China Sunsine Chemicals Holdings

[kopihothot]

Last month, Paul Wan & Co resigned as the auditor of Yong Xin International Holdings, citing the same reason.

Thanks for the info......was worried.....vested

[CityFarmer]

The Board of Directors of China Sunsine Chemical Holdings Ltd. (the “Company”) wishes to inform that following a preliminary assessment of the unaudited 3Q2012 financial results of the Company with its subsidiaries (the “Group”), the Board of Directors of the Company would like to advise shareholders that the Group is expected to report materially lower net profit. The lower net profit was due mainly to the decrease in gross profit margin

http://info.sgx.com/webcoranncatth.nsf/V...100279615/$file/CS_Profit_Guidance3Q2012.pdf?openelement

Not sure the real reason behind the decrease in gross profit margin. Unlikely due to recent Sino-China conflict which impacted the car industrial in China...

(not vested)

[Curiousparty]

That is the problem with S-chips. They might be "suppressing" net profit to do something funny...

The Board of Directors of China Sunsine Chemical Holdings Ltd. (the “Company”) wishes to inform that following a preliminary assessment of the unaudited 3Q2012 financial results of the Company with its subsidiaries (the “Group”), the Board of Directors of the Company would like to advise shareholders that the Group is expected to report materially lower net profit. The lower net profit was due mainly to the decrease in gross profit margin

http://info.sgx.com/webcoranncatth.nsf/V...100279615/$file/CS_Profit_Guidance3Q2012.pdf?openelement

Not sure the real reason behind the decrease in gross profit margin. Unlikely due to recent Sino-China conflict which impacted the car industrial in China...

(not vested)

[CityFarmer]

That is the problem with S-chips. They might be "suppressing" net profit to do something funny...

The Board of Directors of China Sunsine Chemical Holdings Ltd. (the “Company”) wishes to inform that following a preliminary assessment of the unaudited 3Q2012 financial results of the Company with its subsidiaries (the “Group”), the Board of Directors of the Company would like to advise shareholders that the Group is expected to report materially lower net profit. The lower net profit was due mainly to the decrease in gross profit margin

http://info.sgx.com/webcoranncatth.nsf/V...100279615/$file/CS_Profit_Guidance3Q2012.pdf?openelement

Not sure the real reason behind the decrease in gross profit margin. Unlikely due to recent Sino-China conflict which impacted the car industrial in China...

(not vested)

Too early to conclude before the FR is announced... I am wondering the real reason behind... The execution seems smooth so far...

[CityFarmer]

Company share price drop -6% due to profit warning, with small volume of 68 lots. The share price close @ $0.22

[Curiousparty]

This is Mr China for you

********
Dirty money cost China US$3.8 trillion 2000-2011: report
print |email this article WASHINGTON - China has lost USUS$3.79 trillion over the past decade in money smuggled out of the country, a massive amount that could weaken its economy and create instability, according to a new report.

And the outflow - much of it from corruption, crime or tax evasion - is accelerating. China lost US$472 billion in 2011, equivalent to 8.3 per cent of its gross domestic product, up from US$204.7 billion in 2000,

Global Financial Integrity, a research and advocacy group that campaigns to limit illegal flows, said in a report on Thursday.

"The magnitude of illicit money flowing out of China is astonishing," said GFI director Raymond Baker. "There is no other developing or emerging country that comes even close to suffering as much in illicit financial flows."

The lost funds between 2000 and 2011 significantly exceeded the amount of money flowing into China as foreign direct investment. The International Monetary Fund calculated FDI inflows at roughly US$310 billion between 1998 and 2011.

Illicit capital flows rob a government of tax revenues and potential investment funds. Capital flight on this scale can be politically destabilizing by allowing the rich to get richer through tax evasion, GFI said.

China has a low level of tax collection given the size of its economy, according to the IMF. Beijing has recognized that corruption and bribery is a significant problem, an issue brought into sharp focus recently by the Bo Xilai scandal . The country has announced a major crackdown as it prepares for its once in a decade leadership transition.

GFI calculates how much money leaks out of a country unchecked by analyzing discrepancies in data filed with the IMF on import and export prices between trade partners and calculating discrepancies in a country's balance sheet.

The developing world overall lost US$903 billion in illicit outflows in 2009, with China, Mexico, Russia and Saudi Arabia in that order showing the largest losses, it said.

