The Group is committed to continuously explore market opportunities to provide operations management services and expand its business through acquisitions and joint ventures. This transaction is in line with the Group's expansion strategy to capture the potential growth of coke and refined chemicals market and can strengthen the Group's leading position in the market. Given the six Hongye Chemicals Enterprises' production capacity, scale of operation and the market share in their respective regions and considering the Group's expansion plan, the Group believes that the transaction is conducive to the future business expansion of the Company. Moreover, by operating two green factories recognized by the Ministry of Industry and Information Technology of China, the Group can demonstrate through this transaction how to promote industry consolidation and improve coking enterprises by enhancing outdated production facilities. It can further promote the Group's image by taking a leading role in consolidating the standard of environmental protection in the coke industry. It is expected to create synergy with the Group's existing business.
Since July 2019, China Risun has been providing operations management services for the six Hongye Chemicals Enterprises and has been fully responsible for their production, management and operation. The six Hongye Chemicals Enterprises previously were sizable enterprises with a complete industrial chain under the chemical sector of Hongye Group, and they are principally engaged in the production of coke and coking products as well as refined chemicals supply.
After the completion of this transaction, China Risun will be able to expand its geographical reach with the operations and management services business capabilities, and increase the total production of coke and coking products. The Group currently has an annual production capacity of 150,000 tons of caprolactam in its Cangzhou Production Base. The Group's annual production capacity of caprolactam is expected to increase to 350,000 tons by consolidating the annual production capacities of the six Hongye Chemicals Enterprises. (Note: Caprolactam is one of the important organic chemical raw materials. The main purpose is to generate polyamide slice PA6 through polymerization, which can be used in high-end fashion, high-end plastic products, tires, food and drug preservation, outdoor protective equipment, fishery, parachutes, Ropes and other fields). The six Hongye Chemicals Enterprises are based in the Shandong province of China, which is one of the major sales locations of the Group where many of its customers are based. The Group can sell the products manufactured by the six Hongye Chemicals Enterprises to the Group's customers directly from the new production locations which can lower the transportation costs and increase the Group's competitive advantages. Furthermore, the Group can further procure raw materials by economics of scale and enlarge its price spread between its products and its raw materials. This can achieve a higher gross profit margin for the coke products as well as the refined chemical products.
About China Risun Group Limited
China Risun Group Limited is the world's largest independent producer and supplier of coke by volume in 2019, according to Frost & Sullivan. China Risun is an integrated coke, coking chemicals and refined chemicals producer and supplier in China and holds leading positions in a number of refined chemicals sectors both in China and globally. The vertically-integrated business model together with more than 25 years of experience in the coal chemicals industry production chain has enabled China Risun to further tap the downstream refined chemicals markets and hence diversify its income sources and create greater value.
China Risun has been listed on the main board of the Hong Kong Stock Exchange since March 2019 and is now included in various index series, including Hang Seng Composite Index, Hang Seng Stock Connect Hong Kong Index, Hang Seng Stock Connect Hong Kong MidCap & SmallCap Index, Hang Seng Stock Connect Hong Kong SmallCap Index, Hang Seng SCHK Mainland China Companies Index, and Hang Seng SCHK ex-AH Companies Index. For more details, please visit http://www.risun.com/En/
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