Shenyang Chemical Industrial Group Makes Rapid Development through Merging

Shenyang Chemical Industrial Group Co., Ltd., the controlling shareholder of Shenyang Chemical Industry Co., Ltd. (SZ: 000698), has activated vitality and entered the stage of rapid development through merging.   Shenyang Chemical Industrial Group Co., Ltd. is one of the important chemical raw material production bases in China. Several years ago, the company planned to launch a series of large projects including acrylic acid and ester, hoping to expand its scale and enhance its core competitive edge through the construction of these projects. Due to insufficient capital, however, the execution of these projects was postponed again and again.    The implementation of the strategy for vitalizing old industrial bases in Northeast China provided a rare development opportunity to the company. In April 2004, Shenyang Municipal Government and China National BlueStar Group Corporation (BlueStar Group) of ChemChina signed an agreement on the merging of Shenyang Chemical Industrial Group Co., Ltd. (CCR2004, No. 12) Shenyang Chemical Industrial Group Co., Ltd. as a wholly-owned subsidiary of BlueStar Group has quickly removed bottlenecks in capital and technology through reform and merging and its long-planned projects have been launched once after another. The old chemical enterprise has entered a new-round development stage.    The merging with BlueStar Group has given confidence and courage to Shenyang Chemical Industrial Group Co., Ltd. Starting from 2004, BlueStar Group put huge investments in the 130 thousand t/a acrylic acid and ester project and the 500 thousand t/a CPP (catalytic pyrolysis process) ethylene project (CCR2005, No.35). These two projects have a total investment of nearly RMB5.0 billion and have both been launched. The acrylic acid and ester project will start production in the second half of 2006 and the sales revenue will be more than RMB2.0 billion a year. The CPP project will also be completed in 2008 and the sales revenue will reach RMB4.0 billion a year. The 40 thousand t/a propylene oxide and polyether project funded by BlueStar Group was completed and put on stream in August 2004. The project has accomplished a sales revenue of over RMB600 million a year and become one of the major economic growth points in the company. (CCR2004, No. 25) PVC paste resin is a core product of the company, but the output was only kept at around 50 thousand tons a year before the merging. It was therefore imperative for the company to conduct capacity expansion. “Completing the capacity expansion of PVC paste resin to 100 thousand t/a” was one of the main items in the agreement between Shenyang Chemical Industrial Group Co., Ltd. and BlueStar Group. With the capital support from BlueStar Group, the capacity of PVC paste resin reached 100 thousand t/a in August 2004. The company has become a leading PVC paste resin producer in Asia and can orientate the price of PVC paste resin products in China's market. The company is not satisfied with the achievements so far made. It will conduct further capacity expansion to increase the output of PVC paste resin to 150 thousand tons a year in the next few years and consolidate its dominant position in China's market.      Since the merging in 2004, major economic indexes in Shenyang Chemical Industrial Group Co., Ltd. have made a rapid growth. The sales revenue accomplished by the company in 2005 exceeded RMB4.0 billion for the first time in history, an increase of 26% over the previous year and being twice the sales revenue before the merging. Faced with the new situation of rapid development, the management of Shenyang Chemical Industrial Group Co., Ltd. has soberly realized that the sustained and sound economic development both at home and abroad will further stimulate a price rise of petrochemical products. Large petrochemical units starting construction in China in recent years will be completed in 2005. Chemical market competition will become fiercer. Shenyang Chemical Industrial Group Co., Ltd. has therefore decided to combine petroleum processing with chemical production, accelerate readjustments to the product distribution, reduce the output of oil products with price control and conduct in-depth processing of market-geared products without price control and in supply deficit. The company will accelerate the execution of major projects and push various economic indexes to a new high in 2006. Besides, Shenyang Chemical Industrial Group Co., Ltd. as a major shareholder of Shenyang Chemical Industry Co., Ltd. will conduct reform to equity distribution and create a bright future for Shenyang Chemical Industry Co., Ltd. in collaboration with holders of circulating shares.

Performance of Shenyang Chemical Industry Co., Ltd.Item                        2004          2003  2005H1 Sale revenue, million RMB       3 160   2 478   -Net profit, million RMB         45.4    42.1    34.1Earning per share, RMB          0.107   0.100   0.100