China BlueChemical Ltd. (“China BlueChem”, HKEx stock code: 03983), a leading chemical fertilizer and methanol producer in China, announced its unaudited interim results for the first half of 2018 on Tuesday.
In the first six months of this year, the company realized a revenue of 5.498 billion yuan (US$805.58 million) and gross profit of 1.336 billion yuan, representing an increase of 7.0% and 58.3%, respectively, compared to the same period last year. China BlueChem recorded profit attributable to owners of the company of 752 million yuan, rising by 159.3%. Basic earnings per share were 0.16 yuan.
The company reported that during the six-month period ended June 2018, it continuously optimised plant production and operation through refined management of the production process. At the same time, the firm steadfastly reformed its marketing system in order to fully grasp ongoing market trends. These efforts had been translated into a new record high of the company’s production volume and sales volume of compound fertilisers, with its sales volume for the first half of 2018 exceeding that of the whole last year.
Earlier in 2018, the Chinese government initiated a policy to improve the quality of agricultural development and continuously highlighted the importance of ensuring food safety in China. Constant efforts have been made to implement the policy of minimum purchase price for grain rice and wheat.
In the first half of 2018, due to the limits on natural gas supply and the rising environmental protection standards, some urea enterprises reduced urea production significantly and the average ex-factory price of urea in China increased 21% compared with the first six months of 2017. Similarly, the production volume of phosphate fertilizers in China decreased 22%, while the prices remained on the uptrend. Downstream demand of the methanol market was strong, and supply and demand kept in balance.
Xia Qinglong, Chairman of China BlueChem said: “By refining management of the production process, we achieved safe and stable operation of production plants. Both Hainan Phase I and Phase II Methanol Plants broke their respective records by realizing long-cycle operations that lasted over 290 days.”
According to Xia, the firm recorded urea production volume of approximately 1.148 million tonnes in the period from January to June 2018, and the output of methanol amounted to approximately 718,000 tonnes. The output of phosphate and compound fertilizers totaled approximately 452,000 tonnes, with the latter hitting a new historical high of approximately 117,000 tonnes of output.
Facing competition in the market, China BlueChem remained steadfast in the reform of its marketing system. Leveraging its branding and geographical advantages, the company endeavoured to expand its presence in the compound fertiliser market and fully grasped market trends to perform accurate pricing in tandem with the latest market changes.
As the company reported, in the first half of the year, it sold approximately 1.174 million tonnes of urea. Revenue from urea amounted to 2.082 billion yuan, representing an increase of 16.3% compared with the same period of 2017. The sales volume of phosphate fertilizers and compound fertilizers was approximately 423,000 tonnes, and the revenue amounted to 1.062 billion yuan. The sales volume of methanol was approximately 704,000 tonnes with revenue at 1.813 billion yuan.
Xia expected that as the year progresses, the second half of 2018 will see an off-season in the domestic demand for chemical fertilizers, and particular attention would need to be paid to global market trends.
He commented: “The fully-marketized operational environment and the upgrade of environmental protection standards will further facilitate the consolidation of the chemical fertilizer industry in China. The methanol sector is still undergoing a development boom, with downstream traditional demand continuing to grow steadily and methanol-to-olefins and methanol fuels still having ample room for growth. These serve as the major driving forces of the demands for methanol.”
Looking ahead, Xia advised that the company will continue its efforts in coordinating the stable supply of upstream natural gas, with an emphasis on put-into-use of the natural gas from Dongfang 13-2 Gasfield as planned.
“In addition, we will persistently strengthen and enhance HSE and refine production management, as well as put in an effort to achieve the safe and stable operation of each production unit. China BlueChem will bolster the operating capacity and put heightened emphasis on autumn sales, winter storage and sales of chemical fertilizers. Our company will also continue to optimize the product structure by increasing the production and sales proportions of NPK and value-added fertilizers. Furthermore, we will continue to step up efforts on cost reduction, quality improvement and efficiency enhancement, and to lower raw material procurement costs and strictly manage expenses,” added Xia.
In terms of future development, Xia revealed that the company will continue feasibility studies regarding production of high value-added chemical products using natural gas in Hainan in tandem with the development of the offshore natural gas field in the South of Hainan. The firm will continuously pay attention to domestic and overseas developments and evaluate merger and acquisition opportunities which are in line with its development strategies.
China BlueChem is a listed company in Hong Kong. It specializes in the development, production and sales of chemical fertilizers and synthetic chemical products, and is one of the largest producers of urea, phosphate and methanol in China in terms of production volume. Currently, China BlueChem’s production facilities are located in Hainan, Inner Mongolia, Hubei and Heilongjiang, China. It is a subsidiary of China National Offshore Oil Corporation which mainly engages in the exploration, development, production and sales of crude oil and natural gas.