Hefei, Anhui – Anli posted a 91% drop in net profit to CNY 3 m ($451,000) in the first half of 2017, following a similar rate of decline in the first quarter.
The company’s revenue in H1 rose by 3% to CNY 691 m, of which 87% comes from PU faux leather, said its half year report.
In the wake of China’s tightened environmental regulation, prices of chemical feedstock – accounting for half of Anli’s total cost – and energy jumped up to 50% during the period, said the report. The company continued that it was unable to raise its products’ prices enough to counter the impact because the downstream market was stagnant .
Anli’s own environmental investments, including CNY 30 m for wastewater treatment and CNY 80 m to change from coal to gas power in line with local regulations, further dragged down its profitability.
The company’s gross margin for PU leather in H1 fell by 4% to 22%.
By the end of H1 Anli had 80 M m/year PU leather capacity, and is looking at 88.5 M m/year for PU leather and 70kT/year for PU resin when all ongoing projects are in full operation.
The company worries ‘the market won’t be able to well digest its capacity,’ said the report.
