Hongbaoli: Promote Innovation for Development    

Headquartered in Nanjing city, Jiangsu province, Nanjing Hongbaoli Co., Ltd. (Hongbaoli, SZ: 002165) is specially engaged in researching, developing and producing polyurethane and isopropanolamine (IPA) products. It is also the biggest polyether manufacturer in China. At present, the company has a capability of 40 thousand t/a polyether polyol for rigid foam, 20 thousand t/a IPA, and 10 thousand t/a cement additives. The company itself announced it ranks China's first in the production of polyether polyol, and first in Asia and third worldwide in making IPA. In 2008 it controlled 10% of the total polyether polyol market in China, while it held 30% of the market for insulation to be built into refrigerators and freezers.
    Throughout 2008, Hongbaoli made RMB890 million in revenue and RMB67.05 million in net profit, an increase of 20.83% and 20.14% respectively over the previous year. The profit by quarter was RMB11.89 million, RMB15.68 million, RMB21.62 million and RMB17.86 million - results in which it cannot discern an impact of the financial crisis. Despite these achievements, the company says it suffered from great pressure in 2008 due to a series of factors: the continuing appreciation of RMB; fast price growth of raw material prices at home in the first half of 2008; and the slack market of downstream refrigerator (freezer) makers in the second half of 2008, caused by the global financial crisis and macro-control policies.
In April 2009, the company released its first quarterly financial statement, according to which the company made RMB184.65 million of revenue and RMB24.11 million of net profit, down 17.80% and up 85.86% respectively over the same period of the previous year. The main reason for the year-on-year decline in revenue in the first quarter is that: although the total sales amount of polyether polyol, IPA and cement additives grew over the previous year, most of the growth was contributed by IPA whose price had dropped due to falls in the price of its raw materials. The main reasons for the 85.85% year-on-year growth in net profit include: significant growth of integrated gross margin and a 25.49% decrease of costs in the first quarter.

* Independent innovation *    

Hongbaoli, a private enterprise restructured from a flexible polyether foam plastics workshop on the verge of shutting down under Gaochun Chemical Industry Factory, has the courage to compete with international fine chemicals giants with its priority products and is not overshadowed by them at all. Such self-confidence comes from persistent independent innovation.  
    A refrigerator needs not only a compressor to provide cooling, but also blended polyurethane premixed polyether injected into a heat insulation layer. Since 2000, the company has independently developed a new technique which can quickly foam at low density, shortening the foaming time from the previous 15 minutes to only 3 minutes. It also successfully turned out premixed polyether polyol with low thermal conductivity and reduced the electricity consumption of refrigerators by more than 20%.
    Hongbaoli adopts the continuous supercritical fluid reaction method of IPA production, i.e. to heat and pressurize the raw materials until they reach a liquid-gas critical point and make them react continuously in the pipelines. During this process, there is no by-product or pollution generated, so this atom-economic reaction is pursued passionately by the global players.
   Hongbaoli is also innovative in marketing and provides value-added services for the customers. The major factor influencing the foaming effects of PU materials is the adjustment of polyether polyol for rigid foam. Others include different foaming environments in production lines of refrigerator manufacturers downstream, different product regions and also different production seasons. Some customers may also raise special requirements to reduce material costs and increase efficiency. Therefore, the demands by customers are quite personalized. To customize products to their needs, the 52 employees (half of them engineers) in Hongbaoli's Marketing Division provide corresponding services like technologies and process regulations in accordance with the use of polyether polyol in each customer's refrigerator production lines. With good services, Hongbaoli has opened the doors of some leading refrigerator manufacturers in China, such as Changling, Haier, Hisense, and so on.

* Capacity is expanding *    

At present, Hongbaoli can produce only 40 000 tons of premixed polyether polyol for rigid foam per year. Due to the small production capacity, the company failed to meet the polyether polyol demand during the selling seasons in the first half of 2008. However, in 2009, with the operation of its eco-friendly polyether polyol project (50 000 t/a) which was constructed with money raised through IPO in 2007, the production capacity will reach 90 000 t/a while the market development will become the priority in future polyether polyol sales. To alleviate the sales pressure, the company will begin to use new materials to produce PU (polyurethane) insulation materials and extend its industrial chain. It is understood that, in expanding the market, Hongbaoli will focus on the light and heat field and also the field of heat conservation in buildings. Its main product in the light and heat field is a solar water heater.
    IPA produced by the company is partly used for making its own cement additives, and partly for sales. The operating rate of IPA units was around 70% in 2008, and 80% to 90% in the first quarter of 2009. Based on the market demands, the company may expand its IPA capacity in the future to ease the tight supply at present.
    The company's cement additive business is now extending from the high-end market to the middle-end market. In the future, relying on the platform of Nanjing Baochun Chemical Industry Co., Ltd. (its holding subsidiary), the company will enlarge the production scale of its cement additive.