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Public company info - Ko Yo Chemical (Group) Ltd. , 00827.HK
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Ko Yo Chemical (Group) Ltd., 00827.HK - Company Profile
Chairman Tang Guoqiang
Share Issued (share) 5,488,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Fertilisers & Agricultural Chemicals
Corporate Profile Business Summary: The Group is principally engaged in the manufacture and sale of chemical products and chemical fertilisers in the People’s Republic of China (the “PRC”). Performance for the year: For the year ended 31st December 2019, sale turnover was approximately RMB1,964 million, which represents an decrease of approximately 36.7% as compared to year 2018. For the year ended 31st December 2019, the loss attributable to shareholders was approximately RMB732 million, which represent an increase in loss of approximately RMB384 million as compared to a loss of approximately RMB348 million in year 2018. Basic loss per share was approximately RMB0.1598 for the year ended 31st December 2019. Business Review： I. Urea production capacity increases in 2019, supply and demand of nitrogen fertilizer are basically balanced, and prices fluctuate According to statistics, in the year of 2019, urea production capacity increased, supplyside reforms continued to deepen, backward production capacity continued to be eliminated, but the exit of outdated capacity was slightly lower than the new input capacity, and in addition, the rising of operating rate of the domestic urea industry and the increase of the company’s operating load, all lead to the increase of production and the price of urea will fluctuate at low levels throughout the year. According to OILCHEM’s statistics, the production of urea this year will be 52.34 million tons, representing an increase from 2018. With a continued gradual decrease of the demand of agricultural urea in China year by year in recent years, the domestic agricultural demand in 2018 had fallen by about 1%. With regard to raw materials, the overall supply of natural gas in 2019 is sufficient and prices continue to rise during the heating season. Secondly, in 2019, the overall focus of coal and natural gas had moved downwards, and costs had gradually decreased, while the spot urea price continued to decrease, leading to a continuous decline in the profit of urea production in 2019. In particular, after the National Day, agricultural demand gradually weakened and the drop in the spot prices had accelerated. As a result, corporate profits shrank continuously. According to OILCHEM’s data, the average price in the major areas of urea production in 2019 was RMB1,842 per ton while the average price in 2018 was RMB1,973 per ton, representing a decrease of RMB131 per ton comparing with last year. As there was an abundant supply of domestic natural gas in the first half of 2020, the number and time of limitation of gas supply and ceasing of operation faced by the enterprises fell and the production of urea from natural gas process in the period of January-March was higher than the production in the corresponding period of last year. Due to the “novel coronavirus pneumonia” epidemic, there was a brief downturn in the urea market at the beginning of February. The State then issued a number of policies to facilitate the circulation of the chemical fertilizer market and secure the production work of the chemical fertilizer enterprises, including lowering the prices of electricity and natural gas. A small number of enterprises ceasing operation for maintenance planned to resume production in March and the average daily output in March 2020 hopefully will exceed 160,000 tons. Urea production will rise steadily in the first half of the year. Since fertilizers will be accumulated for the spring during the period from February to March and will be used for cultivation in the spring during the period from April to May, which is a peak season, it is expected that market prices will show an upward trend during this period and will gradually fall as demand for agricultural products will decrease in June. Domestic urea production capacity is expected to increase in the second half of 2020 by more than 3 million tons but some of the new production capacity may be affected by the epidemic in the first half of the year and the progress of production may slow down. However, the new production capacity will increase the supply of urea market, bringing certain negative impacts on the market. II. Due to the long-term accumulation of coastal stocks in 2019, the price of methanol showed a downward trend China’s total methanol production capacity reached 88.02 million tons in 2019, representing an increase of 8.11% over 2018. The total output for the whole year was about 60.96 million tons, representing an increase of about 9.52% year-on-year. The volume of methanol imports for the year was approximately 10.71 million tons, representing a year-on-year increase of 44.2%. The overall methanol market in the Mainland showed a “W”-shaped trend in 2019 generally, i.e. first up and then down. In the first quarter, price fluctuated at higher levels. The supply decreased during the quarter and the demand downstream was acceptable, driving the market to recover. From the second to the fourth quarter, there was an excess of supply