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UNAUDITED RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED 30 SEPTEMBER 2018
Review of Performance
Review of the Group’s Performance for the third quarter ended 30 September 2018 (“3Q2018”) as compared to that of the third quarter ended 30 September 2017 (“3Q2017”)
Revenue increased by approximately 17.1% or RMB96.5 million, mainly due to the increase of average domestic sale price of LPG from RMB3,101 per tonne in 3Q2017 to RMB3,831 per ton in 3Q2018 and sales volume of LPG from 180,165 tonnes in 3Q2017 to 193,967 tonnes in 3Q2018. Price competitiveness of LPG as compared to substitute products contributed to the increase of local demand during the period.
Gross profit increased by RMB15.8 million as compared to that in 3Q2017 due to margin increase, favorable sales mix and domestic sales volume increase. Profit margin improved from 3.9% in 3Q2017 to 5.7% in 3Q2018.
Other operating income
Other operating income decreased by RMB8.8 million mainly due to the foreign exchange gain of RMB7.3 million in 3Q2017.
Operating expenses increased by RMB4.8 million mainly due to the following:
Finance costs decreased by approximately RMB0.6 million or 17.4% mainly due to interest expenses saving driven by the decrease in average loans from banks.
Review of the Group’s Financial Position as at 30 September 2018 and the Group’s Financial Position as at 31 December 2017
Current assets increased by approximately RMB44.2 million or 10.7%. This is mainly due to increase in due from related parties of RMB7.0 million, increase in inventories of RMB7.9 million, and increase in trade and other receivables of RMB56.2 million, but partially offset by decrease in cash and cash equivalents of RMB8.2 million and pledged fixed deposits of RMB18.7 million.
Current liabilities increased by approximately RMB48.2 million or 14.2%. This is mainly due to increase in the trade and other payable of RMB49.6 million.
For the nine months ending 30 September 2018, the Group’s working capital decreased by RMB4.1 million or 5.8%, however, the Group’s shareholders’ equity increased by RMB20.2 million or 12.3%.
Review of the Group’s Cash Flow Statements for 3Q2018
The Group’s operating profit before movements in working capital was RMB19.7 million for 3Q2018. Net cash generated from operations was RMB82.2 million during 3Q2018. This was mainly due to increase in trade payable of RMB119.8 million, decreases in inventories of RMB2.2 million and due to holding company of RMB1.7 million, but partially offset by increase in due from a related party of RMB12.7 million and trade and other receivables of RMB48.5 million.
Net cash outflow from investing activities amounted to RMB0.1 million due to purchase of property, plant and equipment.
Net cash outflow from financing activities amounted to RMB92.1 million due to repayment of bank borrowings.
Oil prices have unexpected declined substantially in the recent months despite the US sanctions on Iran oil exports coming into effect. As LPG price follow oil price trend closely, it would be a strong challenge for our Company to manage this unexpected drop in oil prices. Moreover, the China economy has slowed to 6.5% growth and this slowdown is also a concern for our Company as the manufacturing sector faces slowdown in view of the ongoing US China trade war. The outlook for the RMB appears to be further weakening as resolution to the trade war may take a longer time than initially expected. As tariffs are imposed on imports of LPG raw materials from the US, alternative sources of supply may raise some costs for our Company. On the domestic front, there are also several new refineries and petrochemical projects coming onstream which will add significant supply of LPG to the market. Going forward, our Company will remain vigilant in managing risks and operating costs to cope with these challenges and maintain our market competitiveness in the LPG market.