Tianjin Bohai Chemical Industry (Group) Co will maintain its gearing ratio below 60 per cent while the H-share firm proceeds with a five-year, five billion yuan (about HK$4.65 billion) development plan. Dismissing the likelihood of a convertible bond issue, company secretary Yin Guanhui said the required funds would come from internal resources, borrowings from financial institutions and joint ventures. At the end of June, Tianjin Bohai had 72.1 million yuan of unused listing proceeds. Ms Yin brushed aside concerns the expansion would strain its financial resources and substantially raise its gearing. 'As most projects will take the route of joint ventures, they will hardly increase the company's debt to asset ratio,' she said. The company would mainly contribute to the ventures with assets, so limited cash injection would be required, she said. Chief accountant Hao Jingzhao said the company's debts amounted to 58 per cent of its total assets as at June 30. 'It is our plan to contain the ratio below 60 per cent by paying off some debts.' Tianjin Bohai's 'ninth five-year plan' includes 14 projects, with some yet to receive state approval. The company has invested 800 million yuan in upgrading its Dagu Plant with a PVC production line that will use ethylene. The development will have an annual capacity of 80,000 tonnes, and a caustic soda line using ionic membrane cells with an annual capacity of 40,000 tonnes. Both began trial operations this year. The company intends to invest one billion yuan to upgrade facilities at a chemical plant to raise annual capacity in caustic soda production from 58,000 tonnes using mercury, to 85,000 tonnes using ionic membranes. The Bank of China has agreed to a three-year loan of between 750 million and 800 million yuan for the chemical plant. Its upgraded facilities are scheduled to be in operation by 1998. Ms Yin said the Asian Development Bank had agreed to lend US$30 million for energy-saving projects at its soda plant. In the first six months, the company reported a 36 per cent drop in interim profits to 47.72 million yuan, of which 22.2 million yuan came from government value-added tax rebates on new products. The refund was exempted from income tax. Ms Yin said the company would launch two new products in the second half. At the end of June, Tianjin Bohai realised a 30 per cent increase in accounts receivables to about 500 million yuan, largely due to poor market conditions in the first half. Mr Hao said he expected PVC prices to stabilise after being below international levels, having plunged 25 per cent in the first half. He said while soda ash prices would be stable the cost of caustic soda would continue to drop.