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SCMP Reporter

Tianjin Bohai Chemical Industry (Group) aims to save 200 million yuan (about HK$186.42 million) in sales costs in a bid to return to profitability this year.

 Hit by falling product prices and a supply glut, the company posted the biggest loss last year among the 41 H shares, spilling 608.05 million yuan in red ink.

 Senior company official Gong Suozhu said the company had already cut costs by 82 million yuan in the first five months of the year.

 He said prices of key products had been recovering this year, but had yet to return to the level seen in the first half of last year.

 Caustic soda was the only one of three main products selling below cost, he said.

 Chairman and president Wang Baodi said: 'The company should be able to reduce losses this year, but there is great difficulty in returning to the black.'  He said the company should be able to recover the 257.34 million yuan in overdue loan repayments owed by a Tianjin property firm by November next year.

 About 42 million yuan was repaid earlier this year, he said.

 The company's domestic and international auditors said in qualified reports that the company should have made provisions on the loan.

 Mr Wang said the company had secured new collateral from the developer.

 The property pledged, estimated to be worth about 630 million yuan, is part of a two billion yuan, 66-storey landmark building in Tianjin, set to be the third or fourth tallest in the mainland.

 Tianjin Bohai lent the money to the property company in 1997, the same year as it raised a US$40 million syndicated loan.

 Mr Wang said the company made the loan to the property firm because Tianjin Bohai had surplus cash and was looking for a good return. He denied the loan was made at above commercial rates.

 The US$40 million loan had been planned in 1995 and interest rates were high at the time, he said.

 Mr Wang said Tianjin Bohai had sufficient resources to meet this year's repayments on the US$40 million loan.

 He believed members of the creditor syndicate would not recall the loan although the firm had failed to meet some financial covenants.

 Director and vice-finance manager Wang Xin said the firm was still in the process of talking to domestic banks to turn more than 500 million yuan due this year into longer-term debt in a bid to bring current liabilities below current assets.

 Analysts expected the company would continue to be plagued by weak product prices and oversupply in the short term.

H SHARES 



Tianjin Bohai cuts costs to reduce losses