Aramid Fiber Business Fuels Growth of Yantai Spandex     

The expansion of the spandex production, and slackness of the downstream textile sector led to falling price of spandex.
    Yangtai Spandex Co., Ltd. (SZ: 002254), a leading spandex and aramid fiber (aromatic polyamide fiber) producer in China, accomplished a total operating revenue of RMB784.1 million in the first half of 2008, a drop of 5.95% from the same period of 2007. The operating profit was RMB192.5 million, down 25.17% year-on-year. The net profit was RMB139.8 million, down 14.8%.
    The overall gross profit rate was 5.47 percentage points lower than the same period of 2007, because the gross profit rate of spandex business was down by 11.74 percentage points compared with the same period of 27.07% to 28.22%. With the labor cost increase, RMB appreciation with respect to US dollar and lowed export rebate on textile, the demand for spandex in the downstream textile sector decreased. The accelerated spandex expansion caused oversupply of spandex and the price of spandex was down by 20.37% compared with the same period of 2007.
    In addition, due to the power supply shortage, the company is forced to shut down partial spandex production facilities. The company has decided to cut down its spandex output by 2 500 tons in the second half of 2008, which will reduce the operating revenue by RMB110 million and the total profit by RMB13.0 million. Yantai Spandex estimates the performance in the third quarter to be down by 30% - 50% year-on-year.
    The company has already taken aramid fiber as its development orientation. Aramid fiber business will become the focus and make a profit growth for the company.
    Yantai Spandex has achieved the localization of aramid fiber production, with the aramid fiber capacity of around 2 800 t/a. Upon completion of the expansion of aramid fiber 1313 project using funds raised in the stock market, the company will have the aramid fiber capacity of around 4 300 t/a in September 2008. The company will conduct pilot for its 1 000 t/a aramid fiber 1414 in the second half of 2008. Serious power shortage is expected to be solved after the Olympic Games.