Financial statements for China viscose listed companies in H1 2021

The commodity market saw drastic fluctuation in the first half of 2021 amid the expectation of global loose monetary policy and demand recovery, especially the resources in upstream segment. Viscose products witnessed a wave of gains at the beginning of this year, but returning to fundamentals subsequently. Let us review the financial results of viscose listed companies in the first half of year.

Aoyang Health: Funing Aoyang Technology Co., Ltd, a subsidiary of the company whose business is chemical fibers had operating income of 874 million yuan in the first half of 2021 (compared to 488 million yuan in the same period of 2020) and net profit of -816 million yuan (compared to -213 million yuan in the same period of 2020). During the reporting period, the company's VSF business was sold to Sateri China Investment Co., Ltd and was approved by the general meeting of shareholders and anti-monopoly investigations. The substantial loss of the company was mainly cuased by the large-scale provision of asset impairment for related assets when divesting viscose-related business.

Jilin Chemical Fiber: the company is mainly engaged in VSF and VFY production and sales and is actively transforming by developing carbon fiber industry. The company's review and net profit have increased significantly from 2020, owing to sharp increase in sales of related products. The sales of VFY and VSF increased by 44.8% and 175.52% respectively and the price of VSF also rose greatly.

Aoyuan Beauty Valley (originally known as "Kinghand"): the company was originally engaged in real estate, new materials and medical beauty-related business. During the reporting period, in order to better achieve its strategic goals, the company divested its real estate business and acquired two medical aesthetic hospitals. The phase I 40kt/yr lyocell fiber line of its 100kt/yr project was put into operation. Now the chemical fiber segment accounts for 26% of its total revenue. After the real estate business was divested, the chemical fiber sector may become one of the company/s main businesses.

Nanjing Chemical Fiber: the company mainly produces VSF and lyocell. The VSF business is operated by the wholly-owned busidiary-Jiangsu Jinling Cellulose Fiber Co., Ltd that produced 22.6kt of VSF in the first half of 2021, up 8.4kt year on year, realizing the revenue of 187 million yuan and net profit of -16 million yuan. The lyocell business is operated by Nanjing Jinling Bio-based Fiber Co., Ltd whose operating revenue and net profit during the reporting period was 22 million yuan and 138 million yuan respectively. The higher net profit than operating revenue is mainly because that the company sold part of idled land.

Sanyou Chemical: the company's major products are VSF, soda ash, PVC, caustic soda and silicone. During the reporting period, prices of major products of the company generally increased, pushing up operating revenue and net profit significantly. In the first half of 2021, the production and sales of VSF totaled 383.5kt and 341kt respectively, up 33.1kt but down 6.4kt respectively. The net profit of viscose segment was 488 million yuan, which was -161 million yuan in the same period of 2020.

Xinxiang Chemical Fiber: the company mainly produces and sells VFY and spandex. The substantial increase of operating revenue and net profit during the reporting period is mainly owing to the increase in volume and price and spandex. The gross profit margin of the products increased significantly to 40.97% (compared to 13.97% in the same period of last year). The sales value of VFY increased by 55%, while gross profit margin declined by 10.53%.

Zhongtai Chemical: chlor-alkali chemicals and viscose textiles are two major businesses of the company. During the reporting period, the falling revenue of the company was attributed to the disposal of 60% of Shanghai Duojing's equidity. The trading revenue of the company dropped much year on year after losing power of control. The production of viscose fiber and rayon yarn totaled 280kt and 148.1kt respectively, respectively up 50.3kt and 7.6kt year on year. The operating revenue was 1.19 billion yuan and 1.552 billion yuan respectively, respectively up 46.77% and 55.12% year on year.

To sum up, the operating revenue and profit of each company's viscose sector improved significantly under the background of demand recovery and bullish commodities, but there are great divergences among different companies. The supply of VSF industry is further concentrated with the sale of viscose business by Aoyang and the scale of Sateri keeps expanding. In the second half of 2021, VSF market is expected to be weak in the context of tightening global monetary policy and lackluster demand.