Jilin Chemical Industrial Company Limited Announces 2003 Annual Results

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Jilin (NYSE:JCC)
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Jilin Chemical Industrial Company Limited Announces 2003 Annual Results HONG KONG, April 20 /PRNewswire-FirstCall/ -- Jilin Chemical Industrial Company Limited (HKSE: 0368, NYSE: JCC) (the "Company") held the first Extraordinary General Meeting for 2004, at which Yu Li, Shi Jianxun, Zhang Xingfu, XuFengli, Lan Yunsheng, Ni Muhua, Jiang Jixiang, L� Yanfeng, Wang Peirong, Zhou Henglong and Fanny Li were elected as directors of the 4th Board of Directors of the Company,(the "Board") for a term of three years with effect from April 20,2004; Zou Haifeng, Yang Jigang, Yan Weidong and Li Shumin were elected as the supervisors (representatives of shareholders) of the 4th Board of Supervisors of the company. Wang Huaiqing was democratically elected by the company's employees as the employee's representative in the Board of Supervisors. The above supervisors were elected for a term three years with effect from April 20,2004. The Company held the board meeting on April 20, 2004, at which Mr. Yu Li was elected as chairman of the Board, Mr. Xu Fengli was elected as deputy chairman of the Board and the Company announced its audited results for the year ended December 31, 2003, based on the financial statements prepared in accordance with International Financial Reporting Standards (IFRS). Turnover for 2003 was RMB20.7 billion (approximately US$2.5 billion), representing an increase of 57.2% as compared with 2002. The Company generated a net profit of RMB427.6 million (approximately US$51.5 million) compared with net loss of RMB1.02 billion in 2002. Earnings per share in 2003 was RMB0.12 compared with loss per share of RMB0.29 in 2002. The Board has resolved not to declare any final dividend for the year ended December 31, 2003. Having suffered a loss for three consecutive years coupled with intensifying competition in the market, the Company adopted the following strong and effective measures in 2003 to achieve a turnaround from loss making to profitability: 1. Closely pursue an overall approach of large production scale, ongoing product improvement and large economies of scale; fully devote efforts to the improvement of facilities and technologies that are used in production operation; strengthen control over the inspection, analysis and production process; and explore in depth the possibilities of increasing efficiency, saving energy consumption and reducing wastage in order to ensure that the Company's production facilities operate at a full utilization rate. In 2003, the production facilities were in stable operation with a utilization rate of 99.6%. Production fluctuation and unexpected suspension of production decreased by 63% as compared with 2002. 2. Strengthen financial management on a unified basis through strict controls over capital expenditure and to repay interest-bearing liabilities to the greatest extent possible, so that the capital of the Company can be used more effectively and efficiently. In 2003, interest-bearing liabilities of the Company decreased by RMB2,853.59 million with a turnover of working capital of 8.6 times. Substantial increase in cash flow has enhanced the financial situation of the Company. 3. Strengthen materials management and increase the ability to use bidding for materials procurement; strengthen overall monitoring and auditing with the aim of reducing procurement costs. 4. Strengthen business and sales management by pursuing the business concept where "sales shall be dependent on profitability; production shall be dependent on sales; sales to immediately follow production and sales to ensure profitability"; on all aspects of storage, transportation and sales; being market-oriented; hold seminars for customers on a timely basis for the promotion and marketing of our products. As a result, the Company was able to achieve 100% for both its production/sales ratio and payment recovery rate. 5. Further implement the "Code of Conduct for Staff" to strictly train and regulate staff to act professionally and in compliance with such code. The Company further reformed the system