Halfway through 2022, major listed chemical companies have successively announced performance announcements for the first half of 2022. Generally speaking, due to factors such as the national epidemic counterattack in the second quarter, the performance of many leading chemical companies has declined sharply. In addition, the current downstream demand is still bleak. Is the industry about to enter a freeze cycle?
Plunged 50%
The entire industry may face losses
PVC was still priced at 13,000 yuan in October last year, but now the price is around 6,500 yuan, a plunge of more than 50%. The PVC index can be regarded as the chemical index, which is the largest variety index in the chemical industry. Its plummeting represents that the chemical industry has entered a stage of huge losses. The entire chemical industry has entered a freeze cycle, which also means that China’s export demand may experience a cliff-like decline, which will increase huge concerns about future economic needs.
The current domestic average spot price of ethylene-based PVC is 6,511 yuan/ton, and the average spot price of calcium carbide-based PVC is 6,314 yuan/ton. Profits have been compressed in the price drop. The loss of the purchased calcium carbide method exceeds 700 yuan, and the loss of the self-produced calcium carbide method exceeds 200 yuan. The profit of the chlor-alkali integration of purchased calcium carbide has dropped by more than half, but there is still a profit of about 1,000 yuan. From a cost perspective, there is some support.
There are more PVC load reduction companies, but there are fewer maintenance companies. Coupled with the off-season and poor demand, there is an obvious accumulation of inventory.
The current PVC industry is experiencing a rare flattening of the cost curve, and PVC priced below 6,000 yuan/ton will face industry-wide losses.
Terminal demand deteriorates and profits are further compressed
After entering June, the macro interest rate hike was implemented, market transactions were expected to decline, and the trend reversed. Chemical products started to fall ahead of upstream crude oil, and the decline was significantly greater than that of crude oil. The overall pattern of chemical products’ profits was compressed and losses expanded.
Many listed chemical companies
There has been a performance decline or loss in the first half of the year
Recently, many chemical companies such as Lihuayi, Hongchang, Sinochem International, and Kangda have successively announced their performance forecasts for the first half of 2022. Judging from the published operating data, most companies’ performance declined sharply or even suffered losses in the first half of 2022, especially in the field of copper-clad laminates, where both volume and price decreased. In addition to the reduction in production and sales and product prices, the increase in basic raw material prices caused by the epidemic and high-priced crude oil is also one of the reasons for the decline in the operations of various companies.
Kangda New Materials suffered losses
Wind power structural adhesive supplier Kangda New Materials expects a net profit loss of 9.71 million yuan to 16.65 million yuan in the first half of 2022, compared with a profit of 27.75 million yuan in the same period last year.
The main reasons for performance losses are:
1. Affected by the epidemic, transportation and labor costs increased during the company’s resumption of work, and the price of raw material procurement was still high compared with the same period last year;
2. The initial infrastructure investment or technology development investment stage has not yet produced economies of scale;
3. Due to the adjustment in the pace of orders from customers in the military industry sector, the order volume in the first half of the year decreased compared with the same period last year.
Jilin Chemical Fiber suffered losses
Jilin Chemical Fiber, a downstream carbon fiber supplier of epoxy resin, is expected to lose 80 million yuan to 95 million yuan in net profit attributable to shareholders of listed companies in the first half of 2022, a year-on-year decrease of 296.23% to 333.02%. Among them, the Jilin epidemic caused a direct loss of 69.89 million yuan from the company’s production reduction.
Reasons for the performance loss: Affected by the COVID-19 outbreak in Jilin City in the first half of the year, Jilin Chemical Fiber took measures to reduce production. At the same time, the prices of raw materials, chemical auxiliary materials and energy increased significantly year-on-year. Insufficient production was superimposed on rising costs. Under the comprehensive impact, the final result was Profit fell sharply year-on-year.
Sanjiang Chemical suffered losses
China Sanjiang Chemical (02198) announced that the company expects its net loss attributable to equity holders for the six-month period ending June 30, 2022 to be between RMB 70 million and RMB 90 million, which is higher than the company’s net loss as of June 30, 2022. The net profit attributable to equity holders for the six months ended June 30, 2021 was RMB 327.6 million, a significant decrease of more than 120%.