Trade mispricing was the major method of smuggling money out of China, accounting for 86.2 per cent of lost funds, the GFI report found. This scheme involves importers reporting inflated prices for goods or services purchased. The payments are transferred out and the excess amounts are deposited into overseas bank accounts.

Trade mispricing is most common for nuclear reactors, boilers, machinery and electrical equipment, the report said.

The bulk of the money ends up in tax havens - on average, 52.4 per cent between 2005 and 2011. Much of this money eventually makes its way back to China as foreign direct investment for a double hit to the economy.

FDI benefits from special tax breaks and subsidies, essentially setting up an elaborate form of money laundering for Chinese businesses, GFI added. - REUTERS

[CityFarmer]

This is Mr USA for you.

http://www.fbi.gov/news/stories/2012/mar...ime_031312

"The threat remains…and our work goes on. As evidenced in our latest Financial Crimes Report—buttressed by last week’s conviction of Robert Allen Stanford, who misappropriated $7 billion from his own company—we continue to address the threat of financial fraud…everything from insider trading to insurance fraud, from mortgage fraud to bank failures, from mass marketing scams to health care and corporate fraud." - FBI USA Mar 2012

[CityFarmer]

The company announced its 3Q FR today

A quick look into the report, here are key findings

- Revenue grows by +20%, but COGS grows faster by +30%, thus gross profit decreases by -8%
- PBT decreases by -44%, mainly due to increases in expenses esp. Selling and Distribution (S&D) and Admin (including R&D)

- Look further into the report, the drop in gross profit is mainly due to reduces in Average Selling Price (ASP). ASP reduces from RMB 19.6K per ton to RMB 17.2K per ton, a -25% reduction, to expand market share, as stated in the report
- The drop in PBT is due to a over-expense in S&D and Admin. The increases in S&D expense may due to same reason of expand market share. Admin expense is due to additional social insurance expense (for staffs), additional depreciation expense with new facilities and R&D expense

The company seems expanding the market share with the expense of margin. IMO, the expansion may be overly done. The expenses seem losing control with the expansion.

[portuser]

The drop in overall ASP and the drop in gross profit despite rising sales volume deserve further examinations.

The company now has two types of antioxidants, TMQ and 6PPD. TMQ is easier to make and sells for half the price of 6PPD in the open market.

The company's 3Q results announcement states:
"Sales volume from Antioxidant soared from 450 tons a year ago to 2,070 tons in 3Q2012 due to the introduction of a new product, 6PPD, which is currently undergoing accreditation process by the Group’s various customers. However, Anti-oxidant TMQ continued to experience low utilization rate due to intense market competition as this product has low production entry barrier."

From the following table, it seems that the selling price of 6PPD was lower than that of TMQ:

Antioxidants

...........RMB/tonne......Sales vol (tonnes)

3Q11........13,300.................450
4Q11........13,500.................330
1Q12........15,300.................450
2Q12........15,100.................857
3Q12........14,300...............2,070 (spike in sales volume due to sales of 6PPD)

What was the pricing arrangement during product accreditation of 6PPD?

Could 6PPD have been sold below cost, resulting in lower overall gross profit in 3Q 12 despite rising sales volume:

All products (ie accelerators, antioxidants and insoluble sulphur)
......Total sales ......Sales vol.....Gross profit
........(RMBm).........(tonnes)........(RMBm)
3Q11.....310..............15,847.........77.3
4Q11.....296..............16,292.........60.7
1Q12.....324..............18,333.........68.5
2Q12.....363..............20,411.........72.7
3Q12.....369..............21,437 ........62.4

[CityFarmer]

Not sure where do you get the data? I do not see similar data in the FR?

Further looking into the detail, the reduces of ASP is mainly come from Rubber Accelerator product, rather on other products.

The Rubber Accelerator's ASP drops from 21.2K RMB/ton to 18.4K RMB/ton from 3Q11 to 3Q12. If we look at the 9m11 vs 9m12, the drop is from 21.1K RMB/ton to 18.7K RMB/ton, a drop of more than -10%. Rubber Accelerator is the bulk of the sales, it has the larger impact on total ASP.

Looking at the ASP of Anti-oxidant, it increases from 13.1K RMB/ton to 14.6K RMB/ton (from 9m11 to 9m12). It makes sense...

The key issue is the aggressiveness of the expansion, with too much an impact on bottom line, although top line is improving. The expenses also need further tightening. Let's see the performance next Q...