Wanhua Chemical's net profit in the first three quarters fell by 32.28%, and the MDI leader was helpless

Polyurethane is an upstream product in the industry, and its revenue depends on downstream demand.
For example, at present, China's pure MDI products are mainly used in synthetic leather and shoe sole stock solutions, and polymerized MDI is mainly used in white goods such as refrigerators and freezers, construction and car
.

Taking white goods as an example, in the first half of 2020, Midea Group’s net profit fell by 8.
29% year-on-year, Gree Electric’s net profit fell by 53.
73% year-on-year, Hisense’s net profit fell by 48% year-on-year, and Changhong Meiling’s net loss in the first half of the year was 210 million yuan
.

The downturn of the downstream industry directly affects the demand for the upstream industry.
Therefore, the price and sales volume of polyurethane are also inevitable
.

In addition, due to the characteristics of polymer MDI products, which are easy to store and have a wide range of applications, downstream industries also have speculative factors in the purchase of polymer MDI.
In the case of a general decline in prices, sales will also be affected
.

However, while the revenue of polyurethane products has declined significantly, its sales volume has gradually expanded
.
In the first half of 2020, the sales volume of polyurethane was 1.
24 million tons, and the sales volume in 2019 was 1.
32 million tons, a decrease of about 80,000 tons
.
Taking into account the relatively small shipments from February to April, Wanhua Chemical's polyurethane products still ushered in a certain degree of growth in the second quarter.
If the product price can be increased, the profitability can be improved.
Perhaps, in 2020.
In half a year, Wanhua Chemical's MDI revenue and net profit will usher in a turnaround
.

At the same time, according to Wanhua Chemical's mid-term report, the main reason why Wanhua Chemical's revenue in the first half of the year fell far less than its net profit was its petrochemical business - in the first half of 2020, although Wanhua Chemical's chemical series achieved 10.
414 billion Yuan's revenue increased by 2.
901 billion yuan compared with the first half of 2019.
However, the rising cost of petrochemical series products swallowed up most of Wanhua Chemical's profits, which is why Wanhua Chemical's revenue in the first half of the year only decreased year-on-year.
2%
.

According to Wanhua Chemical's mid-term report, Wanhua Chemical's petrochemical series products mainly focus on the sales of liquefied petroleum gas, propylene and acrylic acid.
LPG is mainly imported from the Middle East
.
Although the semi-annual report did not give specific sales data of petrochemical products, it is self-evident that the increase in revenue of petrochemical products did not increase profits in combination with the decline in international crude oil prices mentioned in the semi-annual report
.

According to Wanhua Chemical's mid-term report, in the first half of 2020, Wanhua Chemical's operating cost was 24.
707 billion yuan, a year-on-year increase of 14.
24%, far exceeding the increase in revenue.
Among them, the operating cost of Wanhua Chemical's petrochemical series products was as high as 10.
41 billion yuan.
However, in terms of revenue of the entire company, according to Wanhua Chemical's mid-term report, Wanhua Chemical has dropped by 2%
.

"Increase income without increasing profit", perhaps this is the portrayal of Wanhua Chemical in the first half of 2020
.

Risks of Growing Debt Stress

In addition to "increasing revenue without increasing profits", Wanhua Chemical in 2020 also faces the risk of expanding debt pressure
.

According to Wanhua Chemical's interim report, as of June 30, 2020, Wanhua Chemical's total liabilities reached 71.
972 billion yuan, while in the same period in 2019, its total liabilities were 52.
934 billion yuan
.
Among them, short-term loans were 33.
615 billion yuan, an increase of two-thirds from the end of 2019
.

At the same time, Wanhua Chemical's debt is still increasing:

On August 25, 2020, Wanhua Chemical announced that the company has issued the fourth, fifth and sixth tranches of ultra-short-term financing bills in 2020.
Raised funds of 3 billion yuan
.

At the same time, Wanhua Chemical continues to expand
.

According to its semi-annual report data, Wanhua Chemical's construction in progress reached 32.
67 billion yuan in the first half of the year, compared with 24.
066 billion yuan in the same period in 2019.
As of June 30, 2020, Wanhua Chemical's construction-in-progress project budget has reached 91.
731 billion yuan Yuan, according to its financial report, many of the funds came from bank loans.
In addition, other projects under construction of Wanhua Chemical are in progress as planned
.

What is even more surprising is that in addition to expanding its main business and improving its global layout, Wanhua Chemical is also expanding its business in other fields, such as real estate
.

If other projects under construction of Wanhua Chemical can be completed as scheduled, the production capacity of Wanhua Chemical will be further increased, and the scale effect brought by this will improve the profitability of Wanhua Chemical
.
However, in the face of the problem that the scale of debt is constantly expanding and the investment cost is increasing, Wanhua Chemical has to make an impairment provision for it.
According to public information, due to the impact of the international trade environment, the investment cost of the MDI integration project of American factories has increased.
Significant increase, the construction scope and site selection of the project are being re-evaluated, and Wanhua Chemical has accrued an impairment of 310 million yuan
.

Perhaps, compared to borrowing to expand, Wanhua Chemical should pay more attention to its profitability at this time
.