Prosperity of the Chemical Sector Fuels Good Results for Chemical Firms      

As of July 9th, 88 listed chemical companies has posted their results predicted in the first half of 2008. Of which, 50 companies expected a performance growth, 44 companies projected a performance growth for the second quarter of 2008 over the first quarter.
   Thirty-one companies announced their performance growth of more than 100% in the first half of 2008. Sichuan Chemical Company Limited (SZ: 000155) forecasts the net profit will be RMB100 million higher, up 1 127% year-on-year. Hubei Xingfa Chemicals Group Co., Ltd. (SH: 600141) will see the net profit increase of 550% year-on-year. Companies with a good performance all attribute the increase of the net profit to the price rise of their products.
   The prosperity in the chemical sector is greatly influenced by seasonal factors. The satisfactory performance achieved by chemical firms in the first half of 2008, therefore, is not beyond expectation. The performance in the second quarter of 2008 in some firms with weak influence from seasonal factors, however, also has a drastic growth over the first quarter. Hubei Biocause Pharmaceutical Co., Ltd. (SZ: 000627), involved in both chemical and pharmaceutical sectors, saw a result growth of 25.12% in the second quarter of 2007 over the first quarter, and expected the net profit in the first half of 2008 would have a growth of more than 50% year-on-year. Companies predicted similar growth to Hubei Biocause Pharmaceutical include Eguard Resources Development Co., Ltd. (SZ: 000826), Shandong Liaherd Chemical Industry Co., Ltd. (SZ: 002217) and Yunnan Yunwei Group Co., Ltd. (SH: 600725).
   Analysts think that there is uncertainty for the chemical sector trend in the second half of 2008 as the prices of some chemical products are going down from the high level. For example, the price of glyphosate increased from RMB50 000 per ton this March to RMB100 000 per ton this July. It is generally held that the price of glyphosate will not be maintained at the high level of RMB100 000 per ton after this August and likely fall. The performance of Anhui Huaxing Chemical Industry Co., Ltd. (SZ: 002018), Zhejiang Xinan Chemical Industrial Group Co., Ltd. (SH: 600596) and Nantong Jiangshan Agrochemical & Chemicals Company Ltd. (SH: 600389) in the second half of 2008 may therefore be affected.
   The price of soda ash in the domestic market was down by RMB50 per ton starting from early June. With the completion of new projects and the weak demand in the glass sector, the price of soda ash will go further down in the second half of 2008. The performance of listed companies in the soda ash sector such as Tangshan Sanyou Chemical Company Ltd. (SH: 600409), Shandong Haihua Company Limited (SZ: 00-0822) and Hubei Shuanghuan Science & Technology Stock Co., Ltd. (SZ: 000707) may be affected. Tangshan Sanyou Chemical will see a reduction result in the second quarter from the first quarter. Hubei Shuanghuan Science & Technology Stock expects its result growth in the second quarter will be also much lower than 2007.