Chemrez 2010 Consolidated Sales Jump 14%

Chemrez Technologies Inc. (PSE: COAT) has reported consolidated sales of PhP5.8 billion for 2010, up 14% from the PhP5.1 billion in 2009. However, sales volume decreased by 7% from last year, driven by the tough competition in the biodiesel market. Export sales accounted for 17% of total sales at PhP991 million, which is about three times the value of last year’s P328 million.

Aggressive overseas marketing boosted the company’s export sales and expanded its markets to the United States, Africa, Europe and Australia. Furthermore, the growth in exports was driven by the high demand for oleochemicals in overseas markets.

On the other hand, the volume of resin products increased by 3% from 2009. The 2010 revenue mix is 55% oleochemicals, 40% resins, and 5% powder coating. Overall, Chemrez maintains its leading market position in the Philippines. Growth is expected via new products and new export markets.

The gross profit of PhP759 million is 7% higher, giving a gross profit margin of 13% versus last year’s 14%, small sacrifice in profit margin to protect market share in a highly competitive environment. The slight decrease in gross margin was because of the company’s inability to increase its prices as fast as the raw materials costs increase.

Selling expenses decreased by 8% from PhP91 million in 2009 to PhP83 million in 2010. The decrease was mostly because of the improvement in receivables collection wherein provisions for impairment in receivables have substantially decreased in 2010 compared to 2009. Administrative expenses increased by 19% from PhP71 million in 2009 to PhP84 million this 2010. This is driven by higher local taxes and higher management and logistic support services.

Other income was steady at PhP28 million for 2009 and 2010. This consisted mostly of foreign exchange gains and rental income. Operating profit in 2010 was PhP619 million versus last year’s PhP576 million, giving a 7% increase. Chemrez incurred a finance cost of PhP8 million during the year as a result of bank borrowing, which was not present in 2009. Profit before tax was PhP611 million versus last year’s PhP576 million. Profit after tax increased by 7% to PhP509 million in 2010, up from PhP474 million in 2009. Net profit margin slightly decreased to 8.7% from 9.3%, while earnings per share slightly increased to PhP0.39 from PhP0.38 in 2009.

Financial Condition

Average days receivables improved to 43 days sales in 2010 from 45 days in 2009. This improvement in collection was a result of Chemrez’s continuous effort to collect its accounts as they became due to shorten its cash conversion cycle. To protect clients from a highly erratic commodities market and fast rising raw material costs, the company timed its raw material purchases and took positions to minimize impact to clients. This increased the average days inventory to 64 days in 2010 from 60 days in 2009.

Total assets had a net increase of 14% from PhP3.9 billion at the end of 2009 to PhP4.5 billion in 2010. Total payables increased to PhP630 million, mostly driven by bank borrowing made during the year. Debt to equity ratio increased to 0.16 (from 0.14 in 2009).

Capital expenditures in 2010 amounted to PhP115 million, mostly machineries and equipment. However the net increase in plant, property, and equipment is just 2% because the acquisitions are offset by the depreciation during the year. On the other hand, although the company’s share buyback program has not been terminated, there was no purchase of any shares in 2010, nor were there any sale, transfer, disposal, cancellation and/or use of treasury shares for the period up to 31 December 2010. Retained earnings increased by 33% from PhP1.1 billion in 2009 to PhP1.4 billion by end of 2010. This is the net increase of the profit generated for the period less the dividend paid during the year. Total equity increased by 10% from PhP3.5 billion at the end of 2009 to PhP3.9 billion by the end of 2010.

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