and the demand downstream was relatively weak. There was a long period of accumulation of inventory in the community, leading to a short selling in the market and the prices fall rapidly. Domestic production capacity will continue to grow in 2020, reaching approximately 98.9 million tons, and the real production capacity may reach approximately 67 million tons, representing an increase of 9.91% from 2019. With regard to import, there is a release of new production capacity abroad in 2020, together with weak global demand and the sanctions against Iran, the overall imports may continue to grow to approximately 11 million tons. As the downstream continues to grow, the real consumption in 2020 is expected to be close to 75 million tons. The main concept for the whole year of 2020 should be: the profits of methanol from both the upstream and downstream are contemporaneously squeezed; domestic production capacity is pressed by the domestic production capacity abroad; with the utilization of domestic production capacity being gradually in excess, downstream products are contemporaneously in oversupply; it is difficult to reduce the high inventory to an average level, and in addition to profit distribution in the industry chain, it will generally persists at low levels. As affected by the epidemic, the downstream operation rate in the first quarter is low and the supply of goods exceeds demand. As the downstream businesses are gradually resuming operation, a regional recovery can be expected. III. Downstream demand for synthetic ammonia is weak, prices fluctuate and continue to be weak Compared with 2018, the domestic price of liquid ammonia in 2019 continued to fluctuate and weaken. As of the end of the year, the price of liquid ammonia was RMB2,849 per ton, representing a decrease of RMB524 per ton or a decrease of 15.53%, in comparison with RMB3,373 per ton as of the end of last year. The inventory of liquid ammonia in the market was at a high level at the beginning of the year. As a result of only a small number of downstream enterprises commencing their operation, the downstream demand continued to weaken and the price of liquid ammonia fell sharply. At the beginning of March, there was a slight increase in the number of downstream enterprises of liquid ammonia commencing operation, accompanied by the commencement of accumulation of fertilizers for spring, the urea market continued to rise. Most of the enterprises started to reduce ammonia and increase fertilizer. In addition, as there was a suspension of production due to the maintenance work for certain liquid ammonia equipment, the supply of liquid ammonia in the market was slightly tight, the delivery of goods by the enterprises was smooth and the price of liquid ammonia continued to rise. In the second half of 2019, the market of urea continued to be weak and the liquid ammonia market lacked strong support. Since some enterprises engaged in the operation of changing from urea to liquid ammonia, the price of liquid ammonia fluctuated at low levels. By the first half of 2020, the demand for domestic liquid ammonia will be supported by downstream urea market and the price of liquid ammonia will gradually improve from low levels. In view of the existing situation this year, as the operating rate of the downstream demand end has started to increase, the supply of liquid ammonia will tend to be relatively balanced and the pressure on the inventory of the upstream plant will be weakened. As the price of phosphate compound fertilizer, ammonium phosphate, urea products and other downstream products rise continuously, it will provide certain support to the market of liquid ammonia and the price of liquid ammonia will gradually rise from low levels. Prospects: Facing the economic downturn and the unstable conditions of the fertilizer and chemical industry in 2019, the price of natural gas rose and the price of products decreased. The Group mainly focused on undergoing reforms and innovations within the enterprise and strived to keep pace with changes in the market. In 2020, the Group seized the real-time dynamics of changes in the fertilizer and chemical industry and used the following strategies and measures to help the company to emerge completely from the difficulties and keep itself on a right track. I. To continue to stabilize and optimize existing business, focus on efficiency, change management style and achieve a safe, environmentally friendly and long-term stable operation 1. To continue to arrange and coordinate the work with regard to production materials such as water, electricity and gas, and to provide long-term and high-load operation protection for the plants in Dazhou and Guangan; in ensuring a safe and long-term operation, to ensure that a measurement of cost effectiveness of the production units would be carried out first; and to conduct, daily monitoring, accounting, early warning, timely adjustment and optimization of production arrangement and operating load to ensure that best operating efficiency could be achieved. 2. To proactively push forward the accident prevention mechanism and systematically upgrade the maintenance and analysis of the equipment to ensure a safe production and a continuous and stable long-term operation were in place. 