Yip's Chemical, a producer of solvents, coatings and lubricants on the mainland, said its net profits for the first half rose 2 percent, boosted by the strong business growth in the raw solvents division.

The company's net earnings soared to HK$158 million, while its turnover surged 31 percent to HK$3.08 billion for the six months that ended Sept 30.

Chairman Tony Ip said the global financial downturn and external factors, including the credit crunch, decreasing demand, increasing operating costs, surge in raw material prices and appreciation of the yuan, have brought challenges to the company in the first half.

"We expect to a more challenging operating environment in the second half, due to the credit crisis and weaker global economy amid the global financial turmoil," Ip said, noting that more industries may close down or face difficulties in the coming three to six months.

To better tackle the challenges ahead, the chemicals producer plans to focus more on its core business and slow down the progress of future acquisitions, Ip said in a news conference yesterday.

"We will maintain our strong cash flow under the current market situation," Ip added. The firm's gearing ratio amounted to 1 percent in September, while it further trimmed to zero by the end of November. The company currently has HK$140 million net cash on hand.

The turnover of the company's solvents division, accounting for 60 percent of the core business, reached a record high of 40 percent to HK$1.9 billion in the first half, benefiting from the competitive advantage in economies of scale.

Director and Chief Executive Officer Kenny Wong said the company will continue its expansion plan in Jiangsu's Taixing Jinjiang Chemical Industry, which it acquired in February, aiming to add 120,000 tons acetate solvent production in the 2009 fiscal year and provide a platform for business development in eastern China.

The company's production capacity of raw solvents in southern China has already reached 310,000 tons a year.

Shares of Yip's Chemical ended yesterday's trading at HK$2.15, advancing 4.88 percent, or HK$0.1.

(HK Edition 12/04/2008 page2)