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Lubricant oil producer plans IPO
By Wang Ying (China Daily)
Updated: 2004-12-30 08:53

Beijing Monarch Petroleum Chemical Co Ltd, China's largest privately-owned lubricant oil producer, plans to list on an overseas stock market by the end of 2006.

Li Jia, general manager of Monarch Lubricant Oil, told China Daily about the listing plan in an interview, but did not specify to which stock market the company will go. The company is still comparing stock exchanges, including Hong Kong, London and New York.

Monarch's listing has attracted interest from several foreign strategic investors, Li said, but declined to name any possible partners.

Proceeds from the listing will be used to enhance the company's delivery network and improve its product research and development by establishing China's first lubricant oil research centre, Li said.

"Through the improved delivery information network, we expect to monitor the storage of every individual distributor nationwide, in order to guarantee a deft control over the oil supply and distribution," Li said.

Currently the company has three production units nationwide - in Beijing, Wuxi in East China's Jiangsu Province, and Xiangfan in Central China's Hubei Province, and operates over 1,400 distribution centres and 47,790 retail outlets, according to company sources.

The company attaches great importance to sales and marketing promotion by sponsoring influential sports events and through television advertising.

Monarch Lubricant Oil has been selected as the designated lubricant oil for the Chinese team in the upcoming automobile race Paris Darkar Rally from December 31 to January 16.

"We expect to establish our brand worldwide by participating in these internationally influential sporting events," Li said.

The company captured a winning bid of US$4.3 million for a coveted 15-second advertisement on CCTV (China Central Television) earlier this month.

"We have benefited a lot from television advertising and sports marketing strategies," Li said.

Monarch's annual sales volume reached 2.15 billion yuan (US$259 million) this year, compared with 1.26 billion yuan (US$151.8 million) last year, company statistics show.

Next year the company is expected to see an annual sales volume of 3.2 billion yuan (US$385.5 million), indicating a consecutive annual growth of approximately 1 billion yuan (US$120 million), Li said.

Li attributed much of Monarch's stunning performance to its persistent efforts in product innovation.

The lubricant oil company plans to establish the first lubricant oil research and development centre in China after the stock market listing, Li told China Daily.

"The centre will co-operate with foreign industry technical strengths, to promote Monarch's research and development, and to sharpen the competitive edge of China's lubricant oil industry on the international stage," Li said.

Currently, Monarch annually injects 2 per cent of its aggregate sales revenue into product research and development, and is expected to launch a new lubricant oil product that saves energy and is more environmentally sensitive. The product will be produced in co-operation with Japan and will be released on March 15 - China's Consumers' Day, company sources said.

To meet the growing demand in China's lubricant oil market, Monarch plans to further enhance its production and sales presence in the country, Li told China Daily.

The company has mapped out two lubricant oil production units, each with an annual production capacity of 100,000 tons. The two factories are expected to begin operation in Xi'an, capital of Northwest China's Shaanxi Province and in South China's Guangdong Province next year, Li told China Daily.

The company has invested 80 million yuan (US$9.6 million) into the Xi'an factory, and signed a construction contract with the local government on Tuesday, company sources said.

The establishment of regional factories aims to improve oil delivery efficiency to customers, Li said.

"For examples we need more than 10 days to produce and transport products from the Beijing factory to our customers in northwestern China's Xinjiang Uygur Autonomous Region, but now with the completion of a Xi'an factory next year, five days will be sufficient," Li said.

"We expect to reach an annual production capacity of 1 million tons by 2009, from the current 300,000 tons," Li said.

Li said Monarch is not in a competitive relationship with China's two State-owned lubricant oil giants - Kunlun Lubricant Oil of PetroChina and Great Wall of Sinopec.

"We are not performing on the same stage. We seize every possible corner of this huge potential market in China, including southwestern China's Tibet Autonomous Region and northwestern China's Xinjiang Uygur Autonomous Region, to avoid heated competition in big cities," Li said.

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