China Rerun Chemical : Interim Results 2015 ?PDF File?

China Rerun Chemical Group Ltd (CHRR.L), the producer of lubricant products for the domestic automotive, industrial and agricultural markets in the People's Republic of China ("PRC"), today announces its unaudited half year results from 1 September 2014 to 28 February 2015 ("the period").

Indicative exchange rates as at 26 February 2015: £1: RMB 9.52

Source:www.oanda.com

I am pleased to announce the half-yearly results to 28 February 2015. The figures are not particularly positive, as sales of lubricating oils were heavily down, but mask some improvement in the company's trading.
In the period under review, the Group generated revenue of RMB139.7m (HY 2014:RMB164.7m) representing decline of 15.2%. The Group achieved gross profit of RMB34.8m a decrease of 31.4% compared to the prior year period (HY 2014: RMB50.7m). Gross margin decreased by 5.9 percentage points to 24.9 per cent. year-on-year (HY 2014: 30.8%). The deterioration on gross profit was mainly driven by sales volume decreased by 13.6% to 7.0 million litres compared with HY2014.
Sales and distribution expenses increased to RMB14.1m (HY 2014: RMB11.2m). This increase was mainly driven by increased sales commission rates, distributors' rebates and distribution costs.
During the period under review, administrative expenses were RMB4.1m. The Group achieved a pre- tax profit of RMB16.3m in HY 2015, down 50.2% (HY 2014: RMB 32.7m). Operating margin decreased by 8.2 percentage points to 11.6% (HY 2014: 19.8%). The Group's PRC operating subsidiary is subject to an income tax rate of 25 per cent., which is in accordance with the PRC Enterprise Income Tax Law.
At 28 February 2015, cash increased by RMB116.1m to RMB207.5m (HY 2014: RMB91.4m) and it was mainly attribute to settle the group's various tax liabilities which increased by RMB64.5m to RMB135.6m (HY 2014: RMB71.1m).
The Board remain conscious that we need to improve the company's trading position. Ever endeavour will be made to continue the growth that the company has enjoyed over the past 10 years
Commenting on the results, Mr Xinghe Wu, Executive Chairman of China Rerun said:
"After a long period of sustained top and bottom line growth it is disappointing to see a period when key financial metrics have worsened.
We have experienced a more competitive environment that has been the case in the past and some market share has been lost. We continue to invest in product development, human resources and equipment. We believe that this is the correct response to more challenging market conditions. This strategy has been successful for many years and we believe it will be successful again. We are hopeful that the lost market share can be recovered through this investment
The fundamental drivers of the Chinese lubricating oil market remain strongly positive. GDP growth, whilst lower than in recent years, remains high. Car ownership is increasing quickly"

6 months ended
28 Feb
2014
12 months ended
31 Aug
2014

Unaudited Unaudited Audited

Revenue 139,724 164,703 319,332
Cost of sales (104,878) (114,014) (232,353)

Finance income 157 86 266

Income tax expense (4,533) (9,163) (13,855)

Items that may be reclassified subsequently to profit and loss

Exchange differences on translation of foreign operations (6) 29 4

28 Feb
2014
31 Aug
2014

Unaudited Unaudited Audited

Property, plant and equipment 2,767 3,393 3,087
Intangible assets -* -* -*

Cash and cash equivalents 207,493 91,391 51,960

256,348 137,780 200,027

Retained earnings 62,925 37,837 51,194
Equity attributable to owners 68,240 44,910 56,515
Minority Interest - - -
Total equity 68,240 44,910 56,515

Borrowings 3,897 - 3,891

3,897 - 3,891

Trade and other payables 51,326 25,193 37,418
VAT payable 109,942 54,599 84,127
Corporate income tax payable 25,710 16,471 21,163

186,978 96,263 142,708

*Amount is less than RMB 1,000

6 months
Ended
28 Feb
2014
Year ended
31 Aug
2014

Unaudited Unaudited Audited

Adjustments for:
Interest expense - - 8
Interest income (145) (84) (274) Warrant charge - 497 496
Depreciation of property, plant and equipment 320 317 639

Increase in trade and other payables 39,737 35,661 82,047

Tax paid - - -

Purchase of property, plant and equipment - (11) (25)

At 31 August 2013 12 620 2,287 - 108 16,066 19,093 - 19,093

Profit for the period - - - - - 23,497 23,497 - 23,497

Transfer to statutory reserve - - 1,726 - - (1,726) - - - Exchange difference - - - - 29 - 29 - 29
Total comprehensive income for the year - - 1,726 - 29 21,771 23,526 - 23,526

