CMP Paints Reports Strong Financial Q1 2024 Results and Announces Transfer of Fixed Assets from Subsidiary

On July 31, the ship coating giant, CMP Paints, released its earnings report for the first quarter of the 2024 fiscal year (April 1, 2023 - June 30, 2023). During the reporting period, the company's sales were ¥26.489 billion (approximately RMB 1.33 billion), an increase of 24.7% compared to the same period last year.

In terms of profits, in addition to rationalizing sales prices that are commensurate with manufacturing costs and expanding the sales of high value-added products, profitability also recovered as overseas raw material prices softened. Operating profit was ¥2.074 billion (a loss of ¥450 million in the same period last year) and net profit attributable to shareholders was ¥1.729 billion (a loss of ¥461 million in the same period last year).

In the first quarter of the 2024 fiscal year, CMP Paints' main ship coating business benefited from an increase in shipments to China and South Korea and the rationalization of sales prices commensurate with manufacturing costs, resulting in an overall increase in sales. In the repair ship business, global demand, including environmental requirements, remained strong, and sales progressed smoothly due to the rationalization of sales prices and the sale of high value-added products, mainly in Europe.

In the industrial coating business, sales increased steadily due to the steady development of heavy anti-corrosion coatings in Southeast Asia and Japan. In the container coating business, sales decreased due to intense price competition and the suppression of low-profit order cases.

It should be noted that on the day of the earnings report release, CMP Paints also announced a notice regarding the transfer of fixed assets from its subsidiary through a merger. At a board meeting held on July 31, 2023, CMP Paints made a decision to transfer the fixed assets held by its subsidiary through a merger.

It is understood that among the two factories owned by CMP Paints Shanghai, the second factory mainly produces container coatings. Since 2022, due to sluggish demand and intense price competition, orders have been suppressed, resulting in a sudden decrease in production volume and a decrease in operating rate. In this situation, the local government enterprise, Shanghai Anting Industrial Economic Development Co., Ltd. (hereinafter referred to as "Anting"), a shareholder of CMP Paints Shanghai, requested the sale of the land and buildings of the factory. In response to this, CMP Paints Shanghai considered selling the factory in view of the future demand trends and production efficiency of container coatings, and held multiple negotiations with Anting, ultimately reaching an agreement on the transfer price and other issues. The transfer price was based on the appraisal evaluation of two third-party organizations commissioned by CMP Paints Shanghai and Anting, respectively.

Regarding the production part of the same factory, the production of other factories of CMP Paints and the manufacturing commission of external companies can cover it. CMP Paints Shanghai will also continue to provide products according to demand and maintain its business policy in the future.

The report shows that the fixed assets being transferred, "Shanghai Second Factory," has a land use right of 46,751 square meters and an ownership of building area of 23,282 square meters, located at No. 3021 and 3031, Jia'an Road, Jiading District, Shanghai. The transfer price is approximately ¥153 million.

With the transfer of the fixed assets, CMP Paints expects to include approximately ¥2.5 billion in special gains from the sale of fixed assets in its joint settlement for the fourth quarter of the 2024 fiscal year.