On April 24, Bohai Chemical (600800. SH) released its 2023 annual report, showing that it suffered losses again last year, and the loss area further expanded, and the revenue also decreased by more than 40% compared with the same period last year. Bohai Chemical's "overall goals" include realizing the transformation of traditional petrochemical enterprises into new materials and new energy enterprises by 2035, and becoming a leader in the industry. Bohai Chemical, which has been losing money for two consecutive years, is currently facing the most important thing is how to reverse the decline in performance.
According to the financial report, during the reporting period, Bohai Chemical's revenue was about 3.225 billion yuan, a year-on-year decrease of 46.67%, and the net profit attributable to shareholders of listed companies was about -521 million yuan, compared with a loss of about 38.2378 million yuan in the same period last year. In 2021, Bohai Chemical's net profit will be about 188 million yuan. Last year, the net cash flow from operating activities was about -311 million yuan, a year-on-year decrease of 146.91%. The company's total assets are about 4.278 billion yuan, and the total liabilities are about 1.886 billion yuan.
In the four quarters of last year, Bohai Chemical was in a state of loss, quarterly, revenue of about 521 million yuan, 914 million yuan, 1.018 billion yuan, 773 million yuan, net profit attributable to shareholders of listed companies were about -109 million yuan, -157 million yuan, -128 million yuan, 127 million yuan. Of the seven major shareholding companies, four were in the red last year. Tianjin Bohai Petrochemical Co., Ltd. lost 504 million yuan last year, Tianjin Global Chemical Technology Co., Ltd. had net assets of 42.0188 million yuan and net profit of about 10.338 million yuan, Chongqing Global Paper Co., Ltd. lost about 9.5211 million yuan, and Tianjin Qingyuan Real Estate Co., Ltd. lost about 4.6822 million yuan.
It is worth noting that on April 23, Bohai Chemical announced that it had reviewed and approved the "Proposal on Capital Increase of Wholly-owned Subsidiaries by Converting Bonds into Equity". It is planned to increase the capital of Tianjin Global Magnetic Card Technology Co., Ltd., a wholly-owned subsidiary, by 97 million yuan by way of debt-to-equity swap. Upon completion, the wage injection will be increased from about $115 million to about $212 million. The purpose is to optimize its asset-liability structure and reduce the asset-liability ratio.
Bohai Chemical pointed out in the annual report that the company has a strong cost control advantage, emphasizing "strengthening internal management and strictly controlling various period expenses". Last year, Bohai Chemical's sales expenses, management expenses and financial expenses decreased by 6.35%, 14.84% and 61.69% year-on-year respectively, and R&D expenses also decreased by 13.91% year-on-year. The decrease in selling expenses was mainly due to the decrease in storage expenses, while the decrease in administrative expenses was due to the decrease in costs and compensation for shutdown and maintenance expenses last year. The decrease in finance expenses was attributable to a decrease in the size of debt during the year, a decrease in the comprehensive financing cost ratio, a decrease in interest expense and the use of exchange rate instruments to reduce foreign exchange losses.
Bohai Chemical's main business consists of propylene sales, propane sales, hydrogen sales, petrochemical products trade of its wholly-owned subsidiary, and magnetic card technology data card products, printing products, and intelligent application system machine supporting machinery products of its wholly-owned subsidiary. After the completion of the major asset restructuring, petrochemical became its core business, and its wholly-owned subsidiary, Bohai Petrochemical, was mainly engaged in propane-to-propylene business. The products are mainly sold to Shandong and radiate to North China.
In addition to the above businesses, Bohai Chemical's business also includes smart card design, research, production and sales, and its main products are financial IC cards represented by financial social security cards and standard bank IC cards, and non-financial IC cards represented by transportation cards. For example, in the field of public transportation, Bohai Chemical's products have covered nearly 100 cities and regions. Bohai Chemical's operating profit last year was about -647 million yuan, and in terms of industries, the gross profit margin of chemical industry decreased by 17.14%, machinery decreased by 14.90%, printing increased by 24.83%, and magnetic cards increased by less than 3%. Among them, the gross profit margin of chemical industry was -11.14%, and the gross profit margin of printing was -12.51%.
Bohai Chemical pointed out in the annual report that the company's propylene business will suffer a loss in 2023, mainly because the mainstream price of propylene in Shandong market continues to decline due to weak demand, and the price of propane, the main raw material, continues to run at a high level, the gross profit margin of the company's propylene products has decreased significantly, the gross profit margin of propylene products for the whole year has decreased by 19.03%, and the average price spread of propane propylene has decreased by 647 yuan per ton compared with 2022, a decrease of more than 30%. The operating cost pressure of the PDH unit has increased sharply, and it is in a long-term negative profit operation state, with large losses.
From the perspective of the industry, last year, China's propylene market first fell and then rose, continued to weaken in the first half of the year, and rebounded weakly in the second half of the year, indeed out of the "V" shaped trend. For example, Shandong propylene, which sold for 7,244 yuan at the beginning of the year, fell to 6,965 yuan per ton at the end of the year, a decrease of 3.85% for the whole year. Last year was also a year of rapid expansion of propylene production capacity, with new production capacity reaching 9 million tons per year, and the total production capacity is expected to reach 67.938 million tons last year. These additions have obviously had a negative impact on the propylene market.
Unfortunately, the demand side simply can't keep up with the speed of capacity expansion. Taking the main downstream polypropylene as an example, in the first half of last year, the start of polypropylene powder was less than forty percent. In the first half of the year, the value of propylene and powder was flat, the price difference was small, and Bohai Chemical emphasized that "the profit of powder was seriously inverted", and the industrial pressure was greater, and the risk was reduced by reducing the burden and stopping. Although there was a peak season in the second half of the year, the market was not good, and due to sluggish demand, the end of the year ended dismally.
Bohai Chemical believes that in recent years, the competition in the propylene industry has intensified, the economic benefits of the project have weakened, and it is expected that the profitability of the PDH process will still be "difficult to be optimistic" in 2024, and there is great uncertainty in the future PDH plant in terms of production and capacity utilization. According to the annual report, Bohai Chemical's main production and operation goals in 2024 are to produce 600,000 tons of propylene and achieve revenue of 4.075 billion yuan. However, the company cautions investors to understand the difference between business plans and performance commitments.
As of March 31, 2024, the number of shareholders of Bohai Chemical was 42,000, a decrease of 58 or 0.14% from the previous period. According to data from Oriental Wealth Choice, the number of shareholders of Bohai Chemical is "lower than the industry average". As of the end of March, the average number of shareholders of listed companies in the petroleum and petrochemical industry was 68,400. Among them, the number of shareholders of the company is in the range of 25,000-45,000, accounting for the highest 27.27%, and Bohai Chemical is in this range. (This article was first published in Titanium Media APP, author | Fang Lu)
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