Overview

Dongyue Group (SEHK:189) was founded in 1987 and listed in the Hong Kong Stock Exchange in 2007. Over the past 32 years, focusing on the direction of science and technology, environmental protection and internationalization, the company has developed into a high-tech enterprise in fluorine and silicone industry.1

The company's Company adheres to scientific and technological innovation and has acquired a number of independent intellectual property rights in the field of new environmental protection, new materials and new energy sources, breaking the monopoly of multiple foreign technologies. The Party and state leaders, such as Li Keqiang, Hu Jintao, Li Yuanchao, Wen Jiabao, He Guoqiang, have visited Dongyue Group and spoken highly of the major innovation achievements in fluorine and silicone materials, especially in the research and development of ion-exchange membrane.

The Company has won the honor of China Well-known Trademark, China Top Brand, and National Labor Awards and so on. As a state-level enterprise technology center, post-doctoral workstation and Taishan scholars post, it has also participated in National Key Torch Program, the National 863 Program, 11th Five-Year and 12th Five-Year National Science and Technology Support Program and Shandong High-Tech NO.1 Project and other major technology projects. The Company is honored as a national main high-tech enterprise, the backbone of the country's new materials industry and one of the 18 national science and technology trade export innovation bases recognized by Ministry of Commerce and Ministry of Science and Technology. Now, Dongyue is seizing the opportunity of national supply-side structural reform and provincial shifting from old growth driving forces to the new ones, focusing on scientific and technological innovation, building new engine of Two Replacement and Intelligent Manufacture, to reinvigorate great enterprise vitality and keep sustainable growth of enterprise revenue.

For the future development, Dongyue will continue to focus on scientific and technological innovation, to accelerate the new growth driving force replacing the old ones for sustainable healthy development of enterprise, to develop to a 100 billion RMB production value scale fluoro-silicon industrial park and a world-class brand, to build a new Dongyue with high-end products, international market, modern technology, standard management and lightweight asset.

Engineer Technology R&D Center

R&D Center, Dongyue-Tsinghua green refigerant new tech institute and Dongyue Shanhai Jiaoda Polymer material Institute to support the R&D work. Dongyue has aiso become the implement comany of state emphasis torch plan, State 863 Plan and 11th 5 years Sci-tech Breakthrough Plan. Dongyue Group had not only held amount of self-own intellectual properties, but also broken through some foreign technology monopolies in new environmental protection field, new material field and new Energy Sources field. The company has also been awared as national emphases hi-tech enterprise, state new material industrialization-backbone enterprise National technology promoting trade&innovtion base and created postdoctoral workstation and Mountain Tai Academician.2

Group company

Dongyue Chemical

Founded in 1987, Shandong Dongyue Chemical Co. The market share of main product of environment friendly refrigerant is up to 40%, which take 40% of export quantity in the same industry also.Viewing to Green and Environmental protection, the company R & D successfully series of Dongyue-Tsinghua Green Refrigerants by powerful combination with Tsinghua University. The series of product gained "National S&T Innovation award", also been approved to popularize by USA SNAP Plan. During passed years, depending on the guarantee of series of authentications of ISO9002,ISO14001,ISO10012 and UL and the advantages on scale, science and technology, brand and culture, Dongyue Chemical Co.,Ltd had entered successfully home electric appliance, automobile, pharmacy, and Electron industries, become better supplier of Dupont, Daikin, Mitsubishi, Haier, Hisense, Gree, Midea, Changhong, Chunlan etc famous domestic companies.3

"Dongyue" green environmental protection refrigerant honorably win "China famous brand". Dongyue Group was conferred successively " national May 1st labor award", " civilization unite of shandong province", "model unite of enterprise culture and industry informalization", and were indentified state emphasis hi-tech enterprise and new material industrialization backbone company.

Dongyue Polymer Material

Established in Nov.2001,Shandong Dongyue Polymer Material Co.,Ltd is the largest fluorpolymer base in China and the largest PTFE in the world . In 2003, it was identified the state emphasis new & high technical enterprise of Shandong province; in 2004, PTFE series products gained the famous brand of Shandong province; in 2005, 20,000t PTFE was listed into state important torch plan project.4

Effort on PTFE high performance material R & D, Dongyue polymer Company powerfully supports process innovation and technology improvement. Breakthrough the traditional 10,000t PTFE design idea, Dongyue mastered one completely process,and made great achievement on PTFE biaxially oriented film and electric membrance, meanwhile, Dongyue began R & D modified PTFE that will create steady base for China PTFE further process product development. 

In Nov 2002,Dongyue PTFE and further processed product passed "adopting international standard product signal authority". Since entering the market, its product occupied domestic and foreign market immediately, the domestic market share is up to 30%, and the export quantity in china is up to 50%, its PTFE had been expanded to EU,USA, middle east, southeast Asia etc area.

