HaiKe Chemical Group's shares plummet on annual loss forecast

HaiKe Chemical Group said Friday it was likely to report an annual loss as weakened demand presented challenges for Chinese operations last year.

HaiKe Chemical Group said Friday it was likely to report an annual loss as weakened demand presented challenges for Chinese operations last year.

The China-based chemical and biochemical business said oil refineries were impacted by a sluggish economy for the year to December 31st.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

A deterioration in market conditions affected trading in the last quarter, particularly in December, despite a strong start to the first half.

Tighter margins and lower utilisation rates in the refinery division also pushed down results.

Advertisement - Article continues below

The group's subsidiary Hebang was expected to report losses following a lower than forecast utilisation rate as a result of the change in the market for its first product Trichloroethylene, which suffered price drop and cost rise.

The second phase of construction at Hebang is ongoing and is expected to complete in March after which it will produce new products, namely caustic soda and epichlorohydrin, which are used to produce aluminium and epoxy resin respectively.

However, the company improved sales and marketing efforts in refined oil products, which helped HaiKe achieve record high group turnover.

Speciality, salt and biochemical divisions all recorded volume gains but prices fell in 2012.

HaiKe's gross margin halved in 2012 compared to the previous year as selling, general and administrative expenses surged due to enhanced marketing efforts.

Advertisement - Article continues below

"[Last year] was a difficult year for the refinery industry in China," said Xiaohong Yang, Executive Chairman.

"Despite the anticipated easing of the pricing mechanism, we expect the operating environment and domestic economy to remain challenging for refineries in the current year.

"The speciality/salt and biochemicals divisions, our core growth businesses, delivered a profitable performance and looking forward, the board remains focused on the company's long term growth by continuing to develop and expand its higher margin speciality chemicals which we believe will improve the profitability of the group."

Shares plunged 22.83% to 17.75p at 9:26 Friday.




Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular


Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020

Has the stockmarket hit rock bottom yet?

The world's stockmarkets continue on their wild and disorientating rollercoaster ride. Investors are still gripped by fear. So, asks John Stepek, have…
2 Apr 2020

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020