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By Zhu Jiajun journalist on probation
As one of the excellent Chinese listed companies, Sinochem International has always been the focus of financial media since it went to public. From the strategic transition of industry to the employment of GE administers with high pay, from taking the lead among domestic A share companies to invite international rating agency to grade its corporate governance, to firstly recruiting an accounting firm in pubic, everything Sinochem International has done became the hot topic of the market. In addition, the company has also witnessed fast development of business performance. With stable running, it recorded a EPS of 0.47 Yuan in 2003, which is the best ever. And in the first quarter of 2004, the company again made wonderful performance with a year-by-year increase of net profit doubled. "Seizing opportunities, overcoming challenges, shareholders' value and sustainable enhancement" is a summon-up for the development of Sinochem International since going to the public. Therefore, in hope of exploring its successful experience, we paid a visit to Sinochem International.
Strategic relocation to Shanghai
The relocation to Shanghai in 2001 is considered to be a strategic act, a landmark of Sinochem International in its history. People there bestowed this act with two meanings as followed:
First of all, originally taking chemicals trade as the major business, the company has its most objective markets and clients in East China and Shanghai. And Yangtze River Delta and Zhujiang River Delta is still expected to take the lead in the speedy development of Chinese economy. Therefore, in order to get closer to the market and clients, to share the fruits brought by the speedy economic growth of East and South China, Sinochem International finally made solid and progress to have moved to South in 2001, which was the set strategy soon after the listing of the company.
Secondly, to start with, the company was planning to explore a set of mechanism of market-oriented business administration, and to establish a regular modern corporate system. To move to Shanghai, Chinese center of commerce, trade, shipment, and finance with the highest degree of market orientation, will enable the company to get itself well accustomed to the market economy, to speed up the establishment of market-oriented business mechanism, and to realize the transition from passively making business to impassively making business, from following the government to following the market and from relying on clients to attracting clients. The rapid progress in 2002 and stable development in 2003 of Sinochem International have both fully proved the correctness of the strategic movement to South.
Transferring to comprehensive service provider of chemicals
The strategic plan of Sinochem International is: while maintaining the advantage of chemicals trade and distribution, to extend towards the upstream which is fine chemicals production and R&D, and the downstream as well which is chemicals logistic allocation, to establish the company's own production entity, an advanced industrial platform and the industrial chain of vertical integrity, so that they could turn from a traditional trader to a comprehensive service provider of chemicals. The board of directors have got perspective consideration over this role revision.
First of all, the speedy development of Chinese economy is bound to drag the fast growth of chemical raw material industry. For example in China, the consumption of ethylene per capita is only 4.9 kilogram, one-third of the world average level and one-twentieth of the advanced country. This means there is huge spaces for Sinochem International in Chinese chemicals industrial market, where sever challenges from WTO and various chemical multinationals are also unavoidable. Since listed, Sinochem International has kept making investment in the R&D of fine chemicals, which is a promising business enjoying high added value of high-tech, huge market demand and going well with the competitive edge and strength of the company. With the possession of the patent and IPR on the chemicals and the productive technology of industrial enlargement, the company's products is expected to have a promising prospect of sales.
Secondly, the world oil and chemical giants such as Shell, Exxon, BP, BASF and Taiwan Plastic have all established their factories in China. Due to the limitation of conditions for one or another, they are in need of several powerful chemical service provider to offer them services integrating the supply of raw materials, the products distribution and the professional logistics, which is in particular hard to enter due to high industrial barriers. Feeling the pressure from safe and healthy environmental protection, international marine organizations continue to update the industrial standards, thusly causing a patch of shipment tools with low standards been sifted out. Under this context, no wonder that Sinochem International, the company with perfect network of distribution and the certification of many international logistics agencies, becomes the first choice for those giants to develop their business in China.
Lastly, to create a chemical chain with integrity will better realize the integration of the company's inner resource, avoid the system risk caused by the market fluctuation of the trade and economic period, and further sharpen the core competitiveness of the company. At present, the trade distribution creates most of the income of major business with low gross margin, while chemical production and logistics bring relatively higher gross margin. Moreover, distribution, production and logistics can jointly create a good effect of synergy and mutual advantage supplement. According to the long-range plan of Sinochem International, in the coming years, chemicals, production and logistics will bring most of the profits for the company, promoting the company to realize strategic breakthrough and the perfection of corporate governance in the next year.
The corporate governance of Sinochem International is considerably regular and perfect, which can be reflected from aspects as followed:
Engaging S&P to lead grading. With international rating agencies getting involved, to test the company's corporate governance level according to international standards is conductive for the company to find out the distance and insufficiency, so that they could keep improving their corporate governance, thusly promoting the development of their international businesses and offering favorable conditions for them to enter into strategic alliance with more famous conglomerates.
Sinochem International is the first among over 1000 Chinese A share listed companies to have asked international independent rating agency to lead a grading, showing its confidence in its corporate governance and the hope of making sustainable improvement according to international standards.
In terms of managers system, Sinochem International has successively employed three administers from the Chinese branch of GE and a group of elites from the circle of chemical R&D, production and logistics taking crucial position in the company. This is also another proof of the determination of the board of directors in improving the corporate governance and the company's attraction to social talents with its regular operation and strategic prospects.
Here are some statistics indicating the shareholders' returns: apart from the allocation scheme of presenting five shares per ten shares for successive two times, the company has issued cash dividends for five years in row, adding up to the value more than the face value which is 1 Yuan. In addition, the company also owns the net assets at the current price of over 3 Yuan per share. Since the company went to the public on March 2000, the appreciation range of its stock has kept above 40%, and 57% more in contrast with the SSE index. Investors of Sinochem International, both tradable and non-tradable shareholders have gained remarkable returns.
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