Jiutian Chemical Group plans to spend RMB1.6 billion ($296.96 million) in a bid to broaden its product offerings and gain better control over its supply chain.
The Singapore-listed company, based in China’s Henan Province, is now in the production of dimethylformamide (DMF) as well as methylamine, sodium hydrosulfate and dimethylacetamide (DMAC).
Jiutian plans to expand into the production and sale of synthetic ammonia by tapping on the right to undertake such a project in Henan now held by Anyang Chemical Industry Group, deemed as its controlling shareholder.
In its SGX announcement on Jan 13, Jiutian says it will engage an independent professional valuer, if necessary, to help value the proposed synthetic ammonia project before putting the deal in front of its shareholders to approve at an EGM to be called.
Jiutian plans to fund the investment via RMB480 million in internal funds and borrow the remaining RMB1.12 billion.
Synthetic ammonia is a key feedstock used in the production of DMF. Jiutian says one of its key operating units, Anyang Jiutian is one of the world’s largest producers of DMF, used in the production of acrylic fibers and plastics.
By making its own synthetic ammonia, Jiutian is aiming for better efficiencies to give it an advantage in cost and quality.
At the same time, it can reduce its reliance on third parties for supply, and instead, sell excess production elsewhere.
Synthetic ammonia is used by the chemical synthesis industry in plastics and polymers manufacturing, metallurgy
In its business update for its 3QFY2023 ended Sept 30 on Nov 7, Jiutian reported a net loss of RMB68.6 million, from earnings of RM93.5 million recorded in the year-earlier period. Sales in the same period plunged by 85% y-o-y to RMB80.2 million.
The company attributed the poorer showing to a decrease in both sales volume and average selling prices of DMF, its main product.
The poorer sales, in turn, were because of “industry-wide softening of demand” due to the slower-than-expected economic recovery in China. Additional capacity introduced by a new competitor since 4QFY2022, Jiangxi Xinlianxin Chemical Industry, put further pressure.