Singpu Q&A
19/8/04
Dear Against The Gods, you wrote:
I refer to your annnouncement on plants to build a new VCM plant.
1. The plant will only be expected to be ready in 2007. Currently, how many VCM manufacturers are there in Asia and what is the total production if all are full capacity?
From now to 2007, how many VCM plants that other companies in Asia would start operating and what is the target capacity that would be added?
Thank you
The production capacity of VCM in Asia and globally is 11,044 thousand tones/year (“kt/yr) and 32,342 kt/yr in 2003 respectively. By 2008, the total global production capacity is forecast to be 38,090 kt/yr, an increase of 18% as compared to 2003, and Asia and Middle East is expected to play a main role in the increase.
Currently, in the PRC, the domestic demand for VCM far outstrips supply with the shortfall satisfied by imports. In 2003, PRC imported 861 kt of VCM.
(Source: Sembawang Huanqiu Feasibility Report)
2. Where can I get the Sembawang Huanqiu feasibility report on PVC?
The Sembawang Huanqui Feasibility Report is a private study commissioned by Singpu Chemicals for the VCM project. As the report contains trade sensitive information, we will not be circulating the report publicly.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Jackie, you wrote:
I notice that your liquidity in the singapore exchange is very little for investor to buy into your company. Any ways to improve?
Thank you for your interest in Singpu Chemicals. We will look into ways to address this issue at the appropriate time.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear William Wan, you wrote:
1. How was the IPO proceed spend?
The net proceeds were used to acquire and install additional machinery and equipment to increase our annual production capacity of caustic soda by 50,000 tonnes to approximately 150,000 tonnes.
2. How are the loans of $17m which is due within 1 year to be repaid?
The short-term loans are generally for working capital purposes. We expect to roll-over the loans.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Heng Chew Hock, you wrote:
Instead of relying solely on China market, are there any plans to diversify market risks beyond PRC?
Singpu Chemicals’ commitment to the PRC began more than a decade ago when we saw the growing potential of the chemical industry in Jiangsu Province. The Jiangsu Province has proven to be an excellent base for Singpu Chemicals and our Group has since grown to become a major chemical raw materials producer in the PRC.
With our new medium-term Strategic Business Plan involving US$216 million in investments in the PRC over the next 3 years, we have every intention to extend our reach and entrench our dominance in our geographical location.
We believe in the potential of the chemical industry in the PRC. With the PRC fast emerging as a major manufacturing base of the global economy, we believe that Singpu Chemicals is well positioned to tap into this growth opportunity with our knowledge of the PRC market, experience and track record.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Pui Cheng Wui, you wrote:
What was the average realised unit selling price for caustic soda and chlorine for the half-year period Jan-June 2004, and what are the current market prices?
The average realised unit selling price for caustic soda and chlorine for the half-year period Jan to June 2004 are RMB1317 per tonne and RMB1775 per tonne, respectively. Chlorine prices have been falling since April 2004, while caustic soda prices are on the uptrend.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Yellowcard88, you wrote:
1. This is a massive investment the company is planning. According to the announcements, the company will finance using internal resources and through bank loans. As the investment is over USD200m, I cannot see how you can do it w/o placing new shares to fund the growth. How confident are you in this investment w/o raisng $ through share sale? If you are to gear up, what is the gearing at the end of the 3 year business plan?
The total capex for the initiatives outlined in our medium-term strategic business plan amounts to US$216 million. It is important to note that the investments in the series of initiatives will be carried out in phases over the next three years:-
120MW Co-generation Plant
Initial 60MW Co-gen plant: Commenced construction in 4Q03 with completion targeted in 4Q05 Augmenting Co-gen plant by an additional 60MW: To commence construction in 1Q06, with completion targeted in 4Q06
Doubling of Chlor-alkali Facility:
To commence construction in 1Q05, with completion targeted in 4Q05
VCM Plant: To commence construction in 1Q06, with completion targeted in 1Q07
Based on the timeline outlined above, we expect to fund the various phases of our expansion plan through internal funds and bank loans. But if we choose to bring forward the project timeline, various funding options may be considered.
