Yip's Hang Cheung sees lower yield
PETROCHEMICAL manufacturer and distributor Yip's Hang Cheung has indicated that second-half profit could be lower than last year despite a substantial plunge in raw material prices during the period.
Speaking at the opening of the group's first bulk petrochemical storage terminal yesterday in Panyu, director George Ng Siu-ping said the period between October to March was a low season for solvent and paint manufacturers due to shrinking demand during the holiday season. The firm's shares fell by a cent yesterday to $1.07.
He said furniture and toy manufacturers did not keep chemicals in stock during the holidays because of safety requirements.
First half profit contribution usually accounted for 60 per cent of total annual net profit, he said.
Mr Ng said that while raw material prices had softened since last July by 20 per cent, the group's intensive capital investment of $300 million on solvent and paint factories on the mainland between 1994 and 1996 would squeeze profits.
He expected the factories to start contributing to profits in the 1996-97 financial year but the full pay-back period would be longer - about four years after operation.
The group opened three factories in Chengdu, Jinan and Changchun last year.
Mr Ng said the group had sold a 40 per cent stake in its loss-making lubricant factory opened in Zhangjiang last year to global oil giant Shell this month.
'This will hasten the break-even period for the financial year 96-97,' he said.
The group's new storage terminal involved an investment of $62 million.