3. To focusing on the goal of “refined management”, continue to facilitate the implementation of measures of “broaden sources and reduce expenditure”, reduce operating costs and cash flow expenses. 4. The sales team stabilized high-quality core customers, deeply tapped the market potential, expanded local language sales in the product market and achieved the multiple quantization of high-priced sales areas. At the same time, differentiated urea products were put on the market to ensure target sales could be achieved. Also, the fullest use of market financial instruments were also made to ensure a suitable hedging in futures . 5. To proactively seek cooperation funds and push forward the approval, start-up and construction of new projects. II. To conduct research and to earnestly develop the refined chemical industry and help Ko Yo Group to keep on a right track 1. Project of 300,000 tons/year of dimethyl carbonate in Dazhou Plant This project plan will mainly make full use of the existing equipment of Dazhou Company which will save investment and has a short construction period. This project will use a two-step urea processing technology to obtain propylene carbonate, ethylene carbonate and dimethyl carbonate. The synthesis conditions for urea alcoholysis are mild and easy to operate. It gets rid of the influence of the price inversion of propylene oxide and 1,2-propylene glycol in the traditional transesterification process, and the raw materials under the process route are all the products or emissions of the already-built units of Dazhou Ko Yo Chemical Co. Ltd, which can bring greater competitive advantages. Moreover, the public works of water, electricity, gas, steam and other ancillary facilities required by this project will fully rely on the projects already completed and put into production in the Park and Dazhou Ko Yo Chemical Co. Ltd, which can save a lot of investment costs. At the same time, the raw materials of urea, methanol, liquid ammonia, CO2, etc. of this project come from the existing units and the cost of which is low. There almost involves no transportation cost and it enjoys a big cost advantage. The completion and operation of the project will bring new profit growth to the company. 2. Project of a new material factory of 20,000 tons/year of anthraquinone The project plans to adopt domestic mature technology and to carry out technological transformation on the basis of the existing equipment of Guangan New Materials. It will save investment and has a short construction period and the product cost is low. The project adopts advanced process technology and the safety technology has a high degree of automatic control. It will have less environmental impact and a high added value of products. The modified units can be adjusted between anthraquinone and PPS according to market conditions. The main use of anthraquinone is as a working carrier for hydrogen peroxide synthesis. The domestic market demand for hydrogen peroxide is increasing and the demand for anthraquinone is also growing. The completion and put into operation of the project will broaden the company’s product area, increase the added value of the company’s products and strengthen the company’s ability in risk resistance. 3. Project at Guang’an Plant — 300,000 tons/year of hexamethylene diamine This project is situated in the Xinqiao Chemical Industry Park, Guang’an City Economic and Technological Development Zone, Sichuan Province. It uses butadiene, methanol and ammonia as raw materials to produce adiponitrile, and adiponitrile is then reacted with hydrogen to form hexamethylene diamine. According to PCI’s annual report, the average growth rate of ammonia demand during the period of 2015-2025 is 2.3%. The main downstream of ammonia is nylon 66. Under the trend of light weight, environmental protection and energy saving, the demand for nylon 66 in the automotive industry is rising continuously. With the expansion of the market of downstream nylon 66 and other engineering plastics, the domestic demand for adiponitrile and hexamethylene diamine has increased by more than 15% annually. As the breakthrough to the industrial production of adiponitrile and the access to the price and technological decision-making power of adiponitrile and nylon 66 are badly needed, the policy of the State hence strongly encourages and supports the development of the industry of adiponitrile. 4. Integrated Project at Guang’an Plant — 500,000 tons/year of polyether polyol This project uses propylene and hydrogen as raw materials, adopts advanced technological process and produces new chemical products such as rigid foam polyether, polymer polyol POP, polyether polyol PPG, and hydrogen peroxide (27.5%) through the production processes such as hydrogen peroxide, propylene oxide, and polyether. Compared with similar projects in the same industry, this project consumes less energy and achieves better results in environmental protection. It belongs to the encouraged type of construction projects of the State. Since there will be technological transformation to the project based on the existing facilities, the construction work, equipment and facilities, public works and auxiliary production facilities of the project can partially rely on the existing facilities of the plant, thus reducing the overall investment and operating costs of the project.

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