Tianhe Chemicals Group reported steep drops in both revenue and gross profit for its lubricant additives segment in 2018, chalking up the decline to increased foreign competition.
The Jinzhou, China-based manufacturers lubricants additives business reported a 57 percent plunge in gross profit, from 953 million (U.S. $9 million) in 2017 to 407 million in 2018. Revenue for the segment followed suit with a 52 percent decline to just over 1 billion.
Tianhe attributed the results to increased domestic market competition from foreign competitors leading to decreased demand for its products. In addition, some of our other major overseas customers had been carrying out product upgrades for their lubricant oil products in 2018, resulting in reduced lubricant additives orders for [Tianhe] during the period of such upgrades, the company stated in a release detailing its unaudited financial performance with the Hong Kong Stock Exchange.
Gross profit margin for the segment dipped from 44 percent to 39 percent, due to higher fixed cost of sales incurred against lower sales volumes.
Tianhes specialty fluorochemicals segment, its other main business, recorded a sales drop of 92 percent, due in part to the relocation of production lines for its fluorine chemicals manufacturer subsidiary Fuxin Hengtong. Tianhe indicated relocation work is ongoing, adding it expects production and sales of specialty fluorochemical products to gradually resume at ordinary production levels in the second half of 2019.
The companys net profit dropped from 563 million in 2017 to 131 million last year, a decrease of almost 77 percent.
In the unaudited report published on March 29, Tianhe stated it would not be able to publish its annual results for 2018 on or before the March 31 deadline because it failed to publish annual and interim results for the years from 2014 to 2017. The Hong Kong exchange has suspended trading of Tianhes shares.