China's chemical industry giant Sinochem International Corporation yesterday said net profit dropped 10 percent last year, mainly due to the slump in the export price of coke, one of the company's main businesses.

 

Sinochem International's net income in 2005 dropped to 711.5 million yuan (US$88.9 million) from 797.7 million yuan (US$99.7 million) in 2004, the Shanghai-listed company said in an exchange filing yesterday.

 

But analysts say the drop in net profit did not necessarily mean the company performed poorly performance in the past year.

 

"The company has done remarkably well given the slump in the coke price and when compared with the years prior to 2004," said Jin Zefei, a Shenyin Wanguo Securities analyst.

 

The price of coke in the international market peaked at US$400 per ton in the first half of 2004. The price now has plunged to US$200 per ton as over-capacity in the coke industry started to be felt since the second half of 2004.

 

Statistics show China exported 15 million tons of coke in 2004, accounting for 60 percent of the world's coke trade.

 

Sinochem International contributed to 11 percent of the country's coke exports.

 

As a result of the drop in the export price of coke, Sinochem International's metallurgy and energy business unit, of which coke is a major component, suffered a 51 percent dive in gross profit from the previous year.

 

Total revenue increased to 15.9 billion yuan (US$1.96 billion), up 22 percent over the previous year.

 

Chemical logistics units and rubber products both posted high rise in gross profits around 60 percent while agrochemical unit reported a slight decrease, by 3 percent.

 

The company plans to pay a dividend of 3.5 yuan (44 US cents) for every 10 shares held.

 

Some Shanghai-based brokerages revealed that they have not been following the company recently, possibly signalling investors' lack of interest in the company's stock.

 

"It is still a good company but just needs time to adjust itself amid fluctuations of the coke price," said Jin.

 

Sinochem's current controlling shareholder is the State-owned Sinochem Corporation, which holds a 64 percent stake.

 

Deutsche Bank, one of the world's largest investment bank, holds a small stake and is among the top ten holders of the company's shares with no lock-up requirements.

 

Having completed conversion of its State-held shares to public equity, all of Sinochem International's shares are now tradable, yet some are subject to a lock-up period as required by share reform schemes to reduce the impact on the stock market.

 

Sinochem's yuan-dominated A shares closed at 4.09 yuan (50 US cents) per share yesterday, up by 2.25 percent over the previous day.

 

(China Daily March 16, 2006)