2008 Strong Results for Pesticides Firms
Year:2009 ISSUE:16
COLUMN:M & A, BUSINESS & TRADE
Click:203    DateTime:Jun.05,2009
2008 Strong Results for Pesticides Firms   

By Peter Zong   

According to statistics of the National Bureau of Statistics, China manufactured 1.9 million tons of pesticides in 2008, up 12% over 2007. Pesticide output in Jiangsu province was 538.9 thousand tons, ranking first, accounting for 28.4% of the national total, then came Zhejiang, Shandong, Anhui and Hunan provinces. The total production value, on the basis of the selling prices, increased 46.1%, translating to a price growth of around 30% throughout 2008 given the sharp downturn in the second half.
   Rough data show that China now has more than 600 pesticide technical (pesticide active ingredients) makers and over 1 800 pesticide formulations companies, in which 839 firms achieved a total sale of RMB5 million in 2008. Through years of merge, elimination and creation, the current leading players have owned more dominated positions. In the first half of 2008, the combined production value contributed by the top 20 companies accounted for 31.5% of the pesticide sector's total, improving significantly. The related governmental departments have a program that the market shares of the domestic top 50 pesticide makers will reach 60% by 2011.
   Upon CCR's data, 18 listed companies involved the pesticide business. By reviewing their fiscal report in 2008, some unfavorable factors are commonly blamed, including the increased prices of raw materials, appreciation of RMB, the lifted rate of loan and financial cost, disasters, reduction of export rebates, global economic recession, reduction of insects, prohibition on high toxic pesticides, overcapacity in glyphosate and other pesticides, swelling workforce cost and environmental protection input etc.
    As some reports disclosed, some unfavorable factors may be thought as favorable, for special firms. For instance, amid the global economic turmoil, plenty of small and medium companies shut down, leaving more shares and new developing opportunities for those dominated firms. Ban on the production of methamidophos and other four high toxic pesticides since January 2008 has brought opportunities to the scaled and internationalized firms for developing high potency, low toxicity and low persistent pesticides.
   It is predicted the plant diseases and insects pests in 2009 for Chinese market will be heavier than 2008, which will spur the demand for pesticides. China's government is emphasizing on growth in agriculture, also good news for pesticide manufacturers. It also can be found that the importation, exportation and output in March and April of 2009 all exceeded that in the previous year's same period.
    Glyphosate have ever brought a surprise profit to the producers in the first half, with a more than doubled profit growth in the fiscal 2008, such as Fujian Sannong Group Co., Ltd. (Fujian Sannong, SZ: 000732, 1061.5%), Shandong Shengli Co., Ltd. (Shandong Shengli, SZ: 000407, 812.8%), Hubei Sanonda Co., Ltd. (Hubei Sanonda, SZ: 000553, 328.2%), Zhejiang Xinan Chemical Industrial Group Co., Ltd. (Xinan Chemical, SH: 600596, 239.7%), Nantong Jiangshan Agrochemical & Chemicals Co., Ltd. (Jiangshan Agrochemical, SH: 600389, 175.9%) and Anhui Huaxing Chemical Industry Co., Ltd. (Huaxing Chemical, SZ: 002018, 167.1%). Huge profitability has lured many new comers to enter the glyphosate manufacture business, overcapacity became serious in 2008 and is expected heavily serious in 2009.
   In the fourth quarter of 2008, five companies reported a profit growth year on year, including Xinan Chemical (2.7%), Hubei Sanonda (648.56%), Lianhe Chemical Technology Co., Ltd. (Lianhe Technology, SZ: 002250, 104.5%), Lier Chemical Co., Ltd. (Lier Chemical, SZ: 002258, 59.67%) and Shandong Shengli (a net profit of RMB63.66 million compared with a net loss in Q4 of 2007). Eight firms suffered a loss and four companies reported a profit decline. Shandong Dacheng Pesticide Co., Ltd. (Shandong Dacheng, SH: 600882), Shandong Huayang Technology Co., Ltd. (Shandong Huayang, SH: 600532) and Zhejiang Qianjiang Biochemical Co., Ltd. (Qianjiang Biochemical, SH: 600796) ranked front by loss both in Q4 and in the whole fiscal year of 2008. Hunan Haili Chemical Industry Co., Ltd. (Hunan Haili Chemical, SH: 600731) who had suffered the biggest loss (RMB240 million) in Q4 of 2007 reported a bit loss (RMB2.57 million) in Q4 of 2008.
    In the first quarter of 2009, four companies enjoyed a growth in total sales, including Shenzhen Noposion Agrochemicals Co., Ltd. (Shenzhen Noposion, SZ: 002215, 32.1%), Nanjing Redsun Co., Ltd. (Nanjing Redsun, SZ: 000525, 40.7%), Hebei Veyong Bio-Chemical Co., Ltd. (Hebei Veyong Bio-Chem, SH: 600803, 13.0%) and Lianhe Technology (6.2%), and other 14 companies reported a decline. The six firms that enjoyed more than doubled profit growth in 2008 reported a decline in total sales, perhaps attributing to a price drop of glyphosate and/or an operation setback. Luckily only two among the eighteen firms reported a net loss in Q1 of 2009, both caused by non-pesticide business. Eight firms reported profit growth and eight reported decrease. Comparing the sales in Q1 of 2009 with that in Q4 of 2008, 12 firms increased and six companies fell.  

Individual report

Among the eighteen listed firms involving pesticides production, Xinan Chemical continued to hold the top position in 2008, by the total sales and growth, net profit, pesticides sales and growth, and gross profit rate in pesticides business. It reported a gross profit rate of 42.46% for pesticides business throughout 2008, dominating other 17 companies, with a little drop from 46% in the first half. 70.9% of its sales came from pesticide business and 24.3% from silicone monomer. Upon market region, 71.4% of total sale was contributed by exportation, amounted to RMB5.15 billion with an increase of 213.3% year over year while the sales in domestic market dropped by 5.37%. The company was busy in constructing a 25 000 t/a IDA-routine glyphosate project, which will help the total capacity in the company reach 105 000 t/a. A plan of extending its business from manufacturing pesticides technical only to making environmentally friendly formulations was also disclosed together with the fiscal report.  
    Hubei Sanonda developed glyphosate production while remain producing old pesticides such as chlorpyrifos, methamidophos, avermectins, imidacloprid and others. It announced all methamidophos were exported abroad upon a long term contract.  The 328.2% profit growth in 2008 mainly came from the 20 000 t/a glyphosate capacity although the second line 15 000 t/a came on stream in the second half. The ChemChina held company exported US$177 million of pesticides in 2008, increasing 88.69% over one year earlier. In 2008 the company also came on stream other four new projects - caustic soda, 40 000 t/a refined DMPAT, 3 000 t/a paraquat and a pilot unit of dichlorvos (DDVP).
    Jiangsu Yangnong reported a growth of 48.5% in sales of 2008, ranking the third. It exported US$180 million of pesticides, with an increase of 143.26% year on year, while the domestic sales clamped down by 5.38%. Among the exportation, the proportion of herbicides surpassed that of insecticides for the first time. The 10 000 t/a glyphosate production unit that was startup in February 2008 contributed to the majority of growth in sale and profit. Its insecticides (mainly cyhalothrin series) business fell 2.49% to RMB1.16 billion, still holding 55.2% of total sale. The company said the fell in insecticide business was caused by impacts of counterfeit products and disasters. The gross profit rates for insecticides and herbicides were 19.24% and 17.45% respectively, both hig