China’s leading titanium dioxide (TiO2) manufacturer, Lomon Billions, has revealed its financial statement for H1 2017 and shows a growth beyond expectations. The main reasons are the high price of TiO2 currently and the financial consolidation. with its subsidy Sichuan Lomon.
According to the financial statement of Lomon Billions for the first half year in 2017, the company has achieved an increase in net profit of USD191 million to USD206 million. This development represents a growth of about 1,800% compared to the same fiscal period of 2016. Previous estimations had predicted the net profit at an average of USD170 million. Hence, the enterprise exceeded expectations significantly and strengthens its place as one of the world largest TiO2 manufacturer and supplier.
According to market intelligence firm CCM, the reason for the surprisingly high performance can be found in the high price of TiO2 in this period as well as financial statement consolidations the enterprise handled with its subsidiaries.
Since the merger of Henan Billions and Sichuan Lomons to the huge TiO2 player Lomon Billions, the company has influenced the Chinese TiO2 market decisively and also benefited from the prospering international titanium dioxide market. CCM has listed the main reasons for the huge success of the company.
Firstly, the price of TiO2 was increasing constantly in the first half of 2017. Hence, the domestic demand for TiO2 was high in the first months as processing enterprises aimed to purchase TiO2 before the price was climbing further. Furthermore, the strict environmental policies in China have wiped out some smaller downstream companies of TiO2, like coating enterprises, which has lowered the demand to some extent.
However, Due to the lower demand in July 2017 and the continuous high production rate of China’s TiO2 producers, the price fell down in this month for the first time in 2017.
Secondly, Lomon Billions stated an optimistic view towards the current domestic TiO2 market. The forecasts of some Chinese experts that new regulations on the real estate market will reduce the demand for TiO2 was denied by the enterprise, as the TiO2 demand is depending mainly on the coating industry and not houses in general. So far, China has had plenty of second-handed departments and undecorated houses, which are in healthy need of coatings and therefore TIO2.
What’s more, even the new regulations on the real estate market in China has led to less demand for coatings for houses in China’s first and second tier cities, the demand in third and fourth tier cities and cities in central and western China has boomed and as a result balanced the demand for coatings in these areas. Demand for architectural coatings in these regions is much larger than that in first and second tier cities, which steadily supports the TiO2 market.
In the Q1 financial report of Lomon Billions, the company already stated an increase in net profit by more than 3,440% year on year.
Performance in 2016
Lomon Billions is just continuing its successful development from the year 2016. In that year, the enterprise has revealed a sales increase of almost 57% and a growth of net profit by almost 297% compared to the season in 2015. The huge growth in 2016 was mainly due to the boos in the fourth quarter of the year, where the company consolidated the financial statements of the subsidiary Sichuan Lomon.
According to CCM, 2016 witnessed a slight growth in China's economy, with the GDP up by 6.7% YoY, while the TiO2 industry also showed signs of recovery from the depression of the last two years. Domestic prices of TiO2 increased in more than 10 separate instances. In this context, Lomon Billions achieved a profit growth of 298.44% YoY, benefiting from its dominant position in this booming industry.
The main reasons for Lomon Billions huge success can be found in the Ilmenite self-sufficiency of the enterprise, an R&D into high-end products to increase profit, and benefits from the large-scale production of the company.
Currently, the international TiO2 prices also show an upward trend in the market. The largest international enterprises, like Huntsman and Cristal, quoted higher prices worldwide in succession in May already. In addition, the global demand for TiO2 is estimated to surge driven by the incoming peak season of coating consumption in the US and Europe. According to CCM, the profits of international leading TiO2 enterprises are possible to continue climbing in the near future.
With Lomon Billions, the leader of China's TiO2 industry, established in 2016, the international TiO2 industry has changed and competition has become fiercer with the new player in the market. As a result, many big enterprises have revealed plans to strengthen their position in the fierce market. For instance, in March 2017, Tronox announced the acquisition of Cristal's TiO2 business at a price of USD1.67 billion to form the largest producer of TiO2 in the world. Besides, Huntsman declared the establishment of a TiO2 spin-off and application to American Stock Exchange for IPO of this new company in early May, a decision facilitated by a favourable financial performance of the TiO2 business.
CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.
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