The company development plan is following: keeping to enlarge the fluorpolymer scale, improve process and technology level, R & D HFP oligomer, fluorubber and modified PTFE etc further processed products, create completely product series, establish the largest fluorpolymer base in Asia and become outstanding China PTFE brand enjoying the fame all over the world.

Dongyue Fluorine&Silicon Material

Shandong Dongyue Fluorine & Silicon Material Co., Ltd, established in 2003, have thermoelectricity factory, chloralkali factory, chloride methane factory. Now the company capacity has reached 160,000tons chloride methane, 120,000tons chlorine & alkali, 100,000KW power. Main products are dichloride methane, chloroform, aqueous chlorine, ion membrane Alkali, hypochlorite acid all that have more excellent quality than other domestic companies' , the produce technology is No.1 in China, and is advanced in the world also During the construction and produce process, the company payee much attention to the environmental protection, therefore the company adopted advanced three wastes treat technology from USA and Japan.5

The company's advanced management and automatic control system help it realize harmonious running in high quality and efficiency, but low cost. Guaranteed by the ISO9001 Quality Manage System, ISO14001 Environment Manage System, ISO10012 Measure System and UL Product Safety Authentication, the company keeps to enlarge the scale and technology improvements. Within 3-5 years, the company will construct the largest chloride methane manufacture silicon base in China.  

Dongyue silicon material

Shandong Dongyue silicon material co. Ltd was founded in 2006. The first term of 40,000Mt silicon project will start produce at the end of 2007. The main products includes: Methyl Trichlorosiane, Dimethyl Dichlorosiane, Methylhydro Dichlorosiane, Methylhydro Dichlorosiane and Octamethylcyclotetrasiloxane etc. Silicon material can not only been applied in some high-tech industries such as aviation and space-tech, but also can been implemented in architecture, textile industry, automobile, enginery, electronic, chemical light industry, leather and paper mill and medical industry. It is also an important symbol of national developmental level.6

Corporate provided with top-ranking labs and plants. Company focus on research, exploit and produce in Silicon oil, silicon rubber product, silicon resin, silicon coupling agent and further product. Corporate is seeking to be the famous silicon produce base in the world by five years.

Business Review

After experiencing a significant increase in the past two years, the operating results of the Group has declined during the Year 2019. From the overall situation, changes in domestic and overseas economic conditions have posed great impact on the results for the period. During the first half of the year, the growth rate of domestic economy has been slowing down, while the international trade situation was not favourable since trade conflicts between China and the United States has further exerted pressure on the economy. Under the influence of various factors, the market demand for fluorosilicone in the first half of the year was not stable and the product prices fluctuated to a larger extent, resulting in a greater impact on the Group’s results during the first half of this year. Despite all these challenges.7

During the year 2019, the Group strengthened its leading position in the industry by leveraging its advantages in industry chain, park economy, safety and environmental protection as well as information management. However, the current economic and industry situation is still grim. In response to this, the Group has made the following strategic deployments for the second half of the year.

  1. The industry market condition for the year is not optimistic and demand remains sluggish. Therefore, the Group’s market strategy will first be to maintain a stable operation, maintain a quality assurance supply and maintain quality and core customers. On the basis of maintaining stable operation, the Group will also pay attention to market trends, continue to increase marketing efforts, seize the market and increase market share. In the second half of the year, the Group will launch an activity of “innovative increment” to access the incentive task index increment, new market application increment and gross profit increment, formulate innovative marketing measures and improve its ability to respond to the market. In addition, the Group will also strengthen customer management in the context of trade wars and secure customers.
  2. Safety and environmental protection requirements remain stringent this year, and ensuring that the production of safety and environmental protection products are still a prerequisite condition for normal production and operation. Although the cost of safety and environmental protection is relatively high, the Group will not slacken its efforts in this respect and will continue to increase its efforts in managing safety and environmental protection to ensure the normal operation of the Company’s production and operation. In this regard, the Group will further promote the Dupont Security Management project to achieve systematic and standardized management.
  3. The Group will propel research and development efforts, build new production technologies and cost competition advantages around technological innovation and product innovation, and continue to enhance the proportion of new products, new markets and new applications in operating income as the target and support for long-term development. The Group will improve product conversion rate through technological transformation, improve equipment operation efficiency, reduce manufacturing costs, promote the application of high-efficiency energy-saving technologies, and achieve green development. For the existing products, the Group will improve the product quality through technological transformation and accelerate the substitution of imported products. For the research and development of new products, the Group will seize market opportunities, develop new products in the market, and occupy the market by taking advantage of trade barriers. This will not only achieve the purpose of market development, but also improve the industrial structure of the Group to high-end and high value-added product transformation. The Group will formulate research project management system, R&D market information management system, R&D institution financial management system, and scientific and technological innovation incentive system to improve R&D motivation and quality.
  4. In response to risk management, the Group will increase the coverage of risk control, strengthen internal control construction, and improve internal control self-evaluation standards and systems with a risk-oriented approach. The Group will also speed up the upgrading and application of ERP informatization, achieve network of services both inside and outside the Group, utilize information technology to reduce loopholes, avoid violation of laws and regulations, and utilize ERP system to supplement audit to achieve “full process management”, and improve the business process through internal comprehensive review. The Group will adopt “zero tolerance” treatment for violations of laws and regulations, and combine audit supervision with legal sanctions to seriously investigate and punish violations.
  5. Amid industry downturn, improving management and exploring ways to saving resources would be an important measure for enterprises to respond to the industry downturn. The Company will promote cost reduction, explore ways to saving resources and save energy to increase efficiency. Persons-in-charge at all levels shall strictly control expenses, implement the system solemnly, formulate measures to reduce costs and increase efficiency, tiding over crisis.

