Sinopec Yizheng Chemical Fibre Company Limited

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Sinopec Yizheng Chemical Fibre Company
Limited INTERIM RESULTS ANNOUNCEMENT
2002 August 2002 Hong Kong
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AGENDA

• RESULTS REVIEW
• PLANS FOR 2H 2002
• PROSPECTS

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RESULTS REVIEW
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Financial highlights 1
Unaudited consolidated income statement (IAS)
For the six months ended 30 June
2002
Decrease
2001
(Rmb million)
Turnover
3,687
3,910
5.7
Gross profit
366
439
16.6
Profit from operations
79
162
51.2
Profit attributable to shareholders
56
121
53.6
Basic earnings per share(Rmb)
0.014
0.030
53.6
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Financial highlights 2
Consolidated balance sheet (IAS)
As at 31 Dec.
As at 30 Jun.
2002
2001
Increase / (Decrease)
(Rmb million)
(unaudited)
(audited)
11,324
2.7
11,021
Total assets
2,266
Total liabilities
2,589
14.3
1,230
Bank loans
1,076
(12.5)
2.18
Net assets per share (Rmb)
2.17
-
Liability / total asset ratio
22.9
20.6
2.3
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Financial highlights 3
Unaudited consolidated cash flow statement (IAS)
For the six months ended 30 June
2002
(Rmb million)
2001
Net cash generated from operating activities
711
244
(602 )
Net cash used in investing activities
(236)
Net cash used in financing activities
(79)
( 155 )
Cash and cash equivalents as at 30 June
399
688
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Market review--demand
Domestic consumption of polyester fibre increased
by 25.7 Export volume of textile products
increased by 6.96
The PRC Polyester fibre consumption
The PRC textile product export
000 tonnes
US Bn

Sources the PRC Custom, the Chemical Fibre
Association of China and the Companys estimates
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Market review--supply
Domestic supply of polyester fibre increased by
21.7. The growth of the polyester production
capacity has significantly declined.
Domestic supply of polyester fibre
Supply Structure
000 tonnes
000 tonnes
Sources the Chemical Fibre Association of China
and the Companys estimates
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Market review--prices
The prices of domestic polyester products
rebounded strongly owing to the substantial
increases in polyester raw materials prices. But
both prices were lower as compared with the same
period of last year.
The Companys product price quotation(excluding
VAT)
International supplier contract price quotation
(excluding taxes, compared to the price of the
Companys polyester chips)
Rmb/tonne
US/ tonne
1/2001
6/2002
3/2001
6/2001
12/2001
9/2001
3/2002
Source the Company
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Operations review--operational management
Production and sales volume of polyester products
reached record high. Enhanced its product and
technological development
Differential rate of polyester products ()
tonnes

• A breakthrough was achieved in export
• 18 types new fibre products were developed, of
  which 14 fibre products had been put into
  production

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Operations review--cost and expenses
Succeeded in reducing cost and expenses by Rmb196
million

• Monitored the market condition to purchase more
  raw materials at a lower price
• Unit comprehensive energy consumption decreased
  by 7.9 per cent
• Consumption of main raw materials was further
  reduced
• The production volume of PTA increased by 27 per
  cent
• Administrative expenses and financial expenses
  further decreased by 6.3 and 19.1 respectively

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Operations review--margin
Gross margin was 9.9 , net profit margin was 1.6

Source the Company
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Operation review --
project construction

• Total capital expenditure amounted to Rmb603
  million

• The SSP project with an annual capacity of
  100,000 tonnes, the DTY project with an annual
  capacity of 50,000 of the Company and the DTY
  project with an annual capacity of 5,000 of the
  Foshan Polyester were all put on operation in
  March
• The construction progress of PTA project with an
  annual capacity of 450,000 tonnes was on
  schedule
• Started to construct the staple fibre project
  with an annual capacity of 90,000 tonnes

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PLANS FOR 2H 2002
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Operation environment

• The global economic growth will improve slowly,
  crude oil price is expected to remain stable, and
  the petrochemical sector is experiencing a cyclic
  resurgence
• The PRC Government will continue to adopt active
  polices to promote steady economic growth
• The export volume of the PRCs textile chemical
  fibre sector is expected to grow steadily
• Domestic demand of high quality and differential
  polyester products continues to increase

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Market estimates

• Since mid-July, the prices of polyester products
  rebounded again. Prices of polyester products are
  expected to remain stable and increase
• Prices of major polyester raw materials such as
  PTA, MEG and PX are expected to remain stable

• There are also some uncertainties for the global
  economy
• Competition between domestic polyester
  manufacturers will become more intense in the
  fields of product categories, quality and cost
  given the current demand and supply situation
• Prices of raw materials may be high, which will
  bring much pressure for the petrochemical and
  chemical fibre sectors

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Production and marketing

• Operate at a high utilization rate and continue
  to optimize product mix
• Sell at optimal prices
• Coordinate with the government to conduct the
  anti-dumping investigation and promote the
  hygienic standards for polyester chips used in
  drinking industry
• The Groups planned sales volume of polyester
  products is 572,100 tonnes
• The Groups planned production volume of
  polyester products is 711,600 tonnes,
  representing an increase of 11.8 per cent as
  compared with last year

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Operation optimization
Emphasize overall operation optimization

• Control over the timing and frequency of purchase
  of raw materials so as to purchase at the optimal
  price
• Enhance quality management and quality control
  over its polyester filament production facilities
• Optimize product mix. The planned production
  volumes of differential polyester fibre and chip
  is 100,200 tonnes and 141,000 tonnes respectively
• Maximize efficiency of its product development
  facilites

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Reduction in cost and expenses

The target cost and expenses reduction is
Rmb66,380,000

• Reduce repair expenses by Rmb13,000,000
• Reduce materials and energy consumption by
  Rmb24,000,000
• Reduce packaging expenses by Rmb9,000,000
• Reduce personnel expenses by Rmb5,910,000
• Reduce other expenses by Rmb14,470,000

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Management innovation
Further improve companys efficiency

• Fasten reforms on payroll policies, gradually
  match with human resources market
• Improve simulating mechanism to encourage the
  technicians to be more enthusiastic, innovative
  and creative
• Implementation of ERP system by the end of October

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PROSPECTS
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Development
strategy
Market oriented and increase return on assets

• Sustained structural adjustments and industrial
  upgrades
• Both specialized and diversified in polyester
  business
• Reduce investment and unit production costs by
  connotation development
• Increase the technological content and
  value-added of products

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Future development planning
The largest polyester manufacturer in the PRC
with an annual capacity of 1.13 million tonnes

• Continue to adjust its resource, asset and
  product structures
• Increase return on its existing assets
• Invest in a prudent manner
• Undertake promising investment projects
• Raise the proportion of the equipment investment
  in the total investment
• Continue to lower unit fixed cost
• Keep the ratio of capital expenditure to turnover
  at about 7 per cent

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Expansion projects for 2H 2002

• The planned capital expenditure is Rmb1292 million

• The PTA project with an annual capacity of
  450,000 tonnes will be installed by the end of
  this year and put on operation in the end of the
  first quarter 2003
• The staple fibre project with an annual capacity
  of 90,000 will be completed in mid 2003
• The construction of sea island filament yarn
  project with an annual capacity of 750 tonnes
  and the POY project of Foshan Polyester with an
  annual capacity of 5,000 tonnes will be completed
  in September and October respectively this year
• Start to build a differential polyester chip
  project with a daily capacity of 450 tonnes,
  which will mainly be used for film-grade chip and
  superb bright chip production

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