H share to set up plant with Exxon
Shanghai Petrochemical has teamed up with Exxon of the United States in a US$29 million joint venture to manufacture hydrocarbon resin in Shanghai.
Exxon will take a controlling 60 per cent stake in Shanghai Jinsen Hydrocarbon Resin, which will have a designed capacity of 25,000 tonnes of hydrocarbon resins.
Shanghai Petrochemical, an H share, will have a 40 per cent stake in the venture.
Zhang Jingming, a deputy director at Shanghai Petrochemical's board of secretaries, said yesterday the venture contract was signed on Wednesday.
He said production was expected to begin by 2000.
The plant will be equipped with Exxon's technology for the manufacture of hydrocarbon resins - which could be widely applicable in industrial, food and packaging purposes.
About half of the mainland's demand for such a product is presently imported, according to Mr Zhang.
'The product yields a higher margin than our traditional products,' he said.
Mr Zhang said the project could yield an internal rate of return of 19 to 20 per cent.
ICEA Securities research vice-president Angus Lau Kim-ming said while the project would help the long-term health of the company, it would not provide immediate income to its bottom line.
'It will help the company diversify its business into specialty plastics from mainstream commodities plastics,' he said.
'The good things about specialty products are that demand is steady and competition is not as keen as the mainstream products,' he said.
Shanghai Petrochemical expects to post 496 million yuan (about HK$461 million) in net income this year, compared with 726 million yuan last year due to falling prices resulting from shrinking demand.