Lantai Industrial's Products Has a Huge Market Potential     

Inner Mongolia Lantai Industrial Co., Ltd. (Lantai Industrial, SH: 600328), located in Alxa League in southwestern Inner Mongolia, mainly engages in the production of salts, salt chemicals and bio-pharmaceuticals based on salt lakes. Its major products include refined edible salt, special industrial salt, sodium metal, liquid chlorine, sodium chlorate, calcium gluconate, natural carotene and antibiotics. Jilantai Salt Chemical Group Co., Ltd. is the largest shareholder of Lantai Industrial, holding a 49.13% share.

Salt industry:  Lantai Industrial has the right to exploit the resources of Jilantai Salt Lake, the largest inland salt lake of Inner Mongolia with high salt content but low impurities. At present, the company has an annual capacity of 1.5 million t/a of raw salt, of which about 500 000 t/a is used to produce edible salt and deep-processed slat chemicals, and the rest is mainly sold to its mother company Jilantai Salt Chemical Group and other soda ash manufacturers. Compared with raw salt, deep-processed salt products have much more profit margin. This company's revenues were mainly from the sales of edible salt, sodium metal and sodium chlorate, and the former two products contributed nearly half of the company's revenue in 2008. The company has an edible salt capacity of approximately 200 000 t/a. This business has a strong profitability with a gross profit rate of above 70%. In 2008, the edible salt business contributed 56% of the company's profit and 30% of its revenue.
    Lantai Industrial is one of China's certificated edible salt production enterprises. Thus, it has a certain degree of regional market monopoly with less competition. At present, its major market areas cover Inner Mongolia and Ningxia autonomous regions, Shanxi and Shaanxi provinces and Beijing. Because the salt resources (including the salt lake salt, sea salt and well salt) have a relatively wide distribution, the transportation cost has a great impact on the selling price, and the market is obviously restricted by the transport distance. The company's edible salt business can only win profits within a 500 kilometers sales radius. So it can be predicted that in the future, Lantai industry's edible salt business will continue to maintain profitable with a limited growth potential.

Sodium metal:  Lantai Industrial has world's largest sodium metal capacity of 48 000 t/a. Since the second half of 2008, due to the impact of soft demand for sodium metal in downstream industries such as indigo dye sector, Lantai Industry has maintained a relatively low operating rate. Its sodium metal sales volume was only 20 000 tons in 2008. However, because of its dominant position in the domestic sodium metal market, it has not lowered the prices of sodium metal dramatically and has maintained at a relative high gross profit rate. As the downstream indigo dye enterprises have recovered since the second quarter of 2009, the company's inventory of sodium metal has basically been digested. In the second half of 2009, the operating rate of its sodium metal production lines is expected to increase from 60% to over 75%.
    The company has built a complete industrial chain for the production of sodium metal. Its sodium metal production uses raw materials from Jilantai Salt Lake and is equipped with self-built power plants. The electricity self-sufficiency rate of its sodium metal production reaches above 80%, making the cost of its sodium metal more than RMB1 000 per ton lower than those competitors without equipping power plants. The company is also one of the China's earliest enterprises to adopt the advanced technology developed by DuPont. It now becomes one of the few producers that can produce high-purity sodium metal in the world.
    China's two largest indigo makers, Jiangsu Taifeng Chemical Co., Ltd. and Beijing Dyestuffs Plant (Beijing Beiran Lanshenglong Trading Co., Ltd.), have set up production bases in Alxa Economic and Technological Development Zone. Lantai Industrial is very close to these bases and benefits directly from the industrial clusters.

Sodium chlorate:  The 50 000 t/a production capacity of sodium chlorate in Lantain Industrial was expanded to 100 000 t/a in late August 2009. At the same time, another 50 000 t/a sodium chlorate project of the company will be put into operation in Jiangxi province at the end of 2009. In order to make full use of the by-product hydrogen generated in the sodium chlorate production in the Jiangxi factory, Lantai Industry also has built a 150 000 t/a hydrogen peroxide plant and will put it into operation in the second half of 2010. By then, the company will form a sodium chlorate production capacity of 150 000 t/a, accounting for 50% of China's total. Sodium chlorate is expected to replace liquid chlorine in the paper-making and drinking water industries with a huge market potential in the future. Lantai Industry had a relative high operating rate because of the large demand for sodium chlorate in downstream sectors, but it lowered the price from about RMB3 000 per ton in 2008 to RMB2 800 per ton in August 2009.


Performance of Lantai Industry during 2006-2011
        2006    2007    2008    2009*    2010*    2011*
Main business revenue (MLN RMB)
        811.58    891.44    1011.7    1098.86    1525.76    1778.21
Net profit (MLN RMB)
        47.24    56.01    55.89    95.90    147.51    185.86
Growth rate of net profit (%)
        -25.62    18.56    -0.22    71.58    53.82    26.00
* Projection