Juhua increases capital investment; the registered capital of Gansu Juhua New Materials rises from 100 million yuan to 6 billion yuan

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On the evening of February 18, Juhua Co., Ltd. announced that it plans to jointly increase the capital of Gansu Juhua New Materials Co., Ltd. (hereinafter referred to as “Gansu Juhua”) with its controlling shareholder, Juhua Group Co., Ltd. (hereinafter referred to as “Juhua Group”), in order to raise Gansu Juhua’s registered capital from 100 million yuan to 6 billion yuan. Of this, the company has committed to contributing 4.2 billion yuan, accounting for 70% ； Juhua Group has committed to contributing 1.8 billion yuan (including the 100 million yuan already invested by Juhua Group earlier), accounting for 30% of the total. Juhua Co., Ltd. and Juhua Group plan to contribute registered capital of 700 million yuan and 200 million yuan respectively, raising Gansu Juhua’s registered capital to 1 billion yuan. Based on the assessment of the total equity value of Gansu Juhua’s shareholders, and through consultation among all parties, the price for this capital increase is 1.000406 yuan per unit of registered capital. Following this capital increase, the company acquired control rights over Gansu Juhua, which will then carry out an integrated project for high-performance fluorochlorine new materials, with a total investment of 19.625 billion yuan. The remaining capital contribution shall be paid in full by both shareholders in proportion over a period of 5 years, in line with the progress of the project construction. Of the total investment of 19.625 billion yuan for this project, 17.905 billion yuan is allocated to construction costs, 520 million yuan to interest during the construction period, and 1.20 billion yuan to working capital. The funds for the company’s capital increase within the project’s equity capital come from internal funds or self-raised funds. According to the Feasibility Study Report on Juhua Group’s capital increase to take control of Gansu Juhua and to implement the integrated project for high-performance fluorochlorine new materials released by Juhua Group, this integrated project aims to build facilities with an annual production capacity of 35,000 tons of perfluoropropene (R1234yf, using multiple production processes), 30,000 tons of polytetrafluoroethylene (PTFE), and 10,000 tons of perfluoroethylpropylene (FEP). In addition, there will be facilities for producing 900,000 tons of ion-exchange membrane caustic soda, 460,000 tons of chloromethane, 420,000 tons of methane chlorides, 400,000 tons of calcium chloride, and 198,000 tons of dichlorofluoromethane, among other related products. Upon completion of the project, it is expected that during the production period, annual sales revenue will amount to 8.211 billion yuan, with an annual net profit of 1.068 billion yuan. Juhua Co., Ltd. disclosed that as of September 30, 2024, the company’s cash balance was 1.403 billion yuan (unaudited). The remaining available credit limit was approximately 3.542 billion yuan. After reserving 1 billion yuan for working capital, the total amount of available cash and credit limit combined amounted to 3.945 billion yuan. The company has already paid in 700 million yuan as registered capital, with further payments to be made in installments according to the progress of project construction, which will not have a significant negative impact on the use of funds. Regarding the purpose of this transaction, Juhua Co., Ltd. stated that it is mainly to take advantage of the period of adjustment in the fluoropolymer industry cycle in order to establish low-cost, high-quality production capacity in a counter-cyclical manner. The company aims to integrate its competitive advantages in its core industries with the policies, energy, and resource advantages of the western region, thereby leveraging the group’s resources to expand the scope of industrial development and optimize spatial layout. It seeks to seize the opportunities presented by the upgrade of fluorinated refrigerants and the adjustments in the fluoropolymer industry cycle, so as to promote the advancement of its core industries toward higher standards, greater intelligence, and greater sustainability. Furthermore, it reduces upfront costs, saves time and lowers risks, while avoiding competition with peers. The construction period for this project is 36 months. During its operation phase, the annual sales revenue will be 8.211 billion yuan, with an annual net profit of 1.068 billion yuan. The payback period for the investment is 11.46 years (after taxes). Juhua Co., Ltd. stated that, according to the project feasibility study report, the net profit margin on the project’s capital is 18.78%, while the internal rate of return on that capital is 10.65%. The project offers good economic benefits, which help to improve the company’s performance and enhance its sustainable profitability, thereby generating better returns for shareholders. Fluorine chemicals are the core business of Juhua Co., Ltd. Juhua Co., Ltd.’s performance forecast indicates that for the year 2024, the company is expected to achieve a net profit attributable to the shareholders of the listed company in the range of 1.87 billion yuan to 2.10 billion yuan. This represents an increase of 926 million yuan to 1.156 billion yuan compared with the same period last year, corresponding to a year-on-year growth rate of 98% to 123%. In response, Juhua Co., Ltd. stated that the increase in the company’s performance during this period was mainly due to an increase in both the sales volume and prices of its main products, which led to an rise in its core business revenue as well as the gross profit margin on those products. In this period, there has been a significant structural differentiation in the markets for the company’s main products. Under the production quota system for the second and third generations of fluorinated refrigerants, factors such as improvements in the supply and demand dynamics, competitive landscape, and competitive order, along with enhanced demand from downstream industries, have led to an upward trend in the rationality of product prices, with significant increases observed ； For non-refrigerant chemical products, overall supply exceeds demand, competition is fierce, and prices are declining. As the prices of refrigerant products rise, the company’s refrigerant business has seen a significant increase in its share within the overall structure of its core businesses and profit profile.