Chinese recycled low density polyethylene (LDPE) manufacturer, Guanwei Recycling reported a second quarter revenue increase of 18.6 per cent to almost $18.7 million, while profits have dropped slightly amid an increased cost of labour and rising market prices for materials.
However, the company said that this increase was not sufficient to offset increased raw material, labour and overhead costs in the period, with the resulting lower profit margins contributing to an 8.41 per cent year over year decline in net income nearly $3.2 million.
The company also reported an increase of 3.41 per cent in the selling prices of its manufactured recycled LDPE year over year.
Guanwei noted that a bright spot in the 2012 second quarter was a sequential increase in manufactured recycled LDPE sales volume of over 16 per cent - or an additional 1938 tonnes compared with the first quarter of 2012.
The plastic recycler explained that this however reflected ‘weak’ results in this year’s first quarter largely due to an earlier than usual Spring Festival in China.
On a year over year basis, recycled LDPE sales in the 2012 second quarter were up 6.6 per cent to $16.4 million, which the company said reflected a 3.4 per cent increase in average selling prices to $1212 per tonne and an increase of just over 3 per cent in LDPE sold to 13,538 tonnes.
Costs
The company said that it had seen increased raw material costs, as well as increased labour and overhead expenses, which contributed to the year on year reduction in second quarter gross profit from $5.1 million in 2011 to $4.9 million this year, while gross profit margins declined from 32.3 per cent in last year’s second quarter to 28.3 per cent in 2012.
Guanwei claimed that a shortage of workers in Southern China rapidly increased wages and welfare costs.
Through the first six months of 2012, the per tonne raw material cost of recycled LDPE and sorted non-LDPE material increased 10.8 per cent to $722 per tonne, which the company said reflected the sustained strong demand for LDPE.
“In the second half of the year, we believe we will benefit from moderate increases in prices for our products as well as stabilising raw material costs based on negotiations with our suppliers,” commented Mr. Min Chen, Chairman and CEO of the Company.
“Longer term, we believe the outlook for our Company remains very bright, given the anticipated increasing demand in an improved economy for our low-cost, high quality products,” he added.
