Home>>Related Stories

Email this story     Print this story

China XD keeps up expansion pace

By Steve Toloken | PLASTICS NEWS CHINA

Automotive materials supplier China XD Plastics Co. Ltd. said Aug. 9 that sales rose 13 percent in the second quarter of 2017, to $313.6 million, as the company told analysts it plans to continue its aggressive spending on expansion.

The Harbin, China-based company, which is traded on the Nasdaq stock market, credited new facilities in China and steady growth of 4.6 percent in China's auto market this year for pushing sales higher, even as net income dropped 15 percent on higher R&D spending and other expenses.

The earnings results come on the heels of a July 21 announcement that the company plans to spend nearly $600 million to expand capacity in Harbin for biocomposites materials, 3D printing materials and its traditional engineering plastics business.

The investment in Harbin, the capital of Heilongjiang province in northeast China, will include 300,000 metric tons of capacity (661 million pounds) in biocomposites and bioplastics materials and 100,000 metric tons (220 million pounds) of new engineering plastics capacity.

As well, the company said it would set up a factory with capacity of 10,100 metric tons (22.2 million pounds) of much higher margin materials for additive manufacturing, along with a demonstration and "experience cloud" factory.

They are expected to come on stream by mid-2019.

"We believe that these strategic initiatives form a platform for sustainable growth for the next several years and well positions us for opportunities presented by China's new economy," said Chairman Jie Han.

The expansion of bioplastics production in Heilongjiang comes on top of a similarly sized investment in a bioplastics and 3D printing materials in the city of Nanchong, in Sichuan province in southwest China, that the company announced in late 2016.

Analysts tried to get a handle on the scope of the company's announcements during the Aug. 9 conference call, with one suggesting that the announced capacity expansions could eventually push the company to sales in the range of $5 billion annually.

China XD said it expects sales in 2017 to reach $1.2 billion to $1.3 billion, with net profit between $85 million and $100 million.

The rapid expansion has caused some growing pains, though, particularly in a new engineering plastics facility in Dubai that the company is trying to bring online.

Chief Financial Officer Taylor Zhang said the Dubai plant has about 3,000 metric tons (6.6 million pounds) of capacity now, and will reach 25,000 tonnes (55.1 million pounds) next year. That factory is targeting customers in Europe.

"We understand there have been some speed bumps," Zhang said, but adding that the management of the Dubai factory is pursuing business in Spain, Germany, France and Russia and expects to be able to fill the capacity of that plant.

The company also disclosed June 5 that a special committee of independent members of its board of directors have hired several outside legal and financial firms to help it evaluate a buy-out offer from Chairman Han and Morgan Stanley Private Equity Asia III, Inc.

The deal has gotten push back from some investors, who question whether the $5.21 a share offer undervalues the firm, given the scope of the company's plans.

Han and MSPEA together currently own 74 percent of the company's stock. One analyst on the Aug. 9 call suggested that the expansions announced could push China XD's value to $10 a share.

 

Read Next


NOW IN PRINT

Sample

This week's Plastics
News print issue

To download the full contents of this week's PN global issue, click HERE

GET MAIN NEWS

Latest news

on the trends and events impacting the Chinese plastics industry

SUBSCRIBE

CONNECT WITH US

erj tb ut rpn tb

Copyright © 2016 Crain Communications Inc. Use of editorial content without permission is strictly prohibited.