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Xinyi Glass 2017 Interim Net Profit Soars 19.5% to HK$1,635.9 Million

2017-08-01 03:05
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Declares an Interim Dividend of HK 20.0 Cents

HONG KONG, Aug. 1, 2017 /PRNewswire/ -- Xinyi Glass Holdings Limited ("Xinyi Glass" or the "Group") (stock code: 00868.HK), a leading integrated automobile glass, energy-saving architectural glass and high quality float glass manufacturer, announced its interim results for the six months ended 30 June 2017 ("1H2017") on 31 July 2017.

During 1H2017, benefiting mainly from the significant growth of float glass business, the Group recorded a 13.5% increase in turnover to HK$6,676.8 million. Gross profit surged by 19.0% to HK$2,429.2 million and gross profit margin improved to 36.4%. Thanks to the notable sales growth of float glass business, improved average selling price, plus the increased profit contributed by Xinyi Solar, the Group's net profit increased by 19.5% to HK$1,635.9 million, with net profit margin reaching 24.5%. Basic earnings per share were 41.64 HK cents. The Board of Directors has declared payment of an interim dividend of 20.0 HK cents per share, representing a dividend payout ratio of 48.9%.

Business Review

Float Glass – Strong Earnings Growth Attributed to Economies of Scale and Improved Market Environment

During 1H2017, float glass business recorded markedly improved earnings performance as we pushed to maximize economies of scale. Rise in average selling price, strong growth in sales volume as the demand of the architectural glass industry in the PRC gradually climbed, plus the wide float glass product mix of the Group also helped. Currently, Xinyi Glass is the largest float glass manufacturer in the PRC in terms of production capacity. It achieved a turnover of HK$3,619.0 million for the period under review, with gross profit up significantly by 82.9% to HK$1,090.0 million, and gross profit margin surged to 30.1%.

Automobile Glass – Implemented Flexible and Proactive Marketing Strategies to Explore Overseas Business Opportunities

Xinyi Glass is China's largest exporter of automobile glass in the aftermarket sector and it has been proactive in employing diverse marketing strategies for its automobile glass business so as to bolster continuous growth of the business. Moreover, the Group is devoted to enhancing its product portfolios and exploring new overseas customers to boost its global presence. In 1H2017, the segment reported stable performance, marking turnover of HK$1,871.3 million. Meanwhile, affected by less favourable currency exchange rates, sales dropped in South America and no contribution of retail sales in Hong Kong due to the spin-off of Xinyi Automobile Glass Hong Kong Enterprises Limited (stock code: 08328.hk) in July 2016, gross profit of the business decreased by 7.7% to HK$894.4 million and gross profit margin was 47.8 % which was mainly due to the increase of float glass production cost.

Architectural Glass – Grew Steady Braced by Increasing Market Demand and Nationwide Market Coverage

Despite the continual launch of property tightening policies by the Chinese government in recent years, the overall PRC property construction industry has been on steady climb, which is expected to translate into stable demand for architectural glass. However, with the PRC energy-saving low-emission ("Low-E") glass for construction market highly competitive and the less favourable currency exchange rates, revenue of the Group's architectural glass segment dropped slightly for 1H2017, amounting to HK$1,186.5 million. Gross profit was HK$444.8 million and gross profit margin was down moderately to 37.5% which was mainly due to the increase of float glass production cost.

Market Analysis

The Greater China region remained as the Group's largest market, recording a rise in turnover of 18.1% to HK$4,797.2 million, accounting for 71.9% of the Group's total turnover. From overseas markets, turnover grew slightly by 3.0% to HK$1,879.6 million and that from North America was HK$756.2 million, accounting for 11.3% of the Group's total turnover.

Prospects

In recent years, the glass product mix has been changing gradually and the use of glass products is constantly expanding, thus market demand is expected to stay strong in the foreseeable future. Products such as double and triple glazing Low-E glass and high quality float glass have expanding uses with the government promoting the adoption of energy-saving and green buildings materials. Furthermore, with the average selling price of float glass remains strong, the average production cost of float glass would expect to drop and would improve profitability, the Group is optimistic about its float glass business.

At the same time, the Group is speeding up penetration of overseas markets. In the second quarter of 2017, its first overseas high quality float glass production line in Malacca, Malaysia commenced operation. The second phase of the facility is being constructed and will commence operation by the second half of 2018, allowing the Group to effectively capture global demand and better serve ASEAN-based customers, being closer to them. The Group also enjoys privileged import duty treatment and will implement appropriate pricing strategy. Supported by the new production lines in Malaysia and the huge demand anticipated from the global market, specifically ASEAN, Europe and the US, the Group plans to expand its total float glass production capacity by 50% by the end of 2020.

The Group is generally optimistic about its automobile glass business, in light of the continuous demand from the huge China and global aftermarket. Therefore, the Group plans to increase the production capacity for automobile glass by 1.5% to 16,400,000 pieces per year by the end of 2017. In addition, it will continue to enhance its product offerings and capacity for OEM automobile glass, heeding the foreseeable demand growth.

Datuk LEE Yin Yee, B.B.S., Chairman of Xinyi Glass, said, "We are excited to see the Group delivering such strong growth in 1H2017, particularly float glass business, which afforded outstanding results. The credit, we believe, goes to our diversified and high-end product offerings. Moreover, at our dedicated effort to strengthen global presence, the strategic expansion in Malaysia made good progress during the period. Looking ahead, we will capitalize on economies of scale and optimize our product mix to enhance the Group's competitive strengths. In addition, more production lines in overseas are expected to be built in the coming years, to support our active expansion in the overseas glass market, that we may capture business opportunities worldwide. With strengthening capability and the market environment improving, we are confident of continuing to attain stable development and generate lucrative returns for shareholders."

Source: XINYI GLASS

Related stocks: HongKong:0868 OTC-PINK:XYIGY

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