Tianhe Chemical Groups lubricant additive business recorded significant drops in profit, revenue and gross profit during the six months ending June 30, due to decreased demand from major consumers.
First-half gross profit from the segment fell 36.2 percent from the same period last year, according to unaudited results filed Wednesday. Revenue fared slightly better, dipping 30.9 percent compared to the year-earlier period. Tianhe attributed the drop to increased competition in the lubricant market, leading to decreased demand from the companys major customers.
In addition, some of our other major customers have been carrying out product upgrades for their lubricant oil products and thus ordered fewer lubricant additives from the company, the earnings release stated, adding that management expects volumes to rebound once those upgrades are completed.
Gross profit margin decreased to 40.5 percent due to higher fixed cost of sales incurred against lower sales volume during the first half of 2018, according to the release.
The earnings report did not provide raw number results for the additives segment. For the full year 2017, the segment recorded a gross profit of 953.8 million (U.S. $139.36 million).
Tianhes research and development team has been working to create new and updated offerings to meet customers needs. The company foresees that when such customers product upgrades are completed, the sales of the companys lubricant additive products will increase to the normal level in the last quarter of 2018 following the recovery of orders from such customers, the release added.
The companys newly developed API CH-4 diesel engine oil passed both the Cummins ISM and Caterpillar 1R engine tests this quarter, according to the earnings release. Six other products currently in development-including new sulfonate products, metal deactivating agent and sulfurized calcium alkylphenate detergent-achieved favorable results in a trial production. Tianhe also reported that it is developing additive packages for use in API SN gasoline engine oil, antiwear hydraulic oil and gear oil.
At present, the company is applying [for] patents for three new lubricant additive products, including a new water based metal processing liquid component in China, [the] United States, India and Hong Kong, pending the issuance of letters [of] patent, the earnings release stated.