2019 is a relatively tough year for the fluorosilicone industry, but the tough environment can reflect the competitiveness of companies in the industry. Dongyue will continue to focus on developing the fluorosilicone industry. Leveraging advantages in various aspects such as industry chain, park economy, safety and environmental protection as well as technological innovation, the company will stand firm amid adversity, strive to create promising profits for its shareholders in return to its shareholders’ long-term trust and support for Dongyue.

Business segment

Fluoropolymer

Since the second half of 2018, the demand for downstream Fluoropolymer has gradually cooled down, which returned the ultra-high price from the first half of last year to a stable rate. The decrease in product price during the period under review was not very significant. However, the overpriced products of this segment in the first half of the year led to a year-on-year decline in price, which resulted in a year-on-year decline in terms of result.8

The raw materials of the fluoropolymer segment are R22 and R142b produced by the Group. R22 is used to produce TFE (a fluorocarbon) which is, in turn, used to produce PTFE (a synthetic fluoropolymer with strong resistance to temperature changes, electrical insulation, and ageing and chemical resistance that is used as a coating material and can also be further processed into high-end fine chemicals and be widely applied in chemicals, construction, electrical and electronics and automotive industries) and HFP (an important organic fluorochemical monomer, which can be used to produce various fine chemicals). Furthermore, the refrigerants segment of the Group supplied R22 and R142b as the raw materials for producing a variety of downstream fluoropolymer fine chemicals, including FEP (fluorinated ethylene propylene, modified materials of PTFE, produced with HFP added in TFE, mainly used in the lining for wire insulation layers, thin-walled tubes, heat shrinkable tubes, pumps, valves and pipes), FKM (fluorine rubber, a specialized fluorinated material mainly used in the fields of aerospace, automotive, machinery and petrochemical industries because of its superior mechanical property and excellent resistance to oil, chemicals and heat), PVDF (the fluorocarbon polymerized from VDF which is produced from R142b, mainly used in a fluorine coating resin, fluorinated powder coating resin and lithium battery electrode binding material) and VDF, of which Shandong Huaxia Shenzhou New Materials Co., Ltd. (“Huaxia Shenzhou”) has been engaged in the production. In addition, the membrane functional materials mainly operated by Shandong Dongyue Future Hydrogen Energy Materials Co., Ltd., which was newly established by the Group, are classified into this segment.

Refrigerants

The price of the products in this segment in the first half of the year 2019 varying degrees of decreases, of which the decrease of R22 is relatively lower, which can be attributable to the quota restriction, while the drop of other refrigerants is relatively higher. During the period, downstream refrigerants manufacturers cleared inventory backlogs, and therefore the demand for refrigerants reduced and the price was in turn lowered. The price of the products has decreased, whereas the price of their raw materials has not decreased by the same proportion, resulting in a decline in the results of this segment.

The refrigerant segment’s products mainly include traditional refrigerants (mainly R22) and new green and environment friendly refrigerant products (mainly R32, R125, R134a and R410a). The products are sold to both domestic and international customers, with some products being supplied to the fluoropolymer segment as raw materials. Being the core product of this segment, R22 is the most widely used refrigerant in China and is generally used in household appliances. R22 also serves as the key raw material for its several main products (such as PTFE and HFP) produced by the fluoropolymer segment. R125 and R32 are the key refrigerant mixtures for some mixed green refrigerants (such as R410a) to replace R22. R134a is mainly used for air conditioners of automobile, while R152a is used as a refrigerant, blowing agent, aerosol and cleaning agent. R142b serves as a refrigerant, temperature control medium, intermediate of aviation propellant and raw materials for producing VDF.

