Tianhe Chemicals Group said last week that gross profit for its lubricant additives division rose 35 percent during the first six months of 2016, thanks to increased exports of products to multinational customers.
In a filing on the Hong Kong Stock Exchange, the company also reported that a firm hired to investigate questions about Tianhes 2014 financial performance expects to report its findings within weeks.
Tianhe, which claims to be Asias largest lube additives producer, advised that its additives business recorded 1.14 billion in sales revenue for the first six months of 2016, up from 999 million for the same period of 2015. The filing did not include raw numbers for divisional profits but did say the gross profit for additives increased 35 percent compared to the first half of 2015.
Increasing sales to multinational lubricant marketers would suggest Tianhe is making progress toward its ambitious goals for the additives business. The company has said it aims to grow into a rival of the four suppliers that dominate the global lube additives market – Lubrizol, Infineum, Chevron Oronite and Afton Chemical. Tianhe was much smaller than those companies when it conducted an initial public stock offering in 2014, and it acknowledged then that its additives business was overly dependent on sales to Chinese oil giants Sinopec and PetroChina.
Tianhes overall performance declined in the first half due to a disruption in its other primary business, its fluorochemicals subsidiary. According to last weeks filing, the local government ordered the subsidiary, Fuxin Hengtong Fluoride Chemicals Co., to move production operations to an industrial park being developed for fluoride-related businesses. Fuxin Hengtong cut back operations at its existing facility and began preparing to move only to discover that the government had not finished preparing the industrial park.
Sales revenue for Fuxin Hengtong fell 89 percent to 202 million. As a result, Tianhes total profit for the first half dropped 71 percent to 412 million. Management said it expects the disruption to last through most of the rest of this year.
The mid-year results were unaudited. Tianhes listing on the Hong Kong exchange has been suspended since March of 2015 due to its failure to file annual reports or audited results for 2014 or 2015. The companys former auditor resigned after disclaiming its audit of the 2014 results over questions in several areas, including payments for a base oil capital project, sales to a key customer and bank statements. The stock exchange later directed Tianhe to hire a forensic investigator to investigate those questions as one condition for reinstatement of its listing.
In last weeks filing, Tianhe said the firm that it hired has finished gathering information and is now analyzing it.