Tianhe Chemicals Group Limited, which is headquartered in Jinzhou City, Liaoning Province, China reported a 14% increase in revenue from its lubricant additives business during the first six months of 2016 compared to the same period a year ago, as gross profit rose by 35%, mainly due to significant growth in export sales.
However, the company’s overall net profit declined by 71.4% during this period to approximately RMB 412.3 million (USD 61.73 million) due to its specialty fluorochemicals business segment. Early this year, Tianhe Chemical’s wholly owned subsidiary, Fuxin Hengtong Fluoride Chemicals Co., Ltd., was required by the local government to relocate its production line to a fluoride industrial park, along with other local fluoride-related chemical facilities, in accordance with the government’s integrated planning. This disrupted production at its current facility, where Fuxin was required to reduce production, while the new site was still being prepared.
“Accordingly, despite complying with the administrative order by reducing the production volume, Fuxin Hengtong initiated active communication with the local government to negotiate a possible solution that includes postponement of relocation or exemption from the relocation requirement. As of the date of this announcement, the negotiation between Fuxin Hengtong and the local government was still on-going,” Tianhe Chemicals reported.
Fuxin Hengtong produces perfluoroalkyl iodides (TI), which are key intermediates to produce perfluoroalkyl ethyl iodides (TEI). Reducing the production volume of TI has had significant impact on the performance of Tianhe Chemicals’ specialty fluorochemicals business. “Assuming this matter can be resolved in the near future, it is expected that such impact will last through the second half of 2016, given it will likely take a few months to gradually ramp up production and sales,” the company said.
The company reported these unaudited results to the Stock Exchange of Hong Kong Limited where the company’s shares are listed and were traded. At the company’s request, trading in its shares has been suspended since March 26, 2015, following short-selling of its shares and the resignation of its external auditor, Deloitte Touche Tohmatsu Ltd. in September 2015. Since then, Tianhe Chemicals has hired Zhonghui Anda as independent auditor. Tianhe also engaged Grant Thornton Advisory Services Limited as an independent forensic specialist to conduct a forensic investigation on potential audit issues raised earlier by Anonymous Analytics.