Chemspec Gross Profit Down 46.7% In Q4 2009

Published: 11-Mar-2010

Chemspec International, a China-based contract manufacturer of highly-engineered specialty chemicals, has reported a gross profit of RMB63m for the fourth quarter of 2009, a decrease of 46.7% from the fourth quarter of 2008. Total sales decreased 36.4% to RMB177.1m from the fourth quarter of 2008.

Income from operations was RMB28.6m, a decrease of 66.6% from the fourth quarter of 2008. Net income attributable to shareholders was RMB34.8m, a decrease of 50.5%.

For the full Year 2009, total sales were RMB820.3m, a decrease of 13% from the preceding year.

Gross profit was RMB324.7m, a decrease of 17.6% from the prior year.

Income from operations was RMB207.5m, a decrease of 29.6% from the prior year. Net income attributable to Chemspec International shareholders was RMB172.4m, a decrease of 44.8% from the prior year.

Jianhua Yang, chairman and CEO of Chemspec, said: "2009 was clearly a difficult year for the global economy. A strong retreat in consumer demand affected the electronics markets that we supply, and unfavorable weather patterns had an impact on most agrochemical end markets. While 2009 presented a number of obstacles that we needed to overcome, it also presented an opportunity for us to prepare for future challenges."

Bing Zhu, CFO of Chemspec, said: "Given the tough environment in 2009, we took a conservative look at our inventory at year-end and decided to take a provision of RMB14.7m to write down the value of some of our obsolete inventories. This is a specific year-end non- cash charge, and we believe it reflects the realities of our current business. However, our financial position remains strong, and excluding the write down, our gross margins in the fourth quarter of 2009 would have stayed roughly in line with prior periods.

"In terms of financial performance, we believe we began to experience a positive turn-around in early 2010 as we started to see a recovery in demand in various end markets that incorporate our products. Our guidance for first quarter 2010 sales would represent a record for that period. Although there are still some visibility issues in terms of demand in the coming quarters for some of our products, we have a high degree of confidence that we can achieve quarter-over-quarter sales growth in the next few quarters based on our usual seasonal quarterly-sales fluctuations, our understanding of global market trends in 2010 as well as feedback from our long-term and new customers."

In manufacturing specialty chemicals, Chemspec also provides process design and process development services, which enable rapid production of specialty chemicals that are incorporated into the products of Chemspec's end users. Chemspec's customers and end users include electronics, pharmaceutical and agrochemical companies.

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