September 21, 2010 2:47 am

China’s crude regime pushes Haike into red

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Shares in Haike Chemical fell almost 57 per cent after the Chinese petrochemicals company dropped $21m (£13.5m) into the red in the first half.

Haike Chemical results for six months ended June 30
Sales Pre-tax profit Earnings per share Dividend
$467.2m (loss of $21.1m) (loss of 28.6 cents)
↑ 78.7% $11m 25.8 cents

Haike, which has lost three of its five non-executive directors this year, signalled the losses in June, when it reported a pre-tax loss of $1.8m on revenues of $591.3m for 2009. However, the shares have more than doubled this month on the back of retail investor speculation on the bulletin boards.

Haike’s website, which it is required to maintain under Aim rules, was unavailable on Monday morning after it was suspended by the Chinese government following the introduction of a new regulation. China now requires every website designer to be registered with the government. Haike’s website was designed in the UK.

The London Stock Exchange was alerted and monitored the situation. The website was restored in the afternoon.

The latest losses have been made in spite of an increase in revenues from $262m to $467m in the six months to June 30, mainly because a second refinery has come on stream.

In the first half of 2009 the company made a pre-tax profit of $11m.

The refineries, which are in Shandong province, rely on imports of partly refined fuel oil because China does not allow imports of crude. Prices of the company’s feedstock have been volatile for the past 12 months, pushing Haike into a loss for 2009 in spite of a good start to the year.

At the same time the Chinese government has maintained control over prices for gasoline and diesel.

The company, which is advised by Westhouse Securities, said it had sufficient funds to meet foreseeable business requirements as long as the Chinese banks continued to support it.

While Haike continued to enjoy good relations with its local banks, it warned that if further losses were incurred, or if it lost the support of its banks, “the group may have liquidity risks”.

At the end of June it had short-term borrowings of $366.4m and long-term borrowings of $192.5m.

The company joined Aim in 2007, raising $10m at 80p a share. It has been searching for new non-executives and is expected to announce an appointment in the next month or so.

A 28.6 cents loss per share compares with previous earnings of 25.8 cents. Shares in Haike closed down 24½p at 18½p.

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