Nanjing, Jiangsu – China’s Hongbaoli recorded CNY 29m ($4.3m) net profit in 2018, a 29% drop compared with 2017. The company warned in March that 2018 profits would be down.
Revenue, however, rose by 14% to CNY2.5bn, according to the company’s annual report, released in March.
Hongbaoli’s main business is rigid foam systems, accounting for nearly two thirds of its total 2018 revenue. It was able to obtain a slight increase in gross profit margin to 11%. This was in the face of China’s sluggish refrigerator market and rising feedstock prices.
Nevertheless, last year the company roughly doubled its debts compared with 2017. There was a 24% jump in interests and financial expenses to CNY 34m. Research expenses rose by 16% to CNY 35m.
Costs for Hongbaoli’s 120kT/year propylene oxide project, which was fully started up in January, also deepened the profit drop.
Sales from polyurethane insulation panels in 2018, for which the company has 10m m2/y capacity, was down to less than half of 2019, reaching CNY 17m. This was a result of the slowdown in China’s housing market, the annual report said.
Hongbaoli is betting on new policies to liven up the downstream market. These include Beijing’s municipal subsidies, which start this year. They are designed to boost less energy-consuming products, including refrigerators and water heaters.
The company also considers cold chain logistics a future growth driver. In 2018 China’s cold chain logistics market grew by 19% to CNY 304 bn, the report said.