Shandong Helon Sells New Shares to Replenish Working Capital      

Shandong Helon Co., Ltd. (SZ: 000677) plans to issue up to 120 million new shares at no less than RMB5.14 apiece, in a share placement that could raise up to RMB500 million to supplement working capital, it said on July 4th.
   Shandong Helon is China's leading viscose fiber maker, and the company has been investing in production expansion and technology innovation to strengthen the leading position. In recent years, it has invested in a 30 000 t/a project for differentiated viscose staple fiber, and a technology-upgrade program for a 20 000 t/a cotton pulp plant, in Weifang city, Shandong province. Xinjiang Helon, its 55% holding company, also invested in a 120 000 t/a cotton pulp plant and a 100 000 t/a project for viscose staple fibers, as well as technology upgrade for a 50 000 t/a high modulus industrial fiber plant, a canvas fabrics facility and a high modulus low shrinkage polyester industrial filament fiber plant. These projects will increase Shandong Helon's annual production capacity to 270 000 tons for viscose staple fiber, 240 000 tons for cotton pulp and 33 000 tons for canvas fabrics.
   These projects help the company expand scale while lower the production costs. At the meantime, the company extended new products lines such as fire retardant fibers and high wet modulus fibers, bringing good return to Shandong Helon and substantially increasing its core competitiveness.
   Funding of these projects mainly came from bank loans. The surge in bank borrowing has increased the company's financial risk. Meanwhile, as Xinjiang Helon's first phase project has come on stream in October 2008, and the second phase 50 000 t/a viscose staple fiber plant and Weifang's 50 000 t/a differentiated viscose staple fiber plant are set to start operation this year, the company has to set aside more for working capital for raw material purchase and product manufacturing.
   Shandong Helon posted an operating revenue of RMB668 million in the first three months of 2009, down 19.77%, and net loss of RMB39.26 million, down 178.78%, due to the financial crisis which had a negative impact on the chemical fiber industry. However, the chemical fiber market has been recovering strongly since the second quarter, with rising product prices, and the company's earnings is expected to get back to positive territory.