’s revenue in FY2017 grew 34% to RMB2,738.4 million from the previous year. There were shortages in supply of rubber chemicals in 2017 as some producers who failed to meet the requirements of environmental protection laws and regulations faced either production stoppage or closure. With strong demand from downstream and rising raw material prices, the Group was able to raise its average sellingprice (“ASP”) by 30% and increase sales volume by 3% year-on-year to another record high at 140,476 tons. This was the 9th consecutive year of sales volume growth since our IPO in 2007. Gross profit margin increased to 28.8% from 26.5%a year ago, giving rise to a 54% surge in group profit to RMB341.3 million, a new record.
Group’s earnings per share in FY2017 was RMB70.83 cents and net assets value per share was RMB354.39 centsas at 31 December 2017. The financial position remained healthy, with net cashand bank balances of RMB499.6 millionand no debt (the Group repaid all bankloans in FY2016).
These outstanding results were the outcome of the Group’s circular strategy on production and sales volume -- higher production leads to higher sales volumes, which in turn stimulates even higher production.
During the year, we carried out three expansion projects. Firstly, the testing of machineries at the new 10,000-ton accelerator TBBS production line at Yongshun New District in Shanxian wascompleted. Secondly, the construction of 10,000-ton capacity production line of insoluble sulphur located at Dingtao was completed. Trial-run application for these two projects to the relevant Government Authorities has been submitted and are now pending approval. Thirdly, the installation of one additional boiler and electricity generation system at Guangshun Heating Plant was completed. Machinery testing is underway to be followed by trial-run in the second quarterof 2018.
All these projects will provide impetus and become new growth points for the Group.
In January 2017, China Sunsine was listed in the First Batch of National Champion Manufacturing Enterprise by the Ministryof Industry and Information Technology of China. This helped to enhance our Group’s reputation and influence in the rubber chemical industry.
On 14 December 2017, the first-ever “Academician R&D Workstation” in the Chinese rubber chemical industry was inaugurated for China Sunsine to collaborate with experts from Tsinghua University and the Chinese Academyof Engineering. Under the guidanceof experts, China Sunsine would be able to accelerate its integration of production, learning and research, achieve applications of scientific and technological achievements to economic results, and promote the transformation and upgrading of the rubber chemical industry to become “Green, Intelligent &Miniaturized”.
The auto and tyre industries in China remained robust. 2017 was the nineth year in which China topped global auto sales. A record high of 28.88 million units were sold in 2017, 3.0% higher than the previous year (source: China Associationof Automobile Manufacturers). Being theworld’s largest and with rising affluence, we believe China’s auto market will maintain its steady growth in the nextseveral years.
We noted that Chinese Government implemented stringent environmental protection regulations and enforcement over the recent years. These hadled to the consolidation of Chinese rubber chemical industry. As a leadingrubber chemical producer, who places emphasis on environmental protection, and with its sizable production capacity,substantial cash, available land and ready infrastructure, the Group is able to scale up to meet the demand of the tyre industry.
Due to the greater importance placed on environmental protection and safety production in China, the inspection regime in these areas have become commonplace and prevalent. The Group expects the bigger players to make greater investments in environmental protection and safety production measures, to maximise their utilisation rate, and to improve their capacity through innovations. Some smaller players which have failed to meet the relevant regulations will also invest in environmental protection equipment in order to comply with the regulations, and may resume their production. All these will lead to a gradual normalisation of prices eventually.
In the coming years, the Group will focus on upgrading of technology and innovation, and will continue to invest in R&D, including collaborating with leading academics from prominent universities in China. We believe these should give us an edge over our competitors. High product quality, production scale, productrange, cost advantage, environmental protection records and market leadership are the ingredients of sustainable growth.
I am very confident of our Group’s performance in the future.
After reviewing the economic outlook and the Group’s strong financial position, the Group adopted a dividend policy of paying out not less than 20% of the Group’s consolidated net profit for FY2017 and FY2018.
The Group paid a one-tier tax exempt interim dividend of 0.5 Singapore cents per ordinary share on 18 August 2017. The Board of Directors has recommended a one-tier tax exempt final dividend of 2.5 Singapore cents per ordinary share, subject to shareholders’ approval at the forthcoming Annual General Meeting.Thus, the total dividend for FY2017 will be 3 Singapore cents in adherence to the dividend policy.
With the strong support from our shareholders and various stakeholders, and through our wavering endeavor overdecades, we have grown to become a leader in the global rubber chemical industry. The Group has created and added-value to our customers and shareholders.
Here, on behalf of the Board, I would like to express my sincere gratitudeto our customers, business partners, suppliers and shareholders, who have trusted and supported us all these years. I also would like to thank all my fellow directors for your guidance and valuable suggestions. Last but not least, I would like to thank our management and staff for your dedication and diligence that helped transform China Sunsine into an outstanding enterprise.
10-year is a milestone of our story, it is also a new start of our long journey.Our core values- pursuit of business excellence without compromising our love and care for the living environment and our firm belief in corporate social responsibility- will continue to define and guide us as we scale greater heights inthe future.
Xu Cheng Qiu