Despite market performance in China remaining unstable, Hong Kong-based Yingde Gases Group established a solid foundation to weather the storm in the first half of 2016, and recorded stable revenue growth in leveraging on its “extensive market experience and business strategy.”
As of 30th June 2016, the group recorded revenues of RMB 4.14bn ($622m) – a 9% increase from the corresponding period in 2015. The company attributed the growth to the commissioning of four additional on-site gas production facilities but pointed out that the growth in gross profit was partially offset by the decline in merchant unit prices.
As such, Yingde reached a gross profit total of RMB 1.27bn ($190.9m) and an overall profit margin of 30.7% in its 2016 first-half results.
The company explained, “In the first half of 2016, commodity prices experienced a more obvious rebound, which was mainly driven by short-term factors such as cyclical demand for restocking. Currently, the world’s economic recovery is not yet on a solid base, while China’s growth in domestic demand for industrial products was still weak, and the overcapacity situation of China’s steel industry did not improve significantly.
“It is expected that performance of the macroeconomy will remain steady in the second half of 2016 while the demands in industrial gases will remain stable.”
Yingde’s on-site supply method formed the bulk of its revenue, bringing in RMB 3.46bn ($520m) and accounting for 83.7% of its profits. Deliveries to the merchant market resulted in RMB 401.5m ($60.3m) with other sales forming the rest of Yingde’s profit.
The near double-digit rise in revenue was achieved despite Yingde reducing its weighted average unit price of gases sold to its merchant customers. In the first half of 2016, the company’s unit prices for O2, N2 and Ar on average was RMB 0.76 ($0.11) – around a 6% drop from its average unit price of RMB 0.81 ($0.12) in the same period in 2015.
Yingde identified the main affecting factors of its gas prices gases sold to merchant customers as spot prices in local market, local supply and demand and local economic conditions.
Total assets of the group in the six-month period reached approximately RMB 20.26bn ($3.04bn), representing an increase of RMB 686m ($103.1m) from 31st December 2015. Yingde’s cash flow also increased and settled at RMB 1.05bn ($157.8m) – an increase of RMB 371m ($55.6m) compared to the previous six-month phase.
Yingde’s net capital expenditure for the first half of 2016 was RMB 244m ($36.7m), primarily comprising of expenditures for the construction of new production facilities, purchase of property, plant and equipment, which the company revealed were financed by a combination of internal cash flows and bank borrowings.
In terms of future outlook, the North Pacific rim corporation expects this growth strategy to continue with a statement from the company signifying, “Although the industrial gas market was affected by the weakening global economy and the slowdown of China’s economic growth in the first half of 2016 along with the unstable performance in the retail market, our group remains confident in future market performance.”
“Our group will closely follow the market trends, seize market opportunities and attract more quality customers. While maintaining the on-site gas supply business, our group will adopt a more aggressive strategy in securing customers in the merchant market.”
About the company
Yingde Gases Group was established in October 2001 but has been the largest domestic independent industrial gas supplier specialising in on-site gas supply in China in terms of total revenue since 2009. Its core business focuses on on-site gas supply, retailed gas distribution and specialised production of industrial gases. Yingde primarily serves the iron and steel, chemical, non-ferrous metals, electronics and energy industries.