The substantial decrease in net profit attributable to equity holders of the company is mainly due to: Affected by the new coronavirus epidemic and international emergencies, the prices of raw materials have increased, downstream demand has decreased, and the company’s main products (i.e., ethylene oxide, ethylene glycol and polypropylene) is lower than the average market price increase of the raw material methanol. Anti-epidemic measures disrupted logistics, resulting in a reduction in overall production capacity; one-time items of RMB 7,000 related to foreign exchange losses due to the depreciation of the RMB against the U.S. dollar were includedmillion, and related one-time items of inventory impairment provision of RMB 30 million.
Shenyang Chemical Industry suffered losses
Shenyang Chemical Industry (000698) recently released its 2022 semi-annual performance forecast. It is expected that the net profit attributable to shareholders of listed companies in the first half of 2022 will be a loss of 150 million yuan to 180 million yuan, and a profit of 376.33 million yuan in the same period last year, turning from profit to loss year-on-year; Basic earnings per share loss ranged from 0.220 yuan/share to 0.183 yuan/share, compared with a profit of 0.459 yuan/share in the same period last year.
In the first half of 2022, the company suspended production from March to April due to various factors such as government epidemic prevention and control requirements, major downstream enterprises suspending production and limiting production, and restrictions on cross-regional logistics, resulting in a year-on-year decrease in operating income. At the same time, affected by lower product prices and rising raw material prices, the company is expected to experience a year-on-year loss in operating results for the first half of 2022.
Hongchang Electronics’ profits fell sharply
Epoxy resin and copper-clad laminate supplier Hongchang Electronics expects to achieve a net profit of RMB 79.10-83.99 million attributable to shareholders of listed companies in the first half of 2022, excluding non-recurring gains and losses. Compared with the same period last year (statutory disclosure data), It will decrease by 111.74 million yuan to 116.63 million yuan, a year-on-year decrease of 57% to 60%.
Hongchang Electronics said: In the first half of the year, the downstream market demand for epoxy resin and copper-clad laminates was sluggish, coupled with the impact of repeated epidemics, geopolitical conflicts and intensifying global inflation. The gross profit and gross profit margin of products decreased year-on-year, and the non-recurring expenses attributable to shareholders of listed companies were deducted. Net profit after sexual gains and losses decreased year-on-year.
Jin’an Guoji’s profits fell sharply
Jinan Guoji, one of the main downstream suppliers of epoxy resin, a copper-clad laminate supplier, estimates that its net profit attributable to shareholders of listed companies in the first half of 2022 will be 55 million yuan to 80 million yuan, a year-on-year decrease of 85.35% to 89.93%.
Reasons for the decline in performance: In the first half of 2022, affected by the domestic and foreign epidemics, macroeconomics, etc., the consumer electronics market demand declined, the industry market was sluggish, and market competition was fierce. The company’s copper-clad laminate product sales and product prices both dropped significantly year-on-year, resulting in The gross profit margin of products dropped significantly year-on-year.
Chaohua Technology’s profits fell sharply
Chaohua Technology, one of the main downstream suppliers of epoxy resin, a copper-clad laminate supplier, estimates that its net profit attributable to shareholders of listed companies in the first half of 2022 will be 25 million yuan to 30 million yuan, a year-on-year decrease of 66.02% to 59.23%.
Reasons for the decline in performance: In the first half of 2022, affected by the COVID-19 epidemic, the industrial chain was affected to a certain extent. Downstream demand, especially customer demand for copper-clad laminates and circuit boards, was lower than expected, and the unit price of the company’s products dropped significantly year-on-year.
The risk is approaching, please take precautions
Overall, the revenue of chemical companies in the first half of the year is not optimistic. Combined with the increasing expectations of a global economic recession and the implementation of macroeconomic interest rate hikes, the chemical industry may face a pattern of expanding losses. Please take precautions.
</p
