Wanhua Chemical Group Co., Ltd. has been experiencing a continuous decline in performance, with its stock price falling back to the level of five years ago. The company attributed the decline in performance to the decrease in product prices and reduced gross profit.
In a recent release of the “Annual Report of Wanhua Chemical Group Co., Ltd. for the Year 2024,” it was revealed that in 2024, Wanhua Chemical achieved operating income of 182.069 billion yuan, a year-on-year increase of 3.83%, and a net profit of 13.033 billion yuan, a year-on-year decrease of 22.49%. Specifically, in the fourth quarter of 2024, the performance decline was more severe, with the company generating revenue of 34.5 billion yuan, a year-on-year decrease of 19.49% and a quarter-on-quarter drop of 31.8%, with a net profit of 1.94 billion yuan, a year-on-year decrease of 52.8%.
Furthermore, the company faces significant short-term debt pressures. The announcement indicated that in 2024, the company’s inventory reached 24.107 billion yuan, accounts receivable stood at 12.319 billion yuan, with some impairment risks; cash and cash equivalents were 24.533 billion yuan, short-term borrowings and non-current liabilities due within one year amounted to 46.739 billion yuan, highlighting significant short-term debt pressures; the increase in interest-bearing debt also resulted in financial expenses for the year 2024 reaching 2.094 billion yuan, eroding some profits. Additionally, the net profit attributable to shareholders of the listed company in 2024 decreased by 22.49% compared to the same period of the previous year.
Wanhua Chemical attributed the decline in profits to factors such as fluctuation in market prices and raw material costs, which impacted the overall gross margin despite an increase in product sales volume during the reporting period. The company also witnessed year-on-year growth in sales, management, financial, and other expenses, along with asset impairment provisions or write-offs for certain investment projects.
According to the “First Quarter Report of Wanhua Chemical Group Co., Ltd. for the Year 2025” released on the same day, unlike the revenue growth without profit increase in 2024, the first quarter of 2025 saw a dual decline in revenue and net profit. In the first quarter, Wanhua Chemical achieved operating income of 43.068 billion yuan, a year-on-year decrease of 6.70%, and a net profit of 3.082 billion yuan, a decline of 25.87%. Wanhua Chemical cited the decline in performance as mainly due to decreased product prices and reduced gross profit.
The poor performance in financial results led to a voting with feet in the capital market. According to the “Huaxia Times” news on April 20th, following the disclosure of performance, Wanhua Chemical’s stock price plunged more than 5% the next day (April 15). By the end of trading on April 18, the company’s stock price was at 54.99 yuan per share, falling to the level at the end of 2019 and the beginning of 2020.
Wanhua Chemical Group Co., Ltd. is a chemical and new materials company mainly engaged in the research, development, production, and sale of polyurethane, petrochemical, fine chemicals, and new materials. The company’s main products include polyurethane series, petrochemical series, fine chemical products, and new material series, making it a leading enterprise in China’s chemical industry.
Regarding Wanhua Chemical’s development, the “Huaxia Times” mentioned that in recent years, the continuous expansion of production capacity by Wanhua Chemical has raised concerns about the company’s operations. By the end of 2024, the annual production capacity of Wanhua Chemical’s main products, MDI (Methylene Diphenyl Diisocyanate) and TDI (Toluene Diisocyanate), stood at 3.8 million and 1.11 million tons respectively, ranking it first globally.
However, as production capacity expanded, the company’s debt issues also became apparent. By the end of 2024, the company had cash and cash equivalents of 24.533 billion yuan, with short-term borrowings and current liabilities due within one year standing at 35.557 billion yuan and 11.182 billion yuan respectively, indicating significant short-term debt pressures. The company’s long-term liabilities also increased from 15.968 billion yuan in 2022 to 48.176 billion yuan in 2024. With short-term liabilities and 3.4 billion yuan of bonds payable, the three interest-bearing liabilities alone approached 90 billion yuan, resulting in the company’s financial expenses reaching 2.094 billion yuan in 2024, accounting for 16% of net profit.
In addition to interest-bearing liabilities, there is also a risk of impairment in inventory, accounts receivable, and bills receivable for the company. Furthermore, the depreciation will begin after the construction in progress is converted into fixed assets, which will have a negative impact on the company’s future profits.
According to the financial report, Wanhua Chemical’s asset impairment losses in 2024 were 0.74 billion yuan, a year-on-year increase of 447%; the non-operating expenses were 1.14 billion yuan, a year-on-year increase of 156%, mainly attributable to the increase in losses from write-offs of fixed assets and construction in progress.
Regarding the future trend of product prices, Wu Yanni, a TDI analyst at Zhuochuang Information, expressed to the media that in the coming years, more TDI production capacity will come online, while uncertainties persist in the external environment, causing concerns for the year 2025.
At 09:20:38 Beijing time on April 21st, the stock price of Wanhua Chemical was reported at 55.00 yuan per share, with a total market value of 172.7 billion yuan.