Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Email This Print This Chairman's Statement

Extracted from the Annual Report 2017

Dear Shareholders,

It is my pleasure to present to you our results for the financial year ended 31 December 2017 ("FY2017"). While the Group was beset by an array of challenges in the year under review, such as the persistence of volatile oil prices and increased competition from other substitute energy products, the Group was still able to leverage on emerging opportunities, and pulled ahead to maintain a relatively favourable set of results.

Business Review

Riding on a 34.4% surge in the average sale price of LPG in 2017, Group made a marked improvement of 21.1% over our revenue of RMB2.18 billion in the financial year ended 31 December 2016 ("FY2016"), attaining a total revenue of RMB2.64 billion for FY2017. This upturn was, however, partially moderated by increased competition from alternative energy products, such as natural gas which had a more competitive average price in 2017. Consequently, our sales volume softened from 830,541 tonnes in FY2016 to 750,876 tonnes in 2017.

Following our redoubled efforts to regulate our business risks, rein in operating costs and seize growth opportunities, we upheld a positive gross profit margin of 4.30%. After factoring in costs and taxes, we garnered a net profit of RMB36.63 million in FY2017, a notch lower than our net profit of RMB40.97 million in FY2016.

Business Strategy

The International Monetary Fund ("IMF") recorded a continued upswing in the global economy for 2017, with global economic growth estimated at 3.7%. Closer to our main base of operations, the Chinese economy also saw robust growth, growing 6.9% in 2017 and exceeding the Chinese Government's earlier projection of 6.5%.

Amidst this heightened economic sentiment, we positioned ourselves to harness greater leverage from a stimulated bulk commodities market, as well as the growing demand for energy resulting from higher living standards. Within China, we continued to tap on nascent opportunities by bolstering our market presence in China's rural markets. In the overseas markets, we continued to harness greater mileage from the long-term contracts with our Southeast Asian customers secured in FY2016.

Outlook FY2018

Looking ahead, the economic climate for the financial year ended 31 December 2018 ("FY2018") appears buoyant. Global economic growth is expected to accelerate to 3.9% in 2018, while China's economic growth is projected to stay robust at 6.6% for 2018, albeit a reduced pace if compared to the 6.9% growth rate seen in 2017.

In the same vein, ratings company S&P Global Platts forecasted 7% growth for LPG demand in China, a growth rate 2% shy of the 9% growth achieved in the sector in 2017, but nevertheless still an opportune framework from which to mount renewed endeavours to capture greater growth.

Following the Chinese premier's pledge at the National People's Congress to "make our skies blue again", 2018 will feature a greater level of government environmental regulation. As a provider of an environmentally-friendly energy source that burns cleanly, the development bodes well for the Group. The Chinese Government's Air Pollution Prevention and Control Action Plan, which is being stepped up, encourages the use of gas for heating instead of burning coal and is likely to spur on LPG demand. Another measure, the Environmental Protection Tax Law, went into effect in January 2018 and is likely to increase the levies that many polluting companies have to pay, based on their volume of pollution. With the greater promotion of cleaner energy sources, we expect the tightening of environmental regulations to generally be favourable to the performance of the Group in FY2018.

While we are enthusiastic with the generally encouraging prospects at the outset of FY2018, we also remain wary of the likelihood of persisting volatility in international oil prices, as well as sustained competition from substitute energy products such as liquid natural gas. In light of these projections, the Group will adopt a posture of cautious optimism, balancing our drive to enhance our income streams with prudent spending within our operations and careful business risk management.

Acknowledgements

On behalf of the board of directors of the Company, I would like to express my sincere appreciation for Ouhua's customers, suppliers and other business partners for their relentless support over the years. I am also extremely grateful to our invaluable staff for another year of hard work. Last but certainly not least, I would like to thank our shareholders for their continued faith and unwavering support in our continuing journey to grow from strength to strength.

Liang Guo Zhan
Executive Chairman
Ouhua Energy Holdings Limited