Hangzhou Hangyang Co. Ltd, the largest air separation plant manufacturer and a local industrial gas business player, has released its full financial results for 2016 and reported a near 17% drop in operating revenue.

Operating revenue fell 16.76% from RMB 5.93bn ($861.1m) in 2015 to RMB 4.94bn ($716.8m). Net profit attributable to shareholders of the listed company plunged dramatically, by 296%, from a profit of RMB 144.1m ($20.89m) in 2015 to a loss of RMB 282.6m ($40.98) in 2016.

This is the first time the company has recorded a loss since being listed in the China stock market in 2010, and its most serious plunge in profit. Moreover, it worsens further still when non-recurring gains and losses are deducted – resulting in a plunge of 439.7%.

Earnings per share (EPS) and diluted EPS both also recorded a decline of 300%, from RMB 0.17 ($0.025) per share to a loss of RMB 0.34 ($0.049) per share.

So what caused this sharp decline in fortunes last year?

Breaking down these results into separate business segments, revenue from the manufacturing business dropped 50% from RMB 2.67bn ($387m) in 2015 to RMB 1.33bn ($193.4m) in 2016, of which the manufacture of ASUs fell 53.6% from RMB 2.44bn ($354m) to RMB 1.13bn ($164m). Engineering services, the sale of gases, and other business activities all recorded increases of 119.5%, 7.6% and 12.8%, respectively.

Revenues from local business dropped only 8.75%, whilst revenues from overseas business decreased almost 95%.

The company explained that orders for plants and equipment dropped in 2015 because of the ‘supply side reform’ and the severe market and industry situations, thus affecting revenue. Moreover, it also has to make provisions for the write-off of bad debts and accounts receivable and also for assets impairment.

On the positive side, the financial report describes several major achievements of the company, including the 100,000 Nm3/h ASU that it supplied for the Shenhua Ningmei project and its first overseas EPC contract in Malaysia.

Despite the losses reported, the company revealed it is still optimistic about the outlook of its future development.

For air separation plants, Hangyang will maintain the direction of developing and manufacturing large-scale and super large-scale plants, Aand for the industrial gas business it intends to optimise its investment planning, integrate resources, and improve the operational efficiencies of its plants.

Hangyang also gave a prediction of its profit in the first quarter of year 2017; the company anticipates that the profit attributable to the shareholders of the listed company will return to between RMB 30m ($4.35m) to RMB 40 million ($5.8m), equivalent to an increase of up to 219% in a high scenario over the same period in 2016, due to the total contract amount signed in 2016 being considerably higher than that achieved in 2015.

Other ASU manufacturers

Besides Hangyang, two other cryogenic plants manufacturers, although of smaller capacity, are now also quoted in the stock market and have disclosed their fiscal performance as a result.

Suzhou Oxygen Plant Co. Ltd (Suyang), a long established ASU manufacturer originally founded in May 1971, started trading in the National Equities Exchange and Quotations (NEEQ) in April 2016 and has reported 2014/2015/2016 operating revenues of RMB 500m ($72.5m)/RMB 412.6m ($59.8m)/RMB 344.2m ($49.9m), respectively. The corresponding net profit attributable to shareholders of the listed company was RMB 10m ($1.45m) in 2016.

Likewise, Chengdu Shenleng Liquefaction Plant Co., Ltd – a company founded in April 2008 and specialised in the manufacture of air separation plants and liquefaction plants – started trading in August 2016 and has reported operating revenues in 2014/2015/2016 of RMB 511.3m ($74.1m)/ RMB 454.3m ($65.8m)/RMB 308m ($44.6m), respectively. The net profit attributable to shareholders of the listed company in 2016 was RMB 37.7m ($5.5m).