China Sunsine Chemicals Holdings

[Stockerman]

does anyone know what is the company's strategy to hedge against cost increase of Aniline?

Tks.

[BlackCat]

I was looking at this over the weekend.

does anyone know what is the company's strategy to hedge against cost increase of Aniline?

From a 2009 interview:

We check our raw materials prices every day. If it goes up, we increase our prices. We pass on the cost to customers. We are the largest player, and that helps a bit.

For accelerators, they may have *some* pricing power. Enough to remain profitable while the competitors go bust....Are their competitors SOEs? if so, they may never go bust and the overcapacity may remain. On the demand side, China car industry will recover in time, unless there is a hard landing.

The company has also built the capacity to produce enough 4ADPA (the intermediary for manufacture of 6PPD) to support ultimate production of 30k tonnes of 6PPD.
Things should improve when sales of 6PPD pick up after more tyre manufacturers accredit Sunsine's product. Sunsine's track record of technical competence in rubber accelerators and insoluble sulphur may provide some comfort to investors who are willing to wait out.

For 6PPD, China Sunsine is a small player globally and locally (see p47 for a 2011 estimate). Jiangsu SinorgChem, for example had 2010 capacity 40K tonnes, plus 20K under construction, and was later sold to SOE giant SinoChemical. So I don't know if Sunsine's success in accelerators will carry over into 6PPD.

Personally, I haven't decided on this one. Its not a Buffet stock I would love and hold forever. Maybe I'd buy because its cheap, has reasonable market share in a cyclical industry which should pick up sometime. And I cant find anything else to buy right now.

[Stockerman]

Greatly appreciated all the reviews and comments... I am holding some of this counter and I really want to hear out "ALL the BAD NEWS" about this counter.

Why did the counter spike to as high as 36 cents, BUT only to drop back to the low 20 cents?
Were there some rumours previously of buyout or what?
How trustworthy is the old chairman?

What was the impetus for Sunsine trying to make inroad into 6PPD, given that it was only a small player locally and globally?

Is it because existing clients requested Sunsine to provide 6PPD as well? To make inroad, does it mean Sunsine has to bear with much lower ASP and probably even losses for some time?

what exactly is the entry barrier for such an industry?
e.g. is it the lengthy accreditation process? I doubt so...

[Stockerman]

Did the factory catch fire or what? no bid until 15 cents this morning

[potatolover]

this is bad news for generally all the S-chips out there



*********
[BEIJING] China's factory activity shrank for the first time in seven months in May as new orders fell, a preliminary survey of purchasing managers showed, adding to concerns that a recovery in the world's second-largest economy is sputtering.

The flash HSBC Purchasing Managers' Index for May fell to 49.6, slipping under the 50-point level demarcating expansion from contraction for the first since October. The final HSBC PMI stood at 50.4 in April.

A sub-index measuring overall new orders dropped to 49.5, the lowest reading since September, suggesting China's domestic economy is not strong enough to offset soft external demand.

"The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds," said Qu Hongbin, chief China economist at HSBC.

The survey also showed new export orders hovered below the 50-point level in May, though the rate of decline slowed from April.

Still, the weak showing implied foreign demand remained lethargic due to a patchy US recovery and Europe's nagging debt crisis, and echoes weak export momentum seen in Taiwan and South Korea in May.

"A sequential slowdown is likely in the middle of the second quarter, casting downside risks to China's fragile growth recovery," Mr Qu added.

China posted lacklustre data for industrial output and investment in April after an unexpected economic slowdown in the first quarter, raising fears of a feeble recovery in coming months.

Reflecting the cooling activities in the vast factory sector, both indices for input and output prices stayed muted in May to be near troughs seen in the third quarter last year.

An employment sub-index pulled back slightly again in May though local media reports suggest China's job situation is still holding up this year.

The HSBC flash PMI comes a week before the final reading and should reinforce market expectations that an economic recovery this year would be modest, if one is seen at all.

Following the underwhelming data in April, some analysts have slashed their forecasts for China's 2013 economic growth towards 7.5 per cent from initial predictions closer to 8 per cent. - Reuters

[Stockerman]

The overcapacity issue in the chemical industry is very true and does not apply only to chemical industries alone but also many other industries in general. It is going to be a BIG STRUCTURAL ISSUE that will plague China for many many years to come.


extract from 1Q-2013 results.