Issue of shares -* 1,794 - - - - 1,794 - 1,794
Warrant granted - - - 497 - - 497 - 497

At 31 August 2013 12 620 2,287 - 108 16,066 19,093 - 19,093

Profit for the period - - - - - 35,128 35,128 - 35,128

Transfer to statutory reserve - - - - - - - - - Exchange difference - - - - 108 - 4 - 4
Total comprehensive income for the year - - 2,287 - 108 35,128 35,132 - 35,132

Issue of shares -* 1,794 - - 4 - 1,794 - 1,794
Warrant granted - - - 496 - - 496 - 496

Profit for the period - - - - - 11,731 11,731 - 11,731
Transfer to statutory reserve - - - - - - - - -

Exchange difference - - - - (6) - (6) - (6) Total comprehensive income for the year - - - - (6) 11,731 11,725 - 11,725

Issue of shares - - - - - - - - - Warrant granted - - - - - - - - - At 28 February 2015 12 2,414 2,287 496 106 62,925 68,240 - 68,240

China Rerun Chemical Group Limited ("China Rerun" or the "Company") was incorporated on 30
May 2012 in Cayman Islands. The registered office of the Company is located at 89 Nexus Way, Camana Bay, Grand Cayman Y1-9007, Cayman Islands.
The principal activity of the Company is that of an investment holding company and the principal activities of the Group are production and distribution of lubricating oil for the automotive, agricultural and certain industrial markets in PRC. The principal place of business is at No 99, Zhongsan Road, Sa'ertu district, Daqing, Heilongjiang Province, PRC.
These condensed financial statements present information about the group and are set out in Renminbi
(''RMB'') of the PRC, which is the functional currency of the group.

These condensed financial statements have been prepared on the basis of the accounting policies set out in the last audited consolidated financial statements, which are in accordance with International Accounting Standard 34 Interim Financial Reporting.
The interim report is unaudited and does not constitute the company's statutory accounts for the six months ended 28 February 2015.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may subsequently differ from those estimates.

A company is deemed to be resident in PRC if it is established in PRC or its effective management is in PRC. Residents are taxed on their worldwide income. Non-residents are taxed on PRC source income and income effectively connected with their establishments in PRC.
China Rerun is regarded as resident for the tax purposes in Cayman Islands. There are no applicable taxes in the Cayman Islands for the company.
The Group is regarded as resident for the tax purposes in PRC and subject to national income tax at
25%.
The taxation charge is based upon the expected effective rate for the period ended 28 February 2015.

Details of the warrants outstanding at 28 February 2015 are as follows:
Date of grant: 15 Oct 2013

Basic profit per share is calculated by dividing the profit for the period attributable to equity
shareholders of the company by the weighted average number of ordinary shares in issue during the period.

Profit attributable to equity holders of the
company 11,731 23,497 35,128

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares in the company are share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares) based on the monetary rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have issued assuming the exercise of the share options.
Weighted average number of ordinary shares (diluted):
Weighted average number of shares in issue

Unaudited Unaudited Audited

(thousands) 255,810 254,963 255,390
Effect of conversion of warrants 229 1,921 2,251

At the end of period 256,039 256,884 257,641

The issued share capital of the company as at 28 February 2015 is RMB 12,410 fully paid. There were no movements in the issued share capital of the company in the current interim reporting period.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. All shares rank equally with regard to the company's residual assets.

The company made several large payments, totaling RMB 120m in 2014, intended to settle the group's various tax liabilities. Due to the method of settlement, which was subsequently reversed, the transaction was recorded as a director's loan. All balances have been settled after the Period end.
At 28 February 2015, the amount recorded as due from Mr Wu was RMB5.36m

Since 1 March 2013, the Group commenced to trade (taking over lubrication oil business from Daqing Runyuan for nil consideration) and it has not operated its taxation affairs in accordance with the legislation within the PRC. All relevant tax returns were filed incorrectly. These taxation procedures mean that substantial liabilities, corporation tax and Value-added taxes (VAT), are accruing (and being reflected in the Statements of Financial Position) but are not being settled by the Group. It is unclear whether any penalties or interest will be charged by the PRC tax authorities when the liabilities are eventually settled.
Except for the above issues, the Group had no significant contingent assets or liabilities at any of the financial position dates.

distributed by