Yizheng keeps material buys in the family
Yizheng Chemical Fibre plans to increase its buying of raw materials from stablemate Yangzi Petrochemical after they were merged with three entities under newly formed China Eastern United Petrochemical (Group) last month.
The materials the H-share company would buy from Yangzi - purified terephthalic acid, monoEthylene Glycol, paraxylene and acetic acid - could amount to 75 per cent of its turnover.
In the first 10 months, 75 per cent of Yizheng's unaudited turnover of 4.4 billion yuan (about HK$4.08 billion), or 3.3 billion yuan, was used to buy raw materials.
Yizheng said it was seeking a disclosure waiver from the Hong Kong stock exchange and shareholder approval for the purchases.
However, the company agreed this would not exceed 80 per cent of turnover and the price would not be more than the international market contract price.
Previously, Yangzi has sold materials to Yizheng at a 21 per cent discount to international prices.
When Yizheng revealed the merger in August, it said the main benefit was to secure a steady supply of raw materials from Yangzi which used to provide 30 per cent of requirements.
However, analysts were disappointed that Yizheng failed to acquire any assets from Yangzi and became a window company for China Eastern.