GTS Chemical Holdings PLC Trading Update (1857A)

TIDMGTS

RNS Number : 1857A

GTS Chemical Holdings PLC

03 June 2016

3 June 2016

GTS Chemical Holdings plc

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

Trading Update

First quarter of 2016 continues the trend of 2015

Q1 revenue up 33.6% on corresponding period last year

GTS Chemical Holdings plc (AIM: GTS), the specialty chemicals and lubricating oil producer, and China's largest producer of ammonium sulfite, reports to the market today following continued strong growth in the first quarter of 2016.

Highlights:

-- Unaudited Group revenue for the three months ended 31 March 2016 of RMB 223.2 million, 33.6% up on last year

   --     Speciality Chemicals revenue up 39.0%; Lubricant Oils up 34.8% 
   --     Gross margin increased slightly to 21.7% 
   --     New, higher capacity specialty chemicals production line commissioned in January 2016 
   --     American Petroleum Institute Q1 certificate granted 

Segmental Sales Analysis

 
                                      Q1               Q1           Inc              % of 
 RMB million                        2016             2015             %             total 
 Speciality Chemicals              165.2            118.9          39.0              74.0 
 Lubricating Oils                   48.1             35.7          34.8              21.6 
 Recarburizer                        9.9             12.5        (20.7)               4.4 
 Total                             223.2            167.0          33.6             100.0 
 

Specialty Chemicals

With revenue of RMB 165.2 million, the Speciality Chemical Division grew by 39%. The growth was driven by increases in sales throughout the customer mix but in particular to the chemicals and paper sector. In the quarter we added a further 3 distributors further increasing our geographic reach.

Lubricant Oils

The Lubricant Oils division continues to be successful with revenue growth of 34.8% to RMB 48.1 million in the first quarter (Q1 2015: RMB 35.7), representing 21.6% of total revenue. Our distribution network has increased by 3 in the quarter and we now sell to 70 distributors.

Recarburizer

Consistent with our strategy to focus on the Company's principal product divisions, Recarburizer sales fell in the quarter by 20.7% and represents an increasingly small percentage of our total sales amounting to just 4.4%, down from 6.6% in 2015. It does however generate a good trading margin and is a positive contribution to Group profits without the need for further capital investment.

Group Chief Executive, Mr Cheung Liu stated:

"We continue to grow strongly and exceed market expectations. Despite the ongoing restructuring of the Chinese economy, by concentrating on the production of the highest quality products in the most efficient manner and, in specialty chemicals through the use of recycled waste materials, the revenue growth of both core divisions continues to exceed 30% whilst slightly improving our gross margin 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 
 

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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June 03, 2016 06:38 ET (10:38 GMT)