SEVEN MONTHS AFTER it was listed on the main board, many analysts and fund managers were still asking, 'Asia what?' when The Informer asked about Asia Zirconium. That is even without mentioning a basket of chemical jargon - zirconium oxychloride, zirconium carbonate, zirconium oxides, zirconium hexafluoride and zirconium sulphate. Beneath the complicated jargon is a story of a company which earns a fat profit by churning out zirconium chemicals used to make lipstick, mascara, face masks, rubber additives, optical fibres, artificial jewellery, pesticides, fire-proof materials and even anti-tank missiles. The man behind Asia Zirconium is founder and chairman Yang Xinmin. A Yixing township enterprise in Jiangsu province, Asia Zirconium joined the procession of Chinese private concerns, such as Euro-Asia Agricultural, Greencool Technology, Chaoda Modern Agriculture and China Rare Earth Holdings, that have headed south to the Hong Kong stock market over the last couple of years. However, these stocks, known as P chips, have suffered from terrible publicity, partly because of poor disclosure and what analysts call 'too good to be true' profit margins. Attempting to build up a healthy industry image, Mr Yang said: 'We want to tell the public that we're a solid company with a unique product.' The Informer spoke to Mr Yang about his difficulties in dealing with the press, customers and investors, among other things. Q: How did the Iraq war help the company's bottom line? A: The Iraq war has lifted sharply the demand for zirconium chemicals in the United States, where zirconium is refined and used to produce fire bombs and anti-tank missiles. The material is very strong and resistant to heat. As exports were better than expected, our net profit was boosted by 31 per cent to HK$72.51 million last year, exceeding our forecast of $60 million. Q: Asia Zirconium's gross profit margin has been impressive, at an average of 35 per cent to 37 per cent, over the last four years. Has any analyst ever said to you that your profit margin was too good to be true? A: It is not surprising or abnormal to see such a high level of gross profit margin. It is related to the nature of the industry. China has just 30 years of history in zirconium production. The average price of lower-end zirconium chemicals was US$3,000 per tonne compared to today's $800 per tonne. However, improvements in technology and management skills have lowered costs, which allow the profit margin to remain at a relatively high level. Some zirconium products have a gross profit margin of up to 80 per cent. Q: Chinese private enterprises such as Euro-Asia, Greencool, Chaoda and China Rare Earth have been smeared with a lot of negative news. Do you think the image of private chips is generally poor? A: No, I don't think so. Euro-Asia is an independent case as the company mis-used agricultural land by developing real estate - Holland Village. Many large corporations in the United States have problems, too. Q: How do you handle press coverage of Asia Zirconium? A: It is difficult. Press coverage has not helped our discussions with a mainland acquisition target. It's very sensitive, partly because of the entity involved. The coverage has caused the deal to be delayed for about six months, to the end of this year or early next year. Also, some US clients have indicated that we should avoid talking about them with the press. Otherwise, they will stop orders. (The deal Mr Yang was talking about involves a Xian factory, which is owned by the People's Liberation Army.) Q: Were you the director whose salary was raised to between HK$4 million and $4.5 million last year from $1.5 million to $2 million in 2001? A: No, this is not salary. It is a director's emolument. The $4 million includes salary and year-end bonuses. My salary was kept at $1.6 million last year, the same as in 2001. Every director received a bonus as the company did very well last year.