During a period of declining performance, the company expands against the trend, with Liu Hua Co., Ltd. investing an additional 289 million yuan to increase its hydrogen peroxide project.

China Economic Journal Reporter Chen Jiayun Beijing Report

Against the backdrop of continuous performance decline, LiuHua Co., Ltd. (600423.SH) still chooses to invest in expanding capacity.

Recently, LiuHua Co., Ltd. announced that it plans to raise 289 million yuan to build a 200k-ton/year fully acidic fluidized bed hydrogen peroxide project. After commissioning, the total hydrogen peroxide production capacity will increase by over 125% compared to the current level.

A LiuHua Co., Ltd. spokesperson told the China Business Journal that this project layout is not blind expansion but a strategic arrangement based on the company’s long-term development.

Profit Decline

LiuHua Co., Ltd. mainly produces and sells hydrogen peroxide, with net profit declining for two consecutive years.

In 2024, LiuHua Co., Ltd. achieved operating revenue of 165 million yuan, a year-on-year increase of 16.20%; net profit attributable to the parent was 30.17 million yuan, down 58.81% year-on-year.

In 2025, the company’s performance decline worsened, with an estimated full-year revenue of 137 million yuan, a decrease of 16.67% year-on-year; net profit attributable to the parent was 6.28 million yuan, down 79.19%; non-recurring net profit was 6.02 million yuan, down 82.12%.

The main reason for the worsening performance is the simultaneous decline in both volume and price of the main product. In 2025, LiuHua’s hydrogen peroxide output (adjusted by 27.5%) was 155.3k tons, a decrease of 8.21% year-on-year; the sales price of 27.5% hydrogen peroxide was 810.07 yuan/ton, down 12.90% year-on-year. The gross profit margin dropped from 23.81% in 2024 to 5.99%.

LiuHua’s analysis indicates that the sales price of 27.5% hydrogen peroxide decreased by 12.90% year-on-year, and the ex-factory unit price fell by 17.98% year-on-year, with a decrease of 148 yuan per ton, leading to a reduction in gross profit of about 21.59 million yuan. According to Baichuan Yingfu statistics, the nationwide average price of hydrogen peroxide in 2025 was 694 yuan/ton, down 13.54% year-on-year; the industry’s average profit level was at -21 yuan/ton. In comparison, LiuHua’s ex-factory price for 27.5% hydrogen peroxide (tax included) reached 764 yuan/ton (tax-exclusive 676.07 yuan/ton), about 10% higher than the national average.

Tang Shasha, an analyst at Zhuo Chuang Information, told reporters that the average market price of hydrogen peroxide in 2025 declined significantly mainly due to oversupply and overall sluggish downstream demand.

LiuHua stated that in 2025, the company’s profits are affected by three main factors. First, the overall industry trend weakened; in the first half of 2025, the domestic hydrogen peroxide industry generally suffered losses, although there was a phased turnaround starting in October, the industry’s profit for the year remained negative, and overall market prosperity was lower than last year. Second, regional competition patterns changed, with an additional 1.25 million tons of hydrogen peroxide capacity in Guangxi, concentrated in the Beibu Gulf area, which weakened the company’s regional advantages for paper and new energy customers. To compete, some sales shifted to remote areas like Guizhou, increasing transportation distances and costs, squeezing overall gross margins. Third, hydrogen peroxide output decreased, raising unit product costs. Although the decline in sales prices was roughly in line with the national average, the company’s cost control was better than industry average, and prices in South China remained above the national average, allowing the company to maintain slight profitability despite the industry-wide losses.

Countercyclical Expansion

Amid poor performance, LiuHua announced plans to expand capacity.

On March 27, the company’s board approved a project to build a 200k-ton/year fully acidic fluidized bed hydrogen peroxide plant, with a total investment of 289 million yuan, a construction period of 24 months, fully funded by self-raised capital.

A LiuHua spokesperson said that responding to the national policies on eliminating outdated capacity and seizing market gaps created by process upgrades is the primary reason for this new project.

The spokesperson added that relevant national departments have issued documents on eliminating outdated capacity, explicitly stating that by 2029, traditional acid-base alternating fixed-bed processes in the hydrogen peroxide industry will be fully phased out. As a result, capacities using outdated processes will gradually exit the market, releasing significant market capacity gaps.

On March 12, 2024, the Ministry of Emergency Management issued the “Catalogue of Technologies, Equipment, and Processes for Eliminating Outdated Dangerous Chemical Production,” which explicitly classifies the acid-base alternating fixed-bed hydrogen peroxide process as prohibited, requiring new (expanded) projects to avoid using it, and existing projects to be transformed within five years. The document mandates replacing outdated processes with fluidized bed, fully acidic fixed-bed, or other advanced hydrogen peroxide production technologies, with priority given to fluidized bed technology.

LiuHua stated that the capacity expansion project will adopt the industry’s advanced “fully acidic fluidized bed” technology, aligning with the latest national safety, environmental protection, and industrial upgrade policies. This approach can reduce production costs, improve product profit margins, and seize opportunities from industry capacity restructuring.

Targeting Downstream Demand

In addition to policy factors, increasing demand from the Guangxi regional paper industry, which drives the downstream need for hydrogen peroxide, is another consideration for LiuHua’s project.

A LiuHua representative explained that the main downstream application of hydrogen peroxide is in the paper industry, mainly for pulp bleaching. In recent years, the paper industry has shown a trend of “white paper moving south,” with many leading paper companies establishing large-scale production in Guangxi, boosting regional hydrogen peroxide demand.

The person added that Guangxi currently hosts major paper companies like Sun Paper and Xianhe Paper, with ongoing capacity expansion, which directly supports steady growth in hydrogen peroxide demand. The local market demand in Guangxi provides a solid foundation for the company’s new capacity, with clear downstream customers and market needs, effectively absorbing the additional capacity and avoiding idle capacity risks.

“Once the project is completed, LiuHua’s total hydrogen peroxide capacity will jump from 160k tons/year to over 360k tons/year, an increase of more than 125%,” the company said. Currently, the company’s products are relatively single, with small revenue scale and weak industry influence. This project aims to enhance scale effects and competitiveness, addressing development shortfalls.

Zhuo Chuang Information predicts that in 2026, the nationwide hydrogen peroxide price will fluctuate narrowly around the cost line, with the average price of 27.5% hydrogen peroxide ranging between 650 and 850 yuan/ton.