BY TEH SHI NING

CHINA'S stepped-up efforts to curb industrial pollution wreaked by the intensity of its industrialisation, especially in the lead-up to this year's Beijing Olympics, has been good news for its citizens, who can now breathe a little easier.

It is good news too for China-based Sino-Environment Technology Group, which describes itself as an 'environmental protection and waste recovery solution provider'.

As China's State Environmental Protection Administration (SEPA) rolls out legislation with more economic bite than before, power producers are among those who have had to seek out parties such as Sino-Environment to help treat or manage their industrial waste gases.

David Tan, chief financial officer of Sino-Environment, explained that a core part of the firm's business involves dealing with air pollution. The company has the technology to treat industrial emissions such as volatile organic compounds (VOC), remove sulphur from the sulphur dioxide that coal-fired power plants emit, as well as eliminate dust from the emissions of cement plants, steel mills and coal depots.

Recent efforts by the Chinese government to clean up the air, after its earlier push to combat water pollution, have thus benefited Sino-Environment greatly.

It has been seven years since the fully China-based group was incorporated in Singapore in 2001, and over two years since its listing on the Singapore Exchange in March 2006.

These years have seen much growth and also a gradual diversification into new business segments. Its rapid growth has led to it being named one of the top 10 internationalising companies in the recent Singapore International 100 rankings.

Its latest financial results also tell that story of growth. In Q2, Sino-Environment posted a 31.1 per cent increase in net profit to 57.6 million renminbi (S$12.6 million), on the back of a 73.9 per cent rise in revenue to 190.6 million renminbi. First-half revenue nearly doubled to 358.9 million renminbi, generating a net profit of 113.5 million renminbi, up 56.3 per cent from the previous year.

Sino-Environment's first-mover advantage in the efficient recovery of toluene, a solvent widely used in the chemical, petrochemical, synthetic leather and textile industries, continues to boost its position as a market leader in treating and recovering VOCs from industrial waste gas.

The high recovery rates of the patented VOC automatic recycling device Sino-Environment owns helps its customers kill two birds with one stone: meet the regulatory requirements and recover as much toluene as possible, thus saving costs.

Earlier this year, the company opened a new VOC plant in Fujian. Plans to move this business segment forward include collaboration with various institutions to develop technology to treat and recover other components of industrial waste gas, such as ethylene, methane, yellow phosphorus and nitric acid. The group's wastewater treatment business segment largely exists as a support ancillary to its core waste gas treatment activities, but opportunities in this area have also arisen in Chongqing.

Sino-Environment is also working on a few energy saving and waste management projects, collaborating with a couple of German institutes on processes to produce renewable energy from organic waste.

What is anticipated to really drive Sino-Environment's growth going forward, however, is the group's expansion into desulphurisation (deSOx) and denitrogenation (deNOx), which basically involves removing sulphur and nitrogen from sulphur dioxide and oxidised forms of nitrogen that the coal-fired power plants produce.

In April, the company caused a bit of a stir with a 12 per cent jump in its share price. That turned out to be due to Sino-Environment having clinched rights from a Japanese company to manufacture deNOx catalysts for coal-fired power plants. The catalysts can be used in-house or sold to third parties. The deSOx and deNOx treatments are expected to be strong drivers of growth because the process can be performed off-site and is not constrained to plant capacity.

Legislation will help propel demand for such catalysts too, as China's 11th five-year plan (2006-2010) specifically requires that power plants be fitted with deSOx facilities.

As the manufacturing industries in China continue to flourish, Sino-Environment expects to benefit. Mr Tan said: 'Our growth will continue to be driven not just by legislature, but also by an increasing awareness of the social impact of pollution in general.'

The current economic downturn has thrown a dampener on most companies' growth prospects however, and Mr Tan said that Sino-Environment has felt it too. 'We have seen a greater reluctance to spend, and the deferment of capital expenditure by some of our existing and potential customers,' he said. Hence, growth may be slower than it has been in previous years, although it is still expected to be positive.

Hesitation to spend on the part of customers may be a short-term challenge facing companies across industries, but Mr Tan sees the longer-term challenge as arising from a different quarter altogether, that of human resource supply.

'Our biggest challenge by far is a skilled labour force in our primary market, China,' he said.

The group has a wide presence in PRC, in the coastal provinces of Shandong, Jiangsu and Fujian, as well as the central and western provinces such as Sichuan, Yunnan and Xinjiang.

Mr Tan said that there is still much room for organic growth within China itself, and that Sino-Environment intends to continue investing in both plant and human capital there.

But the group is now also exploring the potential of other markets in the region, such as India, Vietnam and Indonesia - where rising industrialisation will soon necessitate waste management.

This article was first published in The Business Times on November 10, 2008.