Dymatic Chemicals: Double Focus to Address Financial Crisis             

Dymatic Chemicals, Inc. (Dymatic Chemicals, SZ: 002054), headquartered in Foshan, Guangdong province is a leading company dedicated to producing textile auxiliaries and other fine chemicals in China. Founded in 1989, the company operates more than 10 locations across China and was listed on Shenzhen Stock Exchange in July 2006.
    In the face of the global financial crisis, Dymatic Chemicals adjusted its business strategy in time to stabilize the products' gross profit rate, reduce operational risks and ensure the healthy development of its main business by optimizing customer structure and altering its product portfolio. At the same time, the company also makes full use of capital markets and gradually enters into a harvest season of its industrial investments, thus getting fully prepared for the forthcoming "economic winter."

Dymatic Chemicals' main business: focus on stability   

The products of Dymatic Chemicals are mainly sold in domestic market with only around RMB30 million per year exported, accounting for just 4% of its main business. Thirty percent of Dymatic Chemicals' clients are export-oriented textile printing and dyeing companies. The sudden drop of these companies' exporting business also has an indirect negative impact on Dymatic Chemicals. "During August, the impact was greatest with a 10% drop in sales volume compared to last year," said the Deputy Manager of Dymatic Chemicals, "However, we managed to maintain our gross profit rate above 30%."
    Dymatic Chemicals has long been aware of the impact of the global financial crisis on real economy. In its semiyearly report of 2008, the company pointed out explicitly: The breaking out of U.S. sub-loan crisis, with its strong conductibility, has affected other economies in the world. Therefore, the developed countries' consumption demand for textile and clothing products keeps declining, driving down the export growth rate of domestic textiles. To make the situation worse, with the international crude oil price, the costs for chemical raw materials (oil-based material) and labor keep soaring, the textile auxiliaries industry and its downstream dyeing and finishing companies now face a difficult business situation.
    Based on these judgments, Dymatic Chemicals keeps making the adjustment of customer structure and the collection of accounts receivable as the company's priorities although its sales began to rebound in September and returned to normal in October. At present, the polarization among textile printing and dyeing enterprises became ever more obvious and the market decline will accelerate the elimination of inferior firms. In this process, leading companies, big clients and promising customers may win out in the market. As a traditional industry closely linked to people's lives, although the textile industry was given a frontal blow by this financial crisis, it is bound to be one of the first that stepping out of this predicament given its nature of providing daily necessities. Director Zhou of General Office in Dymatic Chemicals introduced that, "Since October, 9 of our company's 11 subsidiaries have fully collected the accounts receivable and according to our company's request, all these figures must reach 100% until 2009 from now."
    Facing the economic crisis, while striving to overcome the current difficulties, problems and risks, Dymatic Chemicals also foresees future challenges and opportunities. "We should, on one hand, reduce operating cost and control business risks by strengthening internal management and on the other hand, prepare engine and accelerator for our main business' development."

Industrial investment: expected to achieve significant profit   
    
During the year 2007, Dymatic Chemicals made three important investments that were closely related to its main business, i.e. taking part in share of Yibin Tianyuan Group Company Limited (CCR2007 No.23), Liaoning Oxiranchem Group (CCR2007 No.17) and Hunan New Century Biochemical Co., Ltd. (CCR2008 No.2) respectively. These three are all chemical enterprises among which the later two are upstream companies of Dymatic Chemicals. These equity investments are beneficial attempts made by the management to improve the company's competitiveness. If successful, the company can extend its industrial chain to the upstream raw material and intermediate business which features high added-value; if not, it can still get considerable return on equity. Therefore, these moves will have a positive effect on increasing the company and the shareholders' value.
   Dymatic Chemicals insists on making industrial investments around the industrial chain and prudent financial investments in familiar industries. As a result, despite the impact of the economic crisis, the profits of these companies did not suffer from the common "all collapse when one collapses" nightmare.   
   It is also revealed that among the three companies that Dymatic Chemicals have invested in, Yibin Tianyuan Group Company Limited is now on the way to go public in an orderly manner. Both Liaoning Oxiranchem Group and Hunan New Century Biochemical Co., Ltd. are expected to see a greater performance growth in 2008, and the former is actively preparing for its listing.