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31-10-2012, 06:35 AM
The drop in overall ASP and the drop in gross profit despite rising sales volume deserve further examinations.
The company now has two types of antioxidants, TMQ and 6PPD. TMQ is easier to make and sells for half the price of 6PPD in the open market.
The company's 3Q results announcement states:
"Sales volume from Antioxidant soared from 450 tons a year ago to 2,070 tons in 3Q2012 due to the introduction of a new product, 6PPD, which is currently undergoing accreditation process by the Group’s various customers. However, Anti-oxidant TMQ continued to experience low utilization rate due to intense market competition as this product has low production entry barrier."
From the following table, it seems that the selling price of 6PPD was lower than that of TMQ:
Antioxidants
...........RMB/tonne......Sales vol (tonnes)
3Q11........13,300.................450
4Q11........13,500.................330
1Q12........15,300.................450
2Q12........15,100.................857
3Q12........14,300...............2,070 (spike in sales volume due to sales of 6PPD)
What was the pricing arrangement during product accreditation of 6PPD?
Could 6PPD have been sold below cost, resulting in lower overall gross profit in 3Q 12 despite rising sales volume:
All products (ie accelerators, antioxidants and insoluble sulphur)
......Total sales ......Sales vol.....Gross profit
........(RMBm).........(tonnes)........(RMBm)
3Q11.....310..............15,847.........77.3
4Q11.....296..............16,292.........60.7
1Q12.....324..............18,333.........68.5
2Q12.....363..............20,411.........72.7
3Q12.....369..............21,437 ........62.4
The company now has two types of antioxidants, TMQ and 6PPD. TMQ is easier to make and sells for half the price of 6PPD in the open market.
The company's 3Q results announcement states:
"Sales volume from Antioxidant soared from 450 tons a year ago to 2,070 tons in 3Q2012 due to the introduction of a new product, 6PPD, which is currently undergoing accreditation process by the Group’s various customers. However, Anti-oxidant TMQ continued to experience low utilization rate due to intense market competition as this product has low production entry barrier."
From the following table, it seems that the selling price of 6PPD was lower than that of TMQ:
Antioxidants
...........RMB/tonne......Sales vol (tonnes)
3Q11........13,300.................450
4Q11........13,500.................330
1Q12........15,300.................450
2Q12........15,100.................857
3Q12........14,300...............2,070 (spike in sales volume due to sales of 6PPD)
What was the pricing arrangement during product accreditation of 6PPD?
Could 6PPD have been sold below cost, resulting in lower overall gross profit in 3Q 12 despite rising sales volume:
All products (ie accelerators, antioxidants and insoluble sulphur)
......Total sales ......Sales vol.....Gross profit
........(RMBm).........(tonnes)........(RMBm)
3Q11.....310..............15,847.........77.3
4Q11.....296..............16,292.........60.7
1Q12.....324..............18,333.........68.5
2Q12.....363..............20,411.........72.7
3Q12.....369..............21,437 ........62.4