GTS Chemical Holdings PLC Trading Update (6911D)

TIDMGTS

RNS Number : 6911D

GTS Chemical Holdings PLC

02 February 2015

2 February 2015

GTS Chemical Holdings plc

("GTS" or the "Company" or the "Group")

Trading Update

Group Revenue up 45.9%; Maiden Dividend to be Proposed at AGM

GTS Chemical Holdings plc, the specialty chemicals producer and China's largest producer of ammonium sulfite, is pleased to update the market today on a period of strong performance in advance of the Company's Preliminary Results for 2014.

Highlights:

   --      Unaudited Group Revenue up 45.9% to RMB 704.6 million (2013: RMB 482.9 million) 
   --      Performance across all divisions exceeded market expectations 
   --      Expansion plans underway following acquisition of land 
   --      One lubricant oil and four specialty chemicals production lines planned for 2015 
   --      Reiteration of 5% dividend policy 

Segmental Sales Analysis

 
                                12 months to       12 months to   Increase 
                            31 December 2014    31December 2013 
 
   Sales (RMB millions) 
 Specialty chemicals                   504.3              405.3     +24.4% 
 Lubricating oils*                     138.6               47.0    +194.9% 
 Recarburizer*                          61.7               30.6    +101.6% 
 Total                                 704.6              482.9     +45.9% 
 

*Commenced in July 2013

Specialty Chemicals

GTS' core business division continued to perform well in the period, and Q4 revenues were particularly strong. GTS continues to benefit from its relationship with Tralin Paper as it implements its own expansion plans at its site near to GTS. Additionally, Tralin Paper has begun construction of a second factory located in North Eastern China, completion of which is expected in August 2015, at which point the Board anticipates a significant increase in demand for solid ammonium sulfite. Sales to other customers which account for 78.2% of divisional sales grew in line with expectations.

Lubricating Oils

The lubricating oils division has exceeded market expectations and accounts for around 20% of total Group revenue; a major achievement given that the division only began trading in the second half of 2013. Since the beginning of this year, we have increased the number of distributors from 18 to 48 and the division now operates in 18 regions, an increase of 9 over the year.

Recarburizer

The recarburizer division network has grown from 11 distributors in 6 provinces at the end of 2013 to 17 distributors across 7 provinces at 31 December 2014.

Investment

Following the completion of the acquisition of the land usage rights over 5.1 Ha of land adjacent to GTS' existing site, the Board has begun to implement its investment plans. Over time, we intend to concentrate lubricant oil production on the new site, and the Group's existing site will be used solely for the production of specialty chemicals. The reorganisation of the Group's facilities will enable the Group to further rationalise its specialty chemical process and create space for further expansion. This expansion of capacity will also enable us to capture an anticipated increase in demand for ammonium sulfite from in particular, the Group's largest customer, Tralin Paper.

In 2015, the Group expects to add four specialty chemicals production lines, which will increase our production capacity of solid ammonium sulfite by approximately 40%, and of liquid ammonium sulfite by approximately 50%. We also plan in 2015 to construct a new state of the art lubricant oil production line, which is expected to more than double current capacity.

Dividend

The Board reiterates its intention to announce a maiden full year dividend for the year ended 31 December 2014. The dividend is expected to be consistent with GTS' stated dividend policy of approximately equal to a 5% yield on the placing price at the time of the Company's IPO. Further announcements relating to dividend payments will be made following the publication of the Company's annual report for 2014.

Mr. Cheng Liu, Chief Executive Officer of GTS Chemical Holdings plc, said:

"I am delighted by the Group's progress in the period, which exceeded management and market expectations. GTS' main business divisions have grown faster than estimated at the time of our August 2014 IPO.

"With the acquisition of the new land now complete, the Board believes that GTS is well positioned to begin the next phase of its expansion plans to increase capacity and improve efficiency. We remain committed to the stated dividend policy, and I look forward to updating the market at the time of our upcoming Preliminary Results."

Enquiries:

 
 GTS Chemical Holdings plc 
  Mr Roy Su, CFO                                Tel: [phone] 
                                                www.gtschemical.com 
 SP Angel Corporate Finance LLP               Tel: [phone] 
  Nominated Adviser and Broker 
  David Facey / Stuart Gledhill / Liz Yong 
 Yellow Jersey PR Limited                     Tel: [phone] 
 Alistair de Kare-Silver / Dominic Barretto   Email: [e-mail] 
 

About GTS Chemical Holdings plc

GTS manufactures specialty chemicals for the paper and chemicals industry. The Group is the largest Chinese producer of ammonium sulfite, a chemical used to manufacture paper from straw. GTS has also a rapidly growing lubricant oil division which services the automotive and industrial markets. Trading in recarburizer is its third division, which accounts for less than 10% of Group revenue.

The Group is located in Shandong Province, one of the largest provinces in China, ranked by GDP, and an area rich in downstream industries. GTS' location also means it is close to several chemical plants and paper factories, which gives it a distinct advantage over its competitors.

The Company is exposed to structural growth in the paper industry and chemicals sector, and market research estimates that from 2014 to 2020, China's demand for ammonium sulfite, led by the paper industry, is set to grow at an annual compound growth rate of 12%. GTS stands to gain from the Chinese Government's support of the non-wood paper industry and its drive to restructure the lubricant oil market through increased regulation and higher standards which favour the more modern producer.

The Group has a history of strong profit growth and consistently high operating margins.

This information is provided by RNS

The company news service from the London Stock Exchange

END

TSTPKKDBCBKDBDN