Our net gearing - currently at 52 per cent - will rise as a result of the expansion plan. The Management of Singpu Chemicals is committed to ensure that our gearing will not be overly stretched.
2. Understand VCM is largely used for the production of PVC... what else can it be used for?
VCM is predominantly used as the main raw material for the manufacture of PVC (Polyvinyl Chloride), which is a versatile plastics. In fact, 99% of the VCM in the world is used in the production of PVC.
China currently imports more than 2 million tons of PVC per year (Source: Sembawang Huanqiu Feasibility Report).
3. When the co-gen power plant is up, will you be selling any excess power into the grid? Will the co-gen be using gas, petrol, diesal or coal to powered? Thanks!
Based on our projection, our 120MW Co-gen plant is expected to just adequately fulfil 100% of our Group’s energy requirements when it is completed in 4Q FY2006. For any excess power, there is a possibility that we could sell it to the grid.
The Co-gen plant will be a coal-fired plant.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Woon Wee Yim, you wrote:
I am interested to know what is the ROCE (Return on Captial Employed) for the first half of 2004 (annualised) and for 2003. Thank you.
Definition of ROCE = Profit After Taxation/(Shareholders’ equity + Long-term liabilities)
1H2004: 11% [six-months’ profit after taxation / (Shareholders’ equity + Long-term liabilities)] [This is not annualized]
2003: 13% [For the full year]
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Warren, you wrote:
Hi Singpu Management, Congrats on your healthy 1H04 results, with fully diluted EPS of 5.2cents. Thank you.
Q1. Will doubling the 1H04 eps be correct for full year04 report? I understand that 3Q traditionally have been weak performance due to maintenance. Appreciate your guidance.
It would not be correct to double the 1H EPS. The full year 2004 EPS will be available when we release our full year results.
The third quarter is characterised by a lower level of activities due to the summer months and the intermittent power outages. We usually take the opportunity to shut down our operations – typically for about 10 days – for annual repairs and maintenance. Likewise this year, we will be conducting our annual repairs and maintenance in the last week of September. As such, assuming everything else remaining constant, our production output is generally lower in 3Q as compared to the other quarters.
With the expansion completed in December 2003, our chlor-alkali production capacities have expanded, generally, by 50%. The full impact of our Phase 3 expansion programme will be reflected in our financial performance for 3Q2004.
Another point to note, we have been experiencing the strengthening of average selling prices for most of the Group's products. We remain optimistic of our Group's performance for the rest of the year.
Q2. Rising energy, raw materials like benzene have eaten bigtime into margins. Have these factors normalised? How exposed is Singpu to oil prices?
Benzene is one of the major input components for our products. Benzene prices are dependent on crude oil, and currently, the international crude oil prices are on an uptrend.
Q3. The US216mil medium term strategic is an BOLD initiative. Although to be implemented in phases over 3-5yrs, its intended to be funded internally and bank borrowings. What sort of debt levels will that mean for Singpu?
The medium term strategic plan is aimed at diversifying our Group’s business to bring us closer to our target of becoming a top-tier company in the production and sale of chemical raw materials in the PRC. We believe these initiatives will enhance our Group's performance and deliver value to our shareholders.
Please refer to our responses to question on debt level by Yellowcard88.
Thanks for allowing us small-timer an opportunity to quiz management on strategy and direction.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Warren, you wrote:
Hi, Reading some broker reports post 1H04 results, most seem upbeat, like Singpu's management, about future outlook. Some even have even revised upwards their profit forecasts for 2004 & 2005.
Q1. In order to sustain broker (and market enthusiasm) can Singpu continue to deliver at least 30% earnings growth over the next 3-4 years?
Our growth in FY2003 and 1H2004 was achieved on the back of an increase in production output following the implementation of production Phase 2 expansion programme and production Phase 3 expansion programme respectively.
Going forward, we have a definite plan to achieve increased growth and profitability. Our medium-term strategic business plan will work towards diversifying the Group’s business and creating value for our shareholders.