of division of labour, fully implemented the "Procedures on the Management of Responsibilities for Risks", offered incentives and rewards for outstanding staff, and established an effective mechanism to ensure competitiveness and further improve supervision of staff. As a result, the Company was able to quicken its pace of development and increase its dynamism. In 2004, the Company will engage in strict management, improve its overall regulatory standards and continue to improve profitability. In the year to come, the Board expects that international oil prices will fluctuate within a high price range. The domestic market for petroleum and chemical products will further develop in line with the international market. It is anticipated that market competition will intensify. The costs of energy, raw materials and transportation in China will increase and rail transportation will come under pressure. All these factors will make it more difficult for the Company to maintain a balance over its resources and control over its production operation and costs. In this regard, the Company will seize the opportunity provided by the Central Government's support to speed up the pace of restructuring and renovate old industrial production facilities in north- eastern China; expand technological development; implement strict staff management and increase productivity. Moreover, the Company will formulate new strategies and management methods for its business and sales operations so that there can be breakthroughs in all aspects of the operations of the Company. In 2004, the Company expects the crude oil processed by it to reach more than 5.8 million tons and the production capacity of its major products to increase based on the solid foundation created in 2003. The Company expects its production facilities to have a utilization rate of over 99%. In addition, it is anticipated that the Company will achieve 100% for both its production/sales ratio and payment recovery rate. The above proposal will be presented to the Company's shareholders for approval at the 2003 Annual General Meeting to be held on June 17, 2004. Jilin Chemical is one of the largest producers of basic chemicals and chemical raw materials, and one of the largest integrated chemical enterprises in the PRC. Its primary business comprises the production of petroleum products, petrochemical and organic chemical products, synthetic rubber products, chemical fertilizers and other chemical products. *In this statement, amounts in Renminbi have been converted into United States dollars at the rate of US$1.00=RMB8.2767, as announced by the People's Bank of China as of December 31, 2003. Financial report A Financial Statements prepared under IFRS (The Group's and the Company's accounts prepared under IFRS have been audited by PricewaterhouseCoopers) Consolidated Profit and Loss Account For the year ended December 31, 2003 (Amounts in thousand except for per share data) 2003 2002 Notes RMB RMB Turnover 1, 7 20,652,809 13,138,387 Cost of sales (19,125,842) (12,518,955) Gross profit 1,526,967 619,432 Distribution costs (29,338) (34,933) Administrative expenses (574,051) (797,434) Shut down of manufacturing assets - (283,418) Other operating expenses (28,260) (9,683) Operating profit/(loss) 2 895,318 (506,036) Interest expense (429,782) (474,370) Interest income 1,531 1,364 Exchange loss (37,153) (48,725) Exchange gain 546 7,675 Share of profit/(loss) of jointly controlled entities 9,664 (7,671) Share of (loss)/profit of an associated company (14,001) 125 Profit/(Loss) before taxation 426,123 (1,027,638) Taxation 3 (270) (1,116) Profit/(Loss) before minority interests 425,853 (1,028,754) Minority interests 1,756 5,655 Profit/(Loss) attributable to shareholders 4 427,609 (1,023,099) Basic and diluted profit/(loss) per share 5 RMB0.12 (RMB0.29) Dividend 6 - - 1 Turnover Turnover represents revenues from the sale of petroleum, petrochemical and chemical products. Analysis of turnover by segment is shown in Note 7 below. 