Jilin Chemical dismisses talk of imminent restructuring
Jilin Chemical Industrial has dismissed market rumours that restructuring is imminent, saying its only acquisition plan is to take over the remaining part of a 300,000-tonne ethylene project from its parent.
The H share's priority is to buy another seven ethylene production units from its parent before 2002. The listed firm already owns four units.
Vice-general manager Lu Qirong said: 'Within five years, we can buy the units one by one, or several together. I think the ethylene project is a good asset.' Shares in Jilin Chemical have been riding high on talks of an asset overhaul.
Peregrine Brokerage research indicated the company would sell its loss-making subsidiaries and acquire profitable mid-stream petrochemical operations.
Mr Lu said as the central government was experimenting with the development of large conglomerates, the Ministry of Chemical Industry and Jilin provincial government would consider similar reforms.
'However, we have received no information of the plan,' Mr Lu said.
In the first half of this year, Jilin Chemical saw its net profit plunge 69 per cent to 103.35 million yuan (about HK$96 million). It shared a loss of about 200 million yuan from the ethylene project, due to high depreciation and financial costs, which was initially expected to break even this year.
An analyst expected the company to make net profit of 20 million yuan for the full year, meaning net loss in the second half.
'In the second half, product prices will fall and non-operating expenses including depreciation and financial outlays will rise,' the analyst said.
The company's profitability would also be hurt by a one-month maintenance this month, leading to a decrease in production volume.
Mr Lu said he did not expect product prices would rise in the second half.
Between January and June, prices of petrochemicals and organic chemicals, dyestuff and dye intermediates, synthetic rubber, and chemical fertilisers fell, except those of petroleum products regulated by the state.
Mr Lu said crude oil and product price trends would determine if the ethylene project would break even next year.