The rubber chemicals industry has continued to face an overcapacity problem and higher operating and raw materials costs. The market in general is facing pressure in profit margin as it is difficult to pass on the higher cost to customers, namely tyre makers.

The automakers are facing overcapacity due to past years of aggressive expansion. Nevertheless, the Group remains positive on the outlook for its domestic market for this year given its established track record, healthy cashflows and portfolio of quality products.

[CityFarmer]

Overcapacity issue is there, but it is more of an operation issue than structure issue IMO.

The overcapacity issue in the chemical industry is very true and does not apply only to chemical industries alone but also many other industries in general. It is going to be a BIG STRUCTURAL ISSUE that will plague China for many many years to come.


extract from 1Q-2013 results.

The rubber chemicals industry has continued to face an overcapacity problem and higher operating and raw materials costs. The market in general is facing pressure in profit margin as it is difficult to pass on the higher cost to customers, namely tyre makers.

The automakers are facing overcapacity due to past years of aggressive expansion. Nevertheless, the Group remains positive on the outlook for its domestic market for this year given its established track record, healthy cashflows and portfolio of quality products.

[Stockerman]

Hi CityFarmer

Would be grateful if you cld elaborate a bit more
Tks.

Overcapacity issue is there, but it is more of an operation issue than structure issue IMO.

The overcapacity issue in the chemical industry is very true and does not apply only to chemical industries alone but also many other industries in general. It is going to be a BIG STRUCTURAL ISSUE that will plague China for many many years to come.


extract from 1Q-2013 results.

The rubber chemicals industry has continued to face an overcapacity problem and higher operating and raw materials costs. The market in general is facing pressure in profit margin as it is difficult to pass on the higher cost to customers, namely tyre makers.

The automakers are facing overcapacity due to past years of aggressive expansion. Nevertheless, the Group remains positive on the outlook for its domestic market for this year given its established track record, healthy cashflows and portfolio of quality products.

[Stockerman]

Hi Blackcat

How do we find out all the competitors of Sunsine?
If they are all SOEs, they will continue to receive subsidies from the central or local govt.

How is Sunsine able to compete with them ?

Will it become a war of attrition ?

I was looking at this over the weekend.

does anyone know what is the company's strategy to hedge against cost increase of Aniline?

From a 2009 interview:

We check our raw materials prices every day. If it goes up, we increase our prices. We pass on the cost to customers. We are the largest player, and that helps a bit.

For accelerators, they may have *some* pricing power. Enough to remain profitable while the competitors go bust....Are their competitors SOEs? if so, they may never go bust and the overcapacity may remain. On the demand side, China car industry will recover in time, unless there is a hard landing.

The company has also built the capacity to produce enough 4ADPA (the intermediary for manufacture of 6PPD) to support ultimate production of 30k tonnes of 6PPD.
Things should improve when sales of 6PPD pick up after more tyre manufacturers accredit Sunsine's product. Sunsine's track record of technical competence in rubber accelerators and insoluble sulphur may provide some comfort to investors who are willing to wait out.

For 6PPD, China Sunsine is a small player globally and locally (see p47 for a 2011 estimate). Jiangsu SinorgChem, for example had 2010 capacity 40K tonnes, plus 20K under construction, and was later sold to SOE giant SinoChemical. So I don't know if Sunsine's success in accelerators will carry over into 6PPD.

Personally, I haven't decided on this one. Its not a Buffet stock I would love and hold forever. Maybe I'd buy because its cheap, has reasonable market share in a cyclical industry which should pick up sometime. And I cant find anything else to buy right now.

[BlackCat]

How do we find out all the competitors of Sunsine?

Sorry, I don't know. For the companies I research, I usually only google to get an idea of how fragmented/concentrated the market is.

Personally, I decided not to buy China Sunsine because of their cash outflows in recent years (working capital and capex) combined with the fact that I don't know how long the downturn will last, due to the questions you asked. The industry is highly specialized, in China, and out of my depth.

My gut feeling is that as the strongest player in Aniline (Edit: I mean accelerators), they will survive and recover. Tyres are consumable goods and more people drive when a country gets richer. But I don't really know when. They don't seem like a bad company, and may be a good one.

As investors, we are really just playing the odds. Even with fundamental analysis.