Noposion: Exploiting Markets with Environmentally Friendly Pesticides       

Shenzhen Noposion Agrochemicals Co., Ltd. (Noposion, SZ: 002215) is committed to research and development, production and marketing of agricultural chemicals as well as plant protection popularization. At present, Noposion produces almost 500 kinds of products in five categories - pesticides, acaricides, bactericides, herbicides and plant growth regulators. Its total production capacity of various types of agricultural chemicals is 30 thousand tons per year. Lu Baiqiang holds the largest share of Noposion, with 32.46%.
   In 2008, the domestic price of most pesticide technical products rose by 40% and sales were affected by natural disasters such as heavy snow, an earthquake and flooding in Noposion's sales areas. However, Dongguan Ruidefeng Biological Technology Co., Ltd. and Ruidefeng Agricultural Means of Production Co., Ltd., which were purchased by Noposion in April, 2007, made great contributions to Noposion's profits in 2008. Noposion's business income in 2008 was RMB1.066 billion, an increase of 47.56% from 2007; and the net profit was RMB89.33 million, an increase of 40.73%.

Demand for pesticide picks up

Since 2006, China has been reducing the output of pesticidal emulsifiable concentrate gradually and since January 1st, 2007, in China, it is totally forbidden to use five kinds of highly poisonous organic phosphorus pesticides such as methamidophos in agriculture. Domestically, 80% of pesticidal emulsifiable concentrate will be replaced by environmentally friendly agricultural chemicals and there is a significant increase of demand for environmentally friendly water-based agricultural chemicals. However, there are still many problems in the domestic agricultural chemicals industry, such as low industrial concentration, serious pollution and irrational product portfolios. For these problems, China has worked out some policies which are beneficial for the development of those enterprises with enormous potential and rational product portfolio. And Noposion is one of these enterprises.

Product properties     

The planted area, for high yield economic crops (oil crops, vegetables, fruits, teas and sugar crops, etc.), has been expanded year by year. Economic crops require more insecticides and herbicides than general grain crops, so growers' demand for high value agricultural chemicals will rise continuously.
    Noposion's product features rich varieties, low toxicity and low residual. More than 100 new products produced by Noposion enter into the market each year. Now, 70-80% of the company's products are targeted for use on economic crops such as vegetables and fruits.
    Furthermore, these products mainly includes biological agricultural chemicals, new types of heterocyclic pesticides and high efficiency, low toxicity and low residual products, among which the environmentally friendly water-based agricultural chemicals account for more than 50% of the sales income. Noposion's product portfolio conforms to the requirements of China's industrial policy and environmental protection policy so their products will probably not be eliminated or have production limited by the Chinese government.

Marketing     

Most salespersons in Noposion have studied plant protection and they can help farmers solve various problems during their planting. Therefore, the company's sales volume of pesticides is considerable, even though their prices are 10% higher than the domestic average price.
   Noposion has established nationwide sales network mainly consisting of county-level distributors. By the end of 2007, it had established cooperation relationship with more than 1 900 distributors and more than 36 000 retail stores throughout the country. In addition, the number of Noposion's salespersons with specialized abilities increased from more than 1 200 to more than 2 000. Its competitiveness was greatly strengthened by this flat management and value-added services, which was in accordance with the development trends of the global agricultural chemicals industry that the source of the industrial profits is shifting from the production of pesticide technical products to pesticide preparations and marketing channels.

IPO fund finances production expansion     

The traditional pesticidal emulsifiable concentrate containing much organic solvent is flammable and explosive, which is bad for environmental safety, and the dust produced during the production and use of wettable powder will negatively affect human health and the environment. Environmentally friendly agricultural chemicals are beneficial to improve food safety and the quality of the environment, and it is the main trend of agricultural chemicals.
    Now, Noposion has a production capacity of 10 000 t/a of pesticide containing organic solvents and 16 000 t/a of water based pesticide. In the coming two years, the projects financed by IPO fund will be operational gradually, and then the capacity of water based pesticide in the company will increase to 30 000 tons. After the completion, these water based pesticide capacity will increase to account for 83% of the company's total.
    In the future, for the pricing of products, Noposion will adopt the method of "production cost plus production cost mutiplication stable gross profit rate". Water based pesticides have a higher gross profit rate than those containing organic solvents because the cost of each ton of water based pesticides can be RMB3 000 - 4 000 lower than that of pesticides containing organic solvents. Therefore, as the output and market recognition of water based pesticides is increasing, a scale effect will gradually appear, and the cost reduction will be more dramatic in the future.