GTS Chemical Holdings PLC Trading Update (8324T)

TIDMGTS

RNS Number : 8324T

GTS Chemical Holdings PLC

23 July 2015

23 July 2015

GTS Chemical Holdings plc

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

Trading Update

Group Revenue up 34.5%; Maiden Dividend being paid 31 July

GTS Chemical Holdings plc, the specialty chemicals producer and China's largest producer of ammonium sulfite, reports to the market today following continued strong growth during the first half of 2015.

Highlights:

   --     Unaudited Group revenue up 34.5% to RMB 415.4 million (H1 2014: RMB 309.0 million) 
   --     Specialty chemicals revenue up 30.8% to RMB 280.1 million 
   --     Lubricant oils revenue up 60.7% to RMB 101.0 million 
   --     Construction of new, higher capacity specialty chemicals production line remains on track 

-- Construction of new lubricant oils line progressing which will increase capacity from 10,000 tonnes per year to 40,000 tonnes per year (single shift basis)

-- Maiden full year dividend to be paid 31 July - CEO and major shareholder, Cheng Liu, reinvesting dividend cash received into the business through a 10 year loan

Segmental Sales Analysis

 
                              6 months      6 months   Increase 
                            to 30 June    to 30 June 
                                  2015          2014 
   Sales (RMB millions) 
 Specialty chemicals             280.1         214.2     +30.8% 
 Lubricant oils                  101.0          62.8     +60.7% 
 Recarburizer                     34.3          32.0      +7.5% 
 Total                           415.4         309.0     +34.5% 
 

Specialty Chemicals

GTS' largest division has continued to perform strongly in the first half, with growth in revenues of 30.8% against increasingly tough comparatives. Sales continue to grow across the division's spectrum of end users.

Lubricant Oils

Sales in the lubricant oils division have continued their strong growth during the period. Further additions to the distribution network and marketing activities have helped to further drive this division and the Group anticipates that lubricant oil sales will continue to progress well. Growth has been spread across each of the Group's principal brands Ogistar, Changyun and Qiaoke.

Recarburizer

Modest growth has continued in this division. While the Directors do not anticipate that growth in this division will be as strong as for the Group's principal Specialty Chemical and Lubricant Oils divisions, the Recarburizer division generates good margins and a positive contribution to Group profits.

Investment

Construction of the Group's new specialty chemicals production line on its existing site continues to progress well. The new line will enable the Group to produce higher quality specialty chemicals and to control the chemical reactions even more closely. The line remains on track to be commissioned in Q3 2015, upon which the Group's production capacity of liquid ammonium sulfite and liquid ammonium bisulfite will be increased from 300,000 tonnes per year to 480,000 tonnes per year, based on an 8 hour shift six days a week.

The construction of a new lubricant oils production unit on the land acquired in December 2014 also continues to progress well and is expected to be completed by the end of 2015.

Dividend

The Company's maiden dividend for the full year ended 31 December 2014 is due to be paid on 31 July 2015. As noted in the Group's annual report, the Group's CEO and major shareholder, Cheng Liu, has decided to reinvest his portion of the dividend (amounting to RMB12.7m net of tax) back into the Chinese operating subsidiary and has entered into an agreement for a 10 year loan at 3% per annum with interest being payable at the end of the term. Mr Liu's decision is welcomed by the board as it allows the Company to invest and expand its operations at a faster rate than otherwise, and underlines his commitment to the business and its success for all shareholders.

The Company remains committed to paying dividends in the future, which will reflect the Company's profitability taking into account its investment needs.

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

"I am delighted that the Group continues to build upon its strong start to the year. GTS' main business divisions continue to perform in line with expectations with the Group's outlook for the full year remaining unchanged.

"I would like to thank our employees and shareholders for their continued support"

Enquiries:

 
 GTS Chemical Holdings plc 
  Mr Roy Su, CFO                    Tel: [phone] 
                                    www.gtschemical.com 
 SP Angel Corporate Finance       Tel: [phone] 
  LLP 
  Nominated Adviser and Broker 
  David Facey / Stuart Gledhill 
 Yellow Jersey PR Limited         Tel: [phone] 
                                   739 
 Dominic Barretto / Alistair 
  de Kare-Silver 
 

About GTS Chemical Holdings plc

GTS is the largest Chinese producer of ammonium sulfite, a specialty chemical used in the paper, chemical engineering, food and pharmaceutical industries. GTS is also the second largest producer of ammonium bisulfite, a preservative and reducing agent used in the petroleum drilling, water treatment and chemical engineering industries. The manufacturing of these two specialty chemicals comprises the Group's core business segment, Specialty Chemicals. This division manufactures its high quality products mainly from recycled waste materials. Additionally, GTS has 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%. The Company's two main divisions continue to benefit from government backed environmental changes that are currently taking place in China. GTS' biggest product, ammonium sulfite, is in increasing demand as the production of paper from straw continues to grow. The Company believes that the increase in production of paper from straw will continue to exceed the overall increase in demand for paper in China as smaller, less environmentally friendly, producers leave the market.

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

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