China: Guanwei Recycling Corp. sees gross profits drop by 24 per cent


China’s leading manufacturer of recycled LDPE has reported that while revenues in the first quarter of 2012 increased by 14.35 per cent, year on year net income has decreased by 24 per cent.

Sales of manufactured recycled LDPE in the quarter increased less than 1 per cent which was attributed to an atypical increase in purchases by customers during the last quarter of 2011, due to the Chinese spring festival being celebrated earlier than normal this year.


Margins also declined as costs of raw material, labour and manufacturing continued to rise and were not sufficiently compensated by price increases.

 Revenue in the three months increased by 14.35 per cent to $16,171,490 (£10,146,243) compared with $14,142,612 (£8,872,960) in the same period last year.

The contribution to revenues from sales of manufactured recycled LDPE was $14,044,642 (£8,810,055) up 0.84 per cent from last year’s first quarter.

Tonnage sales have also declined 5.17 per cent to 11,600 tonnes compared with 23,233 tonnes a year earlier. Average selling prices in the first quarter of 2012 for recycled LDPE rose to 6.76 per cent to approximately $1,216 (£763) per tonne.

In the first three months of 2012 net income was $2,065,256 (£1,294,995) or $0.14 (£0.08) per share a year earlier. The gross profit margin declined for manufactured recycled LDPE and sorted non-LDPE to 24.20 per cent in the first quarter, compared with 29.95 per cent a year earlier.

This was a consequence of a 10.81 per cent increase year on year in raw material costs to $761 (£477.26) per tonne, reflecting the strong demand for LDPE.

Guanwei Recycling Corp. chief executive Chen Min said: “We remain very confident about continuing long term growth in our business, given continuing demand for lower cost recycled LDPE, which perhaps could increase in the tougher economic period as companies seek to lower costs by all means possible.

“At the moment our key concern is maintaining growth on our bottom line in the face of continuing cost inflation, combined with the clear downtrend in economic activity in China and the slow recovery in the west which could impede our ability to match cost increases with pricing increases. As such we are doing everything possible to reduce manufacturing and labour costs as well as to improve our purchasing power with our European suppliers.”