Lee & Man Chemical Company Limited Announces Robust 2025 Annual Results

Key Financial Highlights

• Revenue: HK\$3,755 million, a slight decrease of 5.0% year-on-year.
• Profit for the Year: HK\$558 million, a significant increase of 15.8% year-on-year, driven by lower costs of raw materials and energy.
• Gross Profit Margin: Strong recovery to 34.5%, up 5 percentage points.
• Net Profit Margin: Improved to 14.9%, up 2.7 percentage points.
• Dividend: Proposed final dividend of HK14 cents per share; total dividends for 2025 reached HK33.5 cents per share (2024: HK29 cents). The final dividend is subject to shareholder approval at the upcoming AGM.
• Basic Earnings Per Share: HK67.7 cents (2024: HK58.5 cents).

Business and Segmental Performance

Chemical Segment

• Revenue from chemical operations was HK\$3,752 million, down 4.4% from the prior year, reflecting modest price declines for most chemical products due to cautious market sentiment and weaker manufacturing activity in China.
• Despite weaker revenue, gross profit rose, benefiting from a significant drop in energy and raw material costs.
• Average selling prices (per ton) for key products:
  • Chloromethane products: RMB2,370 (methylene chloride, -17%), RMB2,140 (chloroform, -19%)
  • Caustic soda: RMB990 (+5%)
  • Polytetrafluoroethylene (PTFE): RMB43,600 (-3%)
  • Hydrogen peroxide: RMB710 (-17%)
• Production volumes:
  • CMS products: 400,000 tons
  • Caustic soda: 610,000 tons
  • PTFE: 8,000 tons
  • Hydrogen peroxide: 390,000 tons
• Full-load production was maintained despite adverse market conditions, with efforts to improve efficiency and upgrade processes for future competitiveness.

Property Segment

• Revenue from property operations reached HK\$3.3 million, with over 90% of RIVERDALE residential units sold (11 units remained unsold at year-end).

Cost Management and Efficiency

• Selling & distribution costs decreased to HK\$185 million (-HK\$18 million YoY), mainly due to lower packaging and transportation costs. These costs represented 4.9% of revenue, down from 5.1%.
• Administrative expenses held steady at HK\$272 million (7.2% of revenue).
• Research and development costs rose to HK\$169 million (4.5% of revenue) as the Group developed new products and optimized process technologies.
• Finance costs fell to HK\$17 million (-HK\$5 million YoY), reflecting reduced interest expenses after bank borrowing repayments.
• Net exchange loss of HK\$12 million, attributable to Renminbi fluctuations in 2025.

Balance Sheet and Financial Position

• Net assets: HK\$6,331 million (2024: HK\$5,936 million).
• Current ratio: 1.24 (current assets HK\$1,261 million; current liabilities HK\$1,015 million).
• Net debt: HK\$351 million; net debt to equity ratio at a low 5.55% (2024: 6.03%).
• Strong liquidity: Bank deposits, balances, and cash totaled HK\$163 million at year-end.
• Capital commitments: HK\$118 million contracted but not yet provided for the acquisition of property, plant, and equipment.

Operational Efficiency Metrics

• Inventory turnover: 87 days (improved from 90 days).
• Debtors’ turnover: 36 days (up from 29 days, still within normal credit terms).
• Creditors’ turnover: 26 days (up from 21 days, matching supplier credit terms).

Strategic Developments and Outlook (Potentially Price Sensitive)

• Dividend Policy: The payout ratio remains high at 49.6%, signaling confidence in cash flow and financial stability.
• International Expansion: Signed a land sublease in Ho Chi Minh City, Vietnam, to build its first overseas production facility for chloride-related products. This facility is expected to commence trial production by the end of 2027, positioning Lee & Man to capitalize on growing Southeast Asian demand.
• Product and Capacity Upgrades:
  • The vinylene carbonate (VC) production line at Jiangsu Changshu has started operations and is already contributing to profits.
  • A high-end fluoropolymer production line is under construction in Jiangxi, targeting future sales growth and market expansion.
• Commitment to Sustainability: The Group is actively implementing plans for energy efficiency, water conservation, green energy adoption, carbon emission reduction, and green factory development.
• Management’s Focus for 2026: Accelerate automation and intelligent upgrades, optimize cost structures, and pursue high-quality, sustainable growth aligned with China’s economic policies and market trends.

Dividends and Shareholder Information

• Proposed Final Dividend: HK14 cents per share for 2025 (subject to AGM approval; record date: 11 May 2026; expected payment: 22 May 2026).
• AGM: Scheduled for 29 April 2026. Shareholders must be registered by 23 April 2026 to vote and by 5 May 2026 to receive the proposed final dividend.

Other Noteworthy Information

• No purchase, sale, or redemption of company securities during the year.
• Full compliance with the Hong Kong Code on Corporate Governance Practices.
• The Audit Committee, composed of all independent non-executive directors, reviewed the results and internal controls.

Potential Impact on Share Price

The combination of a robust profit increase, improved margins, prudent cost management, and a sustained high dividend payout is likely to be viewed positively by investors. The announced expansion into Vietnam and the commencement of new production lines (VC and fluoropolymer) are significant strategic moves that could drive future growth and diversify revenue streams, potentially boosting share value. The company’s commitment to sustainability and efficiency further strengthens its long-term investment appeal.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consult with professional advisors before making any investment decisions. The information provided is based on the 2025 annual results announcement of Lee & Man Chemical Company Limited and may be subject to change. Neither the author nor the publisher accepts any liability for actions taken based on this article.

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