Numbers in million RMB unless stated otherwise.
| Twelve Months Ending | 31 Dec 2023 | 31 Dec 2022 | % Change |
|---|---|---|---|
| Revenue | 3,490.4 | 3,825.0 | (8.7) |
| Profit before tax | 453.2 | 733.7 | (38.2) |
| Net Profit | 372.4 | 642.4 | (42.0) |
| EPS (RMB cents) | 38.67 | 66.29 | (41.7) |
| DPS (SGD cents) | 2.5 | 2.5 | - |
CSSC is primarily involved in the manufacturing and selling rubber chemicals, of which the bulk is in China (58%) and rest of Asia (30%). CSSC also provides heating power and waste treatment in China, but revenue is inconsequential. 2H2023 revenue declined 2% y/y, due to 13% y/y decrease in average selling price (ASP), offset by higher 12% y/y sales volume. The decrease in ASP was mainly due to (i) decrease in the price of raw materials; and (ii) a more flexible pricing strategy in response to the intensified competition. Sales volume increased as a result of higher demand and the flexible pricing.
FY2023 gross profit margin declined from 30.4% to 22.9%. Management will continue to adopt more flexible pricing with its "sales production equilibrium" strategy, so as to strengthen its market leadership position. At the same time, they will look to tighten costs control. Management remains confident of being profitable in FY2024.
The Board has declared a 1.5 SGD cents ordinary dividend per share, as well as a 1.0 SGD cent special dividend per share, Ex Date: 9 May 2023. This is the same as previous year.
My Thoughts
CSSC operates in a competitive industry, whereby there is no differentiation between getting rubber chemicals from one supplier versus another. CSSC has adopted the strategy of bulk sales amid flexible pricing. Luckily, CSSC can still maintain profit margin above 20 percent, while enjoying a market leading position. According to the company, it continues to hold the title of the "world's largest producer of accelerators, China's foremost producer of insoluble sulphur, and a significant player in the antioxidants market."
My worry is CSSC being caught a death spiral to zero profit with its adversaries. So far, my nightmare hasn't materialized, but I continue to be watchful of the company's performance through the fiscal year. A 6 percent dividend yield is the icing on a wobbly cake.
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