Lee & Man Chemical profit up 78% to HK$637mn

The spin-off enabled the company to focus on the development of chemical business and provided investors clearer view on the operating and financial position of the chemical business.

Lee & Man Chemical Company Limited (“Lee & Man Chemical”) on Monday announced its annual results for the year ended 31 December 2011.

The Group recorded revenue of HK$2,156 million, increasing 0.8% compared with last year. Net profit was HK$676 million, representing a substantial year-on-year increase of approximately 45.2%. Revenue of the chemical business increased 40.7% to HK$1,808 million, and its net profit surged 77.9% to HK$637 million. The handbag business recorded revenue of HK$347 million and a net profit of HK$39 million upon the completion of the spin-off.

The Board of Directors has recommended the payment of a final dividend of HK12 cents. Together with an interim dividend of HK17 cents per share already paid, total dividends for the year amounted to HK29 cents (2010: HK22 cents).

Ms. Wai Siu Kee, Chairman of Lee & Man Chemical, said, “The Group successfully spun off its handbag business on 27 June 2011 and has this business listed on the Main Board of the Stock Exchange of Hong Kong Limited by way of introduction. The spin-off not only enabled our management team to focus on the development of chemical business, but also provided investors with a clearer and an independent view on the operating and financial position of the chemical business.”

The production capacity of the chemical business has further increased since the fourth production line commenced full operation during the first half of the year. As for the product selling prices, there were significant fluctuations in main product prices during the year; high prices dropped sharply in the second half of the year whereas the by-product prices rose substantially. This segment’s gross profit margin rose 2.0 percentage points from 44.7% of last year to 46.7%, and net profit margin also increased 7.3 percentage points from 27.9% of last year to 35.2%. Such excellent performance not only generated considerable profit contribution to the Group, but also laid a solid foundation for the future business expansion. 

Upon the full operation of the fourth chloromethane production line in the first half of the year, the aggregate designed annual production capacity of Jiangsu Chemical Plant has reached 160,000 tons of chloromethane, 220,000 dry tons of caustic soda and 120,000 tons of hydrogen peroxide. The key business focus in 2012 will be the construction of a new plant in Ruichang City, Jiangxi Province, where the Group intends to spend about RMB1.9 billion for developing the fluorochemical downstream products in two phases. The first production line is expected to commence operation in the first half of 2013. The project will be financed by internal funds and bank borrowings while the relevant bank financing lines have been granted and made available for drawdown at any time according to the progress requirement of the project.

As at 31 December 2011, the Group maintained bank balances and cash of HK$1,233 million (31 December 2010: HK$393 million). Its net cash-to-equity ratio (cash and cash equivalents net of total borrowings over shareholders’ equity) as at 31 December 2011 was 0.16. With strong liquidity position, the Group possesses sufficient cash and available banking facilities to meet its commitments, working capital requirements and future investments for expansion, according to a Lee & Man Chemical report.

“As always, our management team will leverage our internal technical innovation and scientific research and development in a pragmatic and aggressive approach and continue our persistent efforts to make great strides in business development, delivering fruitful returns to the shareholders.” Ms. Wai concluded.