Yunnan Yunwei: Further Perfects the Coal Chemical Industrial Chain     

Yunnan Yunwei Company Limited (Yunnan Yunwei, SH: 600725) is located in Qujing of Yunnan province and got listed in Shanghai Stock Exchange in July 1996. The company is mainly engaged in coal chemicals and salt chemicals. Its main products include coke, methanol, polyvinyl alcohol, vinyl acetate, soda ash, ammonium chloride and coal tar derivatives. Owing to the completion of the acquired coking project and the increased price of coke, the company reported a high growth in profit of the first quarter of 2008.

Acquisitions bring high profit   
The company owns a capacity of 200 000 t/a soda ash, 200 000 t/a ammonium chloride, 28 000 t/a polyvinyl alcohol, 85 000 t/a vinyl acetate, 92 000 t/a calcium carbide, 400 000 t/a cement, 300 000 t/a methanol, 3.05 million t/a coke and 300 000 t/a coal tar derivatives.
   The performance of the company in 2007 was 61.79% higher than 2006. The operating revenue in the first quarter of 2008 was RMB1.307 billion, an increase of 140.25% over the same period of 2007 and the net profit reached RMB96 million, an increase of 289.54%.
   China is rich in coal but lacks oil and gas. Due to the constant increased price of oil the coal chemical sector has become a hope of domestic chemical enterprises today. Yunnan Yunwei has acquired Yunnan Dawei Coking Co., Ltd (Yunnan Dawei) and Qujing Dawei Coking Gas Manufacture & Supply Co., Ltd., with funds raised through non-public offering in August 2007. The company holds 96.36% equity in Yunnan Dawei Coking and 54.80% equity in Qujing Dawei Coking Gas Manufacture & Supply Co., Ltd. (CCR2007, No. 24)
    The coke and its processing project acquired is getting benefits from the prosperity of the coal chemical sector. The price of coke was adjusted upward several times in 2007 and has been keeping the up-trend in 2008. Despite the increased price of raw material coking coal, the gross profit rate of the coke business in the company has maintained a rising trend. The output of coke in the company will increase from 2.0 million tons in 2007 to 3.0 million tons in 2008. With the sustained prosperity of the coal chemical sector, the coking business will bring more benefits in 2008.
    Other products in the company are also in a state of prosperity. The price of polyvinyl alcohol has been maintained at RMB19 000 per ton in 2008, forming a complete change from the low profit-earning ability last year. The profit-earning ability of soda ash and ammonium chloride business is increasing too. All these drive the profit growth of the company.
    Due to equipment problems the operating rate of the 200 000 t/a methanol unit was low in the first quarter, but the problem was solved in April. The price of methanol has been on the high side in 2008 because of the increased energy price in the international market. As the company uses coke oven gas to produce methanol, the production cost is very low. With the increased operating rate, the methanol unit will contribute more to the performance of the company.

The Yunwei Group intends to get listed in the stock market    

The 2007 performance statement of Yunnan Yunwei shows that the acquisitions of Qujing Dawei Coking-as Manufacture & Supply Co., Ltd. and Yunnan Dawei taken by its major shareholder Yunwei Group is the first step for the Group's listing in the domestic stock market. It will remove the competition between Yunnan Yunwei and its controlling shareholder Yunwei Group in the calcium carbide-acetylene chemical industrial chain and help Yunnan Yunwei extend from the calcium carbide-acetylene chemical industrial chain to the coal coking and coal gasification industrial chain.
    Coal resources and water resources are essential to the production of coal chemical enterprises. Qujing where Yunnan Yunwei is located has rich coal reserves. Yunnan Coal Chemical Industry Group Co., Ltd. (the only shareholder of Yunwei Group) owns most of coal resources in Yunnan province. As the company is located in southwestern China, water resources are also ensured. According to market analysts, Yunnan Yunwei will become one of the major coal chemical production bases in Yunnan province.
    The Yunnan Yunwei holds a leading position in the coke production, the methanol production based on coke oven gas and the production of coal tar derivatives. Polyvinyl alcohol, vinyl acetate, soda ash, ammonium chloride and cement also stand on an important position in Chinese market.
   On November 1st, 2007 the Board of Directors of the Yunnan Yunwei decided to issue new shares to raise funds for the 25 000 t/a butanediol  project, the 200 000 t/a acetic acid project and the carbon monoxide preparation and boiler comprehensive technical renovation project. (CCR2007, No. 32)
   Yunwei Group also owns a unit 240 000 t/a ammonia and 280 000 t/a urea. A plan to conduct renovation and expansion to the unit is under consideration. Besides, a 500 000 t/a ammonia unit using the Shell coal gasification technology came on stream in May 2008 in Yunwei Group. Yunwei Group has promised to sell the 500 000 t/a ammonia project to Yunnan Yunwei.