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Email This Print This Chairman's Message

Extracted from Annual Report 2016

Dear Shareholders,

On behalf of the Board of Directors, I present Changtian Plastic & Chemical Limited's ("Changtian" or the "Group") annual report for the financial year ended 31 December 2016 ("FY2016").

Maintaining Stability Amidst
A Challenging Year

The year 2016 was characterised by changes in the geopolitical landscape as well as a soft global macroeconomic environment. Closer to home, China's economic growth continued to slow down, as the government aimed to rebalance the economy towards domestic consumption. In view of the challenging market environment, Changtian focused its efforts on growing existing businesses, supported by the Group's strong experience and technical expertise in the production of adhesive tapes, release papers and UV cured release films. 2016 also marked a significant milestone for the Group, as Changtian completed the construction works for its Nylon-6 chips plant and commenced fine-tuning of production lines in early 2017. All these supported the Group's strategy to achieve sustainable long-term growth.

In FY2016, Changtian reported a loss of RMB16.8 million, compared to a loss of RMB7.1 million for the year ended 31 December 2015 ("FY2015"). Revenue also declined 22.5%, from RMB50.8 million in FY2015 to RMB39.4 million in FY2016. While the average selling price of all products increased in FY2016, it was offset by a more than 20% decline in sales volume of all products, which significantly impacted the Group's financials for the year under review.

The Group recorded cash and bank balances of RMB65.1 million as at 31 December 2016, compared to RMB776.4 million a year ago. This was largely due to payments for the purchase of plant and equipment for its Nylon-6 chips business. Regardless, the Group remains committed to building on the stringent cost measures implemented in FY2015 to maintain the profitability of existing products.

Tapping Our Nylon-6 Chips Business For Further Growth

In view of the uncertainties and headwinds in the global economy in 2017, Changtian remains focused on building up a strong foundation that will allow the Group to weather through the storm. Besides strengthening its existing businesses, the Group focused on developing its Nylon-6 chips business, in order to enhance value for shareholders.

As at 31 December 2016, the Group has committed approximately RMB33.5 million of capital for the acquisition of machinery and equipment, and construction of its Nylon-6 chips plant. The construction works for the plant was completed in early 2017 and commercial production and sales will commence once the Group is satisfied with the results of the trial production. The total capacity of the new plant is 110,000 metric tonnes per annum, and is expected to contribute positively to the Group's business.

In view of the shortfall in cash and bank balances as a result of unpaid capital expenditure, the Group obtained the renewal of written confirmations from its principal banker in the People's Republic of China (the "PRC") in early 2017. This allowed the Group to secure a credit line of up to RMB300 million.

Nylon-6 chips are one of the raw materials used for various consumer goods and industrial applications, such as carpets, rugs and home textiles, engineering plastics, tire cord, film and sheets for food packaging, industrial packaging and medical applications. The many uses of Nylon-6 chips bring forth many opportunities for the Group and Changtian is looking forward to commence the commercial production at its Nylon-6 chips plant.

The Group will continue to leverage on its established reputation as one of the leading chemical-based products manufacturer, as well as the rapport built with existing customers to seek opportunities for growth. In light of the intensifying market competition, Changtian will continue to monitor industry developments closely while staying disciplined in its cost-management measures in order to safeguard profitability of existing businesses.

APPRECIATION

On behalf of the Group, I would like to extend our heartfelt gratitude to our valued shareholders for their continued trust and support as the Group continues to scale new heights. I would like to thank our Board members, and all our business partners who will continue to play an integral role in supporting our business in the days ahead. Last but not least, I would also like to express appreciation to the management team and staff for their dedication and valuable contribution to the Group. It is a privilege to work with such a dynamic and capable team, and I am confident that we will continue to work hard together to step up to the opportunities ahead, delivering greater returns for our shareholders.

Yours sincerely


Yang Qingjin (杨清金)
Chairman
30 March 2017