Kingboard Chemical posts record 1H net profit

Kingboard Chemical Holdings Ltd. (0148.HK) posted record first-half earnings Monday on strong demand for its laminate products.

Its net profit for the six months ended June 30 almost tripled on year to HK$545.5 million, from HK$186.6 million. Revenue during the period was HK$3.06 billion, up from HK$1.85 billion.

Diluted earnings per share was 79.8 HK cents, up from 32.4 HK cents a year earlier.

The company recommended the distribution of one bonus warrant for every 10 shares held. Holders of the warrants will have the right to subscribe to Kingboard shares at HK$20.0 a share before the end of 2006.

Kingboard also doubled its first-half dividend to 10 HK cents a share.

"We have been investing in improving capacity and efficiency to maintain high growth in the coming three years," Director Chadwick Mok said at a media briefing.

By the end of the year, Kingboard's production capacity for paper laminates is expected to increase 36% on year to 3.4 million sheets, while that for glass epoxy laminates will rise 57% to 2.2 million sheets.

Additionally, its manufacturing capacity for glass yarn, a key material for laminates, will double to 4,000 metric tons by the end of the year.

In the first half of 2004, the company derived around 81% of its earnings from laminate products, while its printed circuit board business contributed 8% and chemical products accounted for 9%.

Looking ahead, Chairman Paul Cheung said laminate product prices are expected to remain stable in the second half of the year, after having risen to as high as HK$190 to HK$120 a sheet in the first six months.

He said a shortage of glass yarn would likely keep laminate prices firm until the supply bottleneck eases around the second half of next year.

Cheung also said Kingboard had sought to buy German laminate maker Isola AG for around US$150 million. However, it was acquired instead by U.S. private equity fund Texas Pacific Group and California-based Redfern Partners in April for a higher price.

Cheung attributed the failure to buy Isola to the offer price and concerns over raw material supplies.

"We will look for similar opportunities in the future... but we aren't in M&A talks with any potential parties now," he said.

At the end of 2003, Kingboard had a 7% share of the global laminate market.

Mok said if the company's second-half revenue approximates that of the first half, Kingboard's market share would likely rise to 9% by the end of this year.