Strong Petrochemical eyes storage projects
Strong Petrochemical Holdings plans to spend 355 million yuan (HK$402.68 million) on two mainland oil and petrochemical storage projects by mid-2011 so that it can enter the country's fuel wholesaling market.
The company, which listed in Hong Kong in January, buys crude oil, petroleum and petrochemicals from international oil producers through its Hong Kong and Macau offices, and sells mainly to five mainland state-owned importers.
However, it wants to sell directly to retailers and refiners but can only qualify for a wholesale licence if it owns or partly owns an oil terminal with a berthing capacity of at least 10,000 tonnes and storage capacity of at least 10,000 cubic metres.
Having storage facilities will also give the firm greater flexibility to employ its own trading strategy and drive up its trading volume.
Strong plans to invest 120 million yuan by September this year on a wholly owned project comprising petrochemical and refined fuel storage tanks with total capacity of 134,800 cubic metres in Nantong, Jiangsu province, chairman Jason Wang Jiansheng said.
He said it also had a 15 per cent stake in a 1.57 billion yuan project with port operator Tianjin Port and oil trader Sinochem Corp to build crude oil and petrochemical storage facilities in Tianjin with capacity of 950,000 cubic metres by mid-2011.
On Sunday, Strong posted a net profit of HK$329.47 million for the year to March, up from HK$92.69 million a year earlier.
The main driver was a HK$207.46 million gain from oil hedging, with HK$188.69 million earned in the seven months to October last year.
Despite the substantial gain, Strong amended its risk management policy in September, prohibiting financial derivatives trading before key terms of oil purchases or sales agreements were entered into.
'Previously, our hedging activities were done very loosely. We have since tightened it,' Mr Wang said.
Separately, Strong made gross profit of about HK$150 million in June quarter, a source said.