Li Heng Chemical Fibre Technologies, the manufacturer of high-end nylon fibres, says it posted a 84.1% fall in net profit to RMB130.3 million ($26.8 million) for the year ending 31 December 2009 (FY09). Revenue was RMB2 billion, 46% lower than its corresponding period FY08.

Gross profit for FY09 was RMB250.9 million, 76.4% lower as compared to FY08, and for the same corresponding period, gross profit margin contracted to 12.6% from 28.7%.

As a result of the slowdown in the global economy in 2008, China’s textile and garment industry was inevitably affected which in turn led to price pressure on the group’s nylon yarn products. In FY09, group revenue decreased by 46% to RMB2 billion as compared to FY08.

Although overall average selling prices (ASPs) of nylon yarn products has been stabilising since June 2009, ASPs in FY09 of RMB18,980 per tonne is still about 37.3% lower than RMB30,250 per tonne in FY08.

Total sales volume fell from 122,353 tonnes in FY08 to 105,259 tonnes in FY09 as the group continued to offer new nylon products in finer measurements to their customers which resulted in lighter tonnage.

In FY09, the group also recorded revenue of RMB0.6 million from sales of polyamide chips (PA chips) from trial production of the new PA chip plant completed in 3Q09. The high quality textile grade PA chips plant with 200 tonnes daily designed production capacity had commenced trial and commercial production in September and October 2009 respectively. However, future sales of PA chips would be considered only after in-house consumption for production needs has been met.

Despite the drop in revenue, Li Heng says it continued to capture more market share and grew its customer base in FY09 to 209 customers from 184 at the end of FY08 and these new customers accounted for 7.5% of total revenue in FY09.

Cost of sales dropped 33.8% in FY09 mainly due to the drop in PA chip prices.

Gross profit decreased by 76.4% in FY09 to RMB250.9 million compared to RMB1,063.8 million in FY08.

Net profit after tax in FY09 is 84.0% lower at RMB130.3 million as compared to FY08 in line with the lower revenue and gross profit base. In reviewing quarterly performance, net profit in 4Q09 jumped 585.2% to RMB42.3 million as compared to 4Q08.

As at 31 December 2009, the group maintained a healthy balance sheet and liquidity with net current assets at RMB753.7 million and a net cash inflow of RMB125.1 million from its operating activities while cash and bank balances stood at RMB654.5 million.