China XD Plastics said third quarter revenue rose 7% year on year to US$315.7m, gross profit fell 0.5% to $65.4m and net income was up 5.1% to $43.2m. Total volume shipped was up 5.2% to 95,204 tonnes.
“Strong sequential growth confirms our view that business would accelerate over the course of the year,” said chairman and CEO Jie Han.
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“Revenue growth was fueled by strong domestic demand, success in our geographic diversification efforts outside of China, and improved average selling prices resulting from our strategic shift to higher-end products.”
The greater sales volume was driven by strong demand for polymer composite materials in China and Asia, higher penetration in east and southeast China as well as marketing efforts to develop new customers. Market demand in general is the result of an increasing appetite for middle and high-end automobiles by Chinese consumers, continuing substitution of imported polymer composite materials by domestic suppliers, and an increase in per-vehicle plastic content. The adoption rate of advanced polymer parts is highest in luxury automobile models, which is a rapidly expanding segment. The increase in average RMB selling price was mainly due to the shift of product mix toward higher-end products.
The decrease in gross profit was primarily due to higher cost of sales, as the company used some raw materials in the production of PA6 and PA66 that were originally purchased for R&D projects and were left over after the projects were completed.
The increased cost of sales was offset by a shift in product mix with higher-end products (mainly PA6, PA66, POM, PPO and plastic alloy) accounting for 75.5% of total revenue in the third quarter.
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By GlobalDataOperating income for the third quarter of 2014 was $54.7m, or 17.3% of revenue, a decrease of 2.1% from $55.9m, or 19.1% of revenue, in the same period a year ago.
Outlook
Based on strong performance during the quarter and positive outlook for growing customer demand in the fourth quarter, the company reiterated its revenue guidance for 2014. It expects full-year sales to range between $950m and $1.05bn and net income to range between $100m to $120m.
