GTS Chemical Holdings PLC Trading Update (7818D)

TIDMGTS

RNS Number : 7818D

GTS Chemical Holdings PLC

29 October 2015

29 October 2015

GTS Chemical Holdings plc

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

Trading Update

Group revenue up 34% in Q3

GTS Chemical Holdings plc (AIM:GTS), the specialty chemicals & lubricating oil producer and China's largest producer of ammonium sulfite, reports to the market today following continued strong growth in the third quarter of 2015.

Highlights:

-- Unaudited Group revenue for the nine months ended 30 September 2015 up 34% to RMB 676.2 million (2014: RMB 503.3 million)

   --     Revenue for the three months ended 30 September up 34% as growth continues at the same pace 
   --     Gross margin remains steady at 21.4% 
   --     Construction of new, higher capacity specialty chemicals production line nearing completion 

-- Construction of new lubricant oils production line is complete and in operation, increasing capacity from 10,000 to 26,667 tonnes per year (single shift basis)

Segmental Sales Analysis

 
                                   9 months           9 months   Increase 
                            to 30 September    to 30 September 
                                       2015               2014 
   Sales (RMB millions) 
 Specialty chemicals                  465.4              353.8       +32% 
 Lubricant oils                       161.1              101.4       +59% 
 Recarburizer                          49.7               48.1        +3% 
 Total                                676.2              503.3       +34% 
 

Specialty Chemicals

With revenue of RMB 465.4 million the Group's specialty chemicals division grew by 32%, continuing the pace of the first six months of this year. Sales to key customers have generally been above expectations. The distribution network, which enables GTS to reach smaller users of its products has increased from 26 to 55 distributors in the year to date.

Lubricant Oils

The Lubricant Oils division continues to be successful with revenue of RMB 161.1 million in the period, representing 23.8% of total revenue, up from 20.1% in the same period last year. It has exceeded expectations and we believe the division will continue to grow at a faster rate than the larger Specialty Chemicals Division. The number of distributors has been increased from 48 to 75 within this year.

Recarburizer

Modest growth has continued in this division. It is not expected to grow as strongly as the Group's principal Specialty Chemical and Lubricant Oils divisions. It does however generate a good margin and is a positive contribution to Group profits without the need for capital investment.

Investment

The new production line for liquid ammonium sulphite and bisulfite is nearing completion.

The new lubricating oils production line, which is on the new adjacent site, has been completed and is now in operation. This is a semi-automatic line, which improves quality and efficiency. Capacity is now 26,667 tonnes per year (based on a single eight hour shift day/six days per week).

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

"We have achieved another excellent set of results in the latest quarter, which has cemented the performance of the first half of the year. Despite the current lower growth prospects for the economy we expect our current performance to continue for the remainder of this year. I would like to thank our employees and shareholders for their continued support."

Enquiries:

 
 GTS Chemical Holdings plc 
  Mr Roy Su, CFO                    Tel: [phone] 
  Website                           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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October 29, 2015 03:00 ET (07:00 GMT)