Organic Silicone

Since the fourth quarter of year 2018, the market price of organic silicone products has showed a significant decrease, while the price of raw materials did not show a corresponding year-on-year decrease, resulting in a significant decline in the results of this segment.

The organic silicone segment mainly includes the production and sales of DMC (upstream organic silicone intermediates that are used as raw materials to produce deep processed mid-stream and downstream silicone products, such as silicone oils, silicone rubber and silicone resins), 107 Silicone Rubber, Raw Vulcanizate and Gross Rubber (collectively referred to as “Silicone Rubbers”, deep processed organic silicone rubber products, where Raw Vulcanizate is a key material for producing Gross Rubber), and other by-products and other high-end downstream products, such as Gaseous Silica and Silicone Oils. Named as “Industrial MSG”, organic silicone is widely applied in military, aviation, automotive, electronic, construction and other industries, mainly in the form of additives, treatment chemicals stabilizers, lubricants and sealants and is a key ingredient in industrial processes. The segment produces silicone monomers with silicone powder and the Group’s self-produced chloromethane and further processes them into silicone intermediates (mainly DMC). Certain portion of the silicone intermediates are for sales and the remaining portion is used to produce Silicone Rubbers and other organic silicone products for this segment.

Dichloromethane, PVC and liquid alkali

Most products of the segment are basic chemical products, which were largely affected by the economic conditions and policies. As the domestic and international economic conditions for first halof of 2019 were not optimistic, the product price of this segment was also greatly affected, which led to a decrease in the revenue of the external sales; the price of raw materials has also fallen sharply with the market. Therefore, the results of the segment have increased slightly.

The segment’s main products are methane chloride, liquid alkali and PVC. Methane chloride includes dichloromethane, which is for sales and mainly used to produce antibiotics and served as a foaming mode for polyurethane. Other ingredients of methane chloride are used as a raw material for production in the refrigerant segment and the organic silicone segment. Liquid alkali is a basic chemical product for the production of methane chloride and used in the textile, power and materials industries. The PVC (a thermoplastic polymer) produced by the segment is mainly used in the construction industry to replace traditional building materials. The basic raw material for producing PVC is hydrogen chloride, which is generated during production of refrigerants. Therefore, the production of PVC has boosted the economic value created by the self-sufficient industry chain.

Property development

As at the date hereof, this segment included four property projects, which are located in Huantai County, Zibo City, Shandong Province, Zhangdian District, Zibo City, Shandong Province, Yucheng City, Shandong Province, and Zhangjiajie City, Hunan Province, respectively. Some of the projects are under construction, while some have commenced sales. During the first half 2019, the income from external sales of this segment recorded approximately RMB352,992,000, and the results of the segment recorded approximately RMB35,697,000. The property projects of this segment were not launched on a large scale in the corresponding period of last year, but for this year, most of the projects were officially open for sales, leading to a significant increase in the results of this segment.

Recent development

On 16 December, 2019 company issue profit warning saying that, "based on the preliminary review of the unaudited consolidated management accounts of the Group for the eleven months ended 30 November 2019, the net profit attributable to owners of the Company for the eleven months ended 30 November 2019 has decreased by approximately 35% as compared to that for the eleven months ended 30 November 2018. Based on such information, the Board expects that the Group may record a decrease in its net profit attributable to owners of the Company for the year ending 31 December 2019, as compared to that for the year ended 31 December 2018. Based on the information currently available, the Board considers that such decrease was mainly attributable to the decrease in average market prices of the Group’s major products as compared to the same period of 2018, which led to the decrease in revenue and gross profit margin of the Group during the relevant period."9

References

  1. ^ http://www.dongyuechem.com/en/About.aspx
  2. ^ http://www.dongyuechem.com/en/About.aspx?ID=186&Category=Research
  3. ^ http://www.dongyuechem.com/en/About.aspx?ID=192&Category=Company
  4. ^ http://www.dongyuechem.com/en/About.aspx?ID=243&Category=Company
  5. ^ http://www.dongyuechem.com/en/About.aspx?ID=244&Category=Company
  6. ^ http://www.dongyuechem.com/en/About.aspx?ID=245&Category=Company
  7. ^ http://www.dongyuechem.com/UploadFiles/News/2019/09/78bd7d59-b077-4bc0-ae01-91ab3aeef0da.pdf
  8. ^ http://www.dongyuechem.com/UploadFiles/News/2019/09/78bd7d59-b077-4bc0-ae01-91ab3aeef0da.pdf
  9. ^ http://www.dongyuechem.com/UploadFiles/News/2019/12/84cdc96d-0263-44ab-8acb-8e0ebb44662c.pdf
Tags: HK:189
Created by Asif F on 2020/02/10 14:46
     
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