2. Operating Profit/(Loss) 2003 2002 RMB RMB Operating profit/(loss) is arrived at after crediting and charging the following items: Crediting Government grants and subsidies 502 - Charging Amortisation of intangible assets (included in "administrative expenses") 101,642 79,980 Auditors' remuneration 4,250 3,000 Cost of inventories (approximates cost of sales) recognised as expense 19,125,842 12,518,955 Depreciation on property, plant and equipment 930,365 1,028,542 Writedown of carrying value of property, plant and equipment (included in "administrative expenses") - 323,844 Employee compensation costs (including directors' and supervisors' emoluments) 625,700 517,360 Shut down of manufacturing assets - 283,418 Net loss/(profit) on disposals of property, plant and equipment 26,379 (3,876) Operating lease rentals on land and buildings 10,501 9,453 Operating lease rentals on plant and machinery 2,463 - Provision for impairment of receivables (included in "administrative expenses") 100,713 - Provision for impairment of prepaid expenses and other current assets (included in "administrative expenses") - 51,484 Provision for diminution in value of inventories and inventory writedowns 12,856 139,985 Repair and maintenance 264,613 560,010 Research and development expenditure 1,764 3,927 3 Taxation 2003 2002 RMB RMB PRC income tax 270 352 Share of tax of jointly controlled entities - 767 270 1,116 In accordance with the relevant PRC income tax rules and regulations, the enacted PRC income tax rate applicable to the Group is 33% (2002: 33%). Certain subsidiaries and jointly controlled entities are Sino-foreign joint ventures and are entitled to cert The tax on the Group's profit before taxation differs from the theoretical amount that would arise using the basic tax rate in the PRC applicable to the Group as follows: 2003 2002 RMB RMB Profit/(Loss) before taxation 426,123 (1,027,638) Tax calculated at a rate of 33% 140,621 (339,121) (Utilisation of previously unrecognised deferred tax assets)/ unrecognised deferred tax assets (133,827) 345,141 Other (6,524) (4,904) Tax expense 270 1,116 4 Profit/(Loss) Attributable to Shareholders The profit attributable to shareholders is dealt with in the financial statements of the Company to the extent of RMB435,484 for the year ended December 31, 2003 (2002: Loss of RMB976,198). 5 Basic and Diluted Profit/(Loss) Per Share Basic and diluted profit per share for the year ended December 31, 2003 have been computed by dividing net profit for the year by the weighted average number of 3,561,078,000 (2002: 3,561,078,000) shares issued and outstanding for the year. There are no dilutive potential ordinary shares. 6 Dividend No dividend was declared in respect of 2002 and 2003. 7 Segment Information Petrochemical Chemical Year ended and organic fertilisers December 31, Petroleum chemical and inorganic 2003 products products chemicals RMB RMB RMB Profit and loss Sales (including intersegment) 12,906,594 8,595,891 - Less: Intersegment sales (3,586,528) (812,800) - Total sales to external customers 9,320,066 7,783,091 164,861 Segment results 37,344 721,791 (121,754) Finance costs - net Share of profit of a jointly controlled entity - 9,664 - Share of loss of an associated company - - - Profit before taxation Taxation Minority interests Net profit Depreciation and amortisation 494,535 362,532 9,671 Impairment charge of current assets (receivables and inventories) Assets and liabilities Segment assets 2,503,467 7,700,372 848,240 Interests in a jointly controlled entity - 53,722 - Investment in an associated company - - - Total assets 2,503,467 7,754,094 848,240 Segment current liabilities 501,931 2,387,753 454,000 Borrowings Total liabilities Segment capital expenditure on property, plant and equipment and on intangible assets 35,042 179,145 179,071 Year ended Synthetic Other December 31, rubber products 2003 products and services Total RMB RMB RMB Profit and loss Sales (including intersegment) 1,133,031 2,560,499 25,360,876 Less: Intersegment sales - (308,739) (4,708,067) Total sales to external customers 1,133,031 2,251,760 20,652,809 Segment results 356,048 (98,111) 895,318 Finance costs - net (464,858) Share of profit of a jointly controlled entity - - 9,664 Share of loss of an associated company - (14,001) (14,001) Profit before taxation 426,123 Taxation (270) Minority interests 1,756 Net profit 427,609 Depreciation and amortisation 40,855 124,414 1,032,007 Impairment charge of current assets (receivables and inventories) 113,569 Assets and liabilities Segment assets 755,820 799,060 12,606,959 Interests in a jointly controlled entity - - 53,722 Investment in an associated company - 4,908 4,908 Total assets 755,820 803,968 12,665,589 Segment current liabilities 95,190 175,462 3,614,336 Borrowings 6,509,897 Total liabilities 10,124,233 Segment capital expenditure on property, plant and equipment and on intangible assets 75,241 18,355 486,854 SIGNIFICANT DIFFERENCES BETWEEN IFRS AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA ("US GAAP") For the year ended December 31, 2003 (Amounts in thousands unless otherwise stated) Effect of significant differences between IFRS and US GAAP on net profit/(loss) and shareholders' equity is summarised below: Net profit/(loss) Year ended December 31, 2003 2002 2003 2002 RMB RMB US$ US$ Net profit/(loss) under IFRS 427,609 (1,023,099) 51,664 (123,612) US GAAP adjustments: -- Depreciation charge on fixed asset revaluation surplus on Restructuring and at February 28, 1995 11,223 3,593 1,356 434 -- Reduction in loss on write-off of fixed assets - 2526 - 305 -- Reversal of writedown in carrying amount (net of minority interests) of fixed assets and provision for fixed assets impairment (42,700) 322,240 (5,159) 38,933 -- Depreciation charge on writedown in carrying amount (net of minority interests) of fixed assets and provision for fixed assets impairment (27,954) - (3377) - -- Depreciation charge on foreign currency translation difference on interest components capitalised in fixed assets 1,531 1,531 185 185 -- Depreciation charge on fixed assets revaluation surplus of Jilin - 7630 - 922 Net profit/(loss) under US GAAP 369,709 (685,579) 44,669 (82,833) Basic and diluted net profit/(loss) per share RMB0.10 (RMB0.19) US$0.01 (US$0.02) Shareholders' equity As at December 31, 2003 2002 2003 2002 RMB RMB US$ US$ Shareholders' equity as reported under IFRS 2,510,556 2,082,947 303,328 251,664 US GAAP adjustments: -- Fixed asset revaluation on Restructuring and at February 28, 1995 (744,007) (744,007) (89,892) (89,892) -- Deferred tax asset on fixed asset revaluation surplus on Restructuring 235,941 235,941 28,507 28,507 -- Depreciation charge on fixed assets due to revaluation on Restructuring and at February 28, 1995 665,461 591,426 80,402 71,457 -- Reversal of deferred tax liability on fixed asset revaluation surplus at February 28, 1995 9,580 9,580 1,157 1,157 -- Reduction in loss on write-off of fixed assets 11,532 11,532 1,393 1,393 -- Reversal of writedown in carrying amount (net of minority interests) of fixed assets and provision for fixed assets impairment 279,540 322,240 33,774 38,933 -- Depreciation on writedown in carrying amount (net of minority interests) of fixed assets and provision for fixed assets impairment (27,954) - (3377) - -- Foreign currency translation difference on interest components capitalised in fixed assets (30,616) (30,616) (3,699) (3,699) -- Depreciation charge on foreign currency translation difference on interest components capitalised in fixed assets 10,717 9,186 1,295 1,110 -- Gain on transfer of fixed assets to Jilin (65,320) (65,320) (7,892) (7,892) -- Depreciation charge on fixed asset revaluation surplus of Jilin - 62812 - 7589 -- Tax adjustment (245,521) (245,521) (29,664) (29,664) Shareholders' equity as reported under US GAAP 2,609,909 2,240,200 315,332 270,663 Amounts in RMB have been converted into United States dollars at the respective rates of US$1.00: RMB8.2767 announced by the People's Bank of China as at December 31, 2003. No representation is made that the RMB amounts could have been or could be converted into US dollars at that rate. For further information, please contact: Jilin Chemical Industrial Company Limited Tel: (86) 432-390 3651 Mr. Li Chunqing Fax: (86) 432-302 8126 E-mail: Fortune China Public Relations Ltd. Tel: (852) 2838 1162 Ms. Mabel Tai Fax: (852) 2834 5109 E-mail: . DATASOURCE: Jilin Chemical Industrial Company Limited CONTACT: Mr. Li Chunqing of Jilin Chemical Industrial Company Limited +86-432-390 3651, fax, +86-432-302 8126, ; or Ms. Mabel Tai of Fortune China Public Relations Ltd., +1-852-2838-1162, fax, +1-852-2834 5109,

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