Third-quarter reports of listed fertilizer companies: Rising coal prices help reverse losses

Thread Content

Source: China Chemical Industry News Recently, more than 10 listed fertilizer companies, including Hualu Hengsheng, Luxi Chemical, Hubei Yihua, Lutianhua, Sichuan Meifeng, Lubei Chemical, Yuntianhua, Hechi Chemical, and Yanhu Co., Ltd., have released preliminary reports or official announcements on their performance for the first three quarters; however, there is a significant variation in their performance levels. Coal-based companies in the eastern region that combine multiple product productions with fertilizer manufacturing – Hualu Hengsheng and Luxi Chemical Industry – have seen their performance soar, with both achieving net profits of over 2 billion yuan. Although the performance of fertilizer companies in the southwest region is only passable, it is already no small feat for them to turn losses into profits. Yanhu Co., Ltd., located in Qinghai, is expected to incur a loss of 1.25 billion yuan due to reasons such as losses from comprehensive development and utilization projects of salt lake resources. 　　“\"Qilu Double Star\" shows strong performance. According to the announcement, Hualu Hengsheng achieved new highs in all key indicators during the first three quarters of this year: it recorded operating revenue of 10.849 billion yuan, and net profit attributable to the listed shareholders amounted to 2.535 billion yuan, representing increases of 50% and 198.95% respectively on a year-on-year basis; the earnings per share were 1.564 yuan. 　　Hualu Hengsheng stated that the prices of its key products such as urea and acetic acid reached new highs in recent years; by seizing market opportunities and coordinating production with sales, the company achieved significant growth in revenue. In addition, since the upgrading projects for the company’s traditional industries were put into operation in the fourth quarter of last year, significant economies of scale have been achieved, production costs have further decreased, and this has expanded the company’s profit margins. 　　It is worth noting that Hualu Hengsheng has ample cash flow, with its net operating cash flow reaching 3.1 billion yuan in the first three quarters. 　　Luxi Chemical’s performance growth was evident already last year. In the first three quarters of last year, Luxi Chemical achieved a net profit of 1.072 billion yuan; for this year’s first three quarters, profits are expected to range from 2.3 billion to 2.4 billion yuan, representing a year-on-year increase of 114.59% to 123.92%. 　　Luxi Chemical stated that in the first three quarters, the company paid close attention to safety and environmental protection, ensuring stable product quality; it responded promptly to market changes by adjusting sales prices flexibly; by taking advantage of the integration benefits offered by the industrial park, it maintained a balance between production and sales, thereby achieving good economic results. 　　Industry analysts believe that the significant improvement in the performance of both \"Qilu Double Stars\" is attributed to the fact that these two companies carried out structural adjustments at an early stage, resulting in the fertilizer business accounting for less than 1/4 of their total revenue and profits. Chemical products, especially new chemical materials, have become the core products of these two companies. 　　Industry leaders turn losses into profits Industry leaders such as Yuntianhua and Hubei Yihua have been struggling with losses in recent years; this year, as market prices rose, these two companies managed to turn a profit. 　　Yuntianhua’s announcement on expected improved financial results shows that it is projected to earn around 81 million yuan in the first three quarters, a significant increase of 285.53% compared to the previous year. The amount of non-recurring gains and losses resulting from subsidies and other factors was approximately 168 million yuan, representing a 80% decline compared to the previous year. After deducting non-recurring gains and losses, Yuntianhua incurred a loss of 87 million yuan in the first three quarters, with the amount of loss decreasing by 715 million yuan compared to the same period last year. 　　Yuntianhua stated that in the first three quarters, the prices of the company’s main fertilizer products increased on a year-on-year basis, which helped to mitigate the adverse effects of rising raw material costs. Meanwhile, the prices of polyoxymethylene products also rose on a year-on-year basis and remained at a high level, resulting in an increase in gross sales margins. 　　In the first half of this year, Hubei Yihua managed to turn a loss into a profit, with its net profit attributable to shareholders amounting to 238 million yuan, a year-on-year increase of 188.43%. The company stated that the revenues from its key products – polyvinyl chloride, caustic soda, urea, and diammonium phosphate – increased on a year-on-year basis, boosting the company’s profitability; the sale of major assets was completed, resulting in higher earnings and reduced losses. 　　In fact, the reason why Hubei Yihua was able to turn a loss into a profit this year is largely due to the completion of the transfer of 80.1% of the shares in Xinjiang Yihua. In 2017, Xinjiang Yihua’s revenue was only 688 million yuan, while its losses amounted to 2.95 billion yuan. 　　Lutianhua, another fertilizer manufacturer, reported preliminary results for the first three quarters, showing that it is expected to earn profits of 350 million to 450 million yuan during this period, thus turning from a loss to a profit. Its net profit increased by 393.41% to 477.24% compared with the same period last year. 　　Industry experts believe that Lutianhua’s ability to turn losses into profits is attributed, on the one hand, to the rise in product prices, and on the other hand, to its decision to take tough measures. It is reported that Lutianhua and its subsidiary companies have officially entered reorganization proceedings; during this period, interest on loans from financial institutions is suspended, resulting in a significant reduction in financial expenses. 　　The leader in potassium fertilizer production continues to suffer huge losses. What is even more concerning is that Yanchi Salt Lake Co., the industry leader in potassium fertilizers, remains mired in losses. Its performance forecast for the first three quarters shows that the net profit attributable to the shareholders of the listed company for January to September is expected to be in the range of a loss of 1.15 billion to 1.25 billion yuan. 　　Regarding the reasons for the loss in performance, Yanhu Co., Ltd. stated that, first, the integrated magnesium metal project faced higher unit production costs due to rising prices of raw materials, the conversion of a large amount of work-in-progress into fixed assets at the end of last year, and low operating load of the facilities; as a result, depreciation and financial expenses increased significantly compared to the same period last year. Secondly, the Haina PVC integrated project was affected by safety incidents, which led to the shutdown of some chemical processing units; as a result, the project incurred losses of around 720 million yuan during the reporting period. Third, due to the impact of insufficient natural gas supply on Projects 1 and 2, the company incurred a loss of approximately 440 million yuan during the reporting period as a result of comprehensive utilization issues. 　　It is reported that Yanchi Lake Co., Ltd.’s current main business activities are divided into three categories: the development, production, and sales of potassium chloride; the comprehensive exploitation and utilization of salt lake resources; and other businesses including cement production, retail chain operations, and hotel management. Among them, the revenue from the development, production, and sales of potassium chloride constitutes the core part of the company’s main business during the reporting period. 　　In 2017, after 21 years on the stock market, Yanhu Co., Ltd. recorded a loss for the first time; the net profit attributable to the shareholders of the listed company was -4.159 billion yuan, a sharp drop of 1,318.77% compared to the previous year. This loss amounted to almost the total of the company’s net profits from the preceding five years. One of Salt Lake Co., Ltd.’s core business areas is the chemical projects related to the comprehensive development and utilization of salt lake resources, in which the company has been investing continuously since 2005; these projects have had a significant impact on the company’s performance.