Q2. Most broker I've read are generally happy with the US$216mil expansion plan. Can you explain what are the risk associated with this ambitious growth initiative?
We believe in the potential of the chemical industry in the PRC. As the PRC continues to be a major manufacturing base in the local economy, the chemical industry is expected to grow in tandem.
China currently imports more than 2 million tons of PVC per year (Source: Sembawang Huanqiu Feasibility Report). With our strong customer network and presence in the PRC, we believe that as long as there are uses for PVC, there will be resulting demand for VCM.
Q3. Historically speaking, Singpu has always managed to push work production to near-100% of any new capacity increase within 3-6 months of it coming onstream. Will this also be the case with the planned expansion program?
Singpu Chemicals had implemented three phases of chlor-alkali production expansions in the past. With each phase, we gain added experience and efficiency. We will try our best efforts to utilise this experience for the planned expansion.
Q4. During the next 3-5 years, Singpu will be in cash conserve mode to fund the US$216mil expansion. What does that mean for shareholders in terms of dividend payouts? Thank you for answering these questions Warren
Singpu Chemicals issued our first dividend payout on 10 May 2004 - within the first year of our listing on the Main Board of the Singapore Exchange.
With our recently announced medium-term strategic business plan, our top priority is to reinvest our cashflow to provide for the expansion and growth for our business to deliver value to our shareholders. We are focused on increasing shareholders’ value, and we will weigh the issue of dividends based on our performance for the year and the cashflow needs for the expansion of our operations.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear mrmoon, you wrote:
The following is my questions:
1. How has the shortage of electricity affected your operations? What are your counter measures?
As electricity supply was tight in eastern China, we had to reduce our production in line with the local government’s instructions for reduced electricity usage.
Our annual electricity consumption is approximately 400 million kw/hr per year and there is no immediate solution to alleviate the power-shortage issue. Moving forward, our plan is to build a 60MW power plant which we expect to be completed in 4Q 2005. We have plans to double the capacity of the power plant by 4Q 2006. Upon completion, our Co-gen plant will reduce our energy costs, and improving the Group’s competitiveness.
2.Do you foresee any needs to raise capital from the equity market in the near future (1 to 2 years)?
Please refer to our responses to the same question from Yellowcard88.
3. What proportion of your bank loans interest rates are fixed and variable?
Currently, all our interest rates for long term loans are pegged to the PRC interest rates and short term loans are fixed.
4. Where are your export markets? Do you foresee in growing the export sales?
For the first half of 2004, we had begun exporting aniline to multi-national companies such as Dow Chemical and BASF. Export sales accounted for 10% of our Group’s total revenue in the first six months of the year. We intend to explore opportunities in growing our export sales.
5. Is there any dividend policy?
There is no fixed dividend policy. We are focused on increasing shareholders’ value, and we will weigh the issue of dividends based on our performance for the year and the cashflow needs for the expansion of our operations.
6. How do you perceive the prospects of the business in 3 to 5 years?
Thanks & regards
Currently, the PRC is the second largest chlor-alkali producer in the world with an annual production capacity of more than 7 million tonnes of caustic soda in 2001, compared to the USA’s production capacity of about 14 million tonnes. As the PRC continues to be a major manufacturing base, the chemical industry is expected to grow in tandem.
Singpu Chemicals has enjoyed success in the PRC, and the opportunities facing the Company going forward are tremendous. With our new medium-term Strategic Business Plan, we have every intention of extending our reach and entrenching our dominance.
Rgds, The Management Team Singpu Chemicals Ltd.
Dear Investors,
Thank you for all your questions and the interest in Singpu Chemicals Ltd. We have come to the end of this Q&A session.
We have enjoyed and learnt much from your questions and we hope that you have a better insight of our Company and know more about our operations.
Rgds, The Management Team Singpu Chemicals Ltd.
http://www.listedcompany.com/ir/singpu/web/show.cgi?content=qa_190804
posted by mrmoon @ 8:23 PM
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