Domestic Pesticide Firms Strive to Deliver in Challenging Global Pesticide Market
Year:2009 ISSUE:26
COLUMN:M & A, BUSINESS & TRADE
Click:204    DateTime:Sep.16,2009
Domestic Pesticide Firms Strive to Deliver in Challenging Global Pesticide Market   

By Lily Wang    
By tracking Chinese listed pesticide firms' results for the first half of 2009, CCR found that the Chinese pesticide makers reported a reversed result compared with the strong growth in H1 of 2008 or the whole year of 2008 as they were influenced by the global economic turmoil and sluggish pesticide market as well as moderately-happened insect pest this year in China. Only four of the sixteen involved firms saw an annual profit growth (excluding subsidies), while the 11 firms posted a double-digits sales decrease from a year earlier.
   Glyphosate business had ever brought a good profit margin to the domestic glyphosate makers in the first half of 2008, like Zhejiang Wynca Chemical Industrial Group Co., Ltd. (former Xinan Chemical), Fujian Sannong Group Co., Ltd., Hubei Sanonda Co., Ltd., Nantong Jiangshan Agrochemical & Chemicals Co., Ltd. and Anhui Huaxing Chemical Industry Co., Ltd. Significant profitability attracted expansions of glyphosate production in China. However the global demand has dropped swiftly since July 2008. Lower price and domestic oversupply of glyphosate caused the 2009 thin profit or loss for China's glyphosate producers.

Zhejiang Wynca Chemical Industrial Group Co., Ltd. (Wynca Chemical, SH: 600596) reported its net profit dropped 85.27% year-on-year to RMB163 million for H1 2009 from RMB1.1 billion in H1 2008, while the operating revenue fell 51% from a year earlier to RMB2.0 billion from RMB4.05 billion, driven by lower pricing and lower sale volumes on the weak global demand for glyphosate. The pesticide business contributed RMB1.2 billion to its total sale revenue, showing a year-on-year decrease of 60.39%. The operating profit rate for the pesticides business was 19.25%, compared with 46.04% in H1 2008 and 42.46% in the fiscal 2008. For its extra main business, silicone recorded a revenue of RMB563 million, down 11.15%. The company predicts the global glyphosate market would be idle in the remaining months of 2009, and expects the net profit from January to September 2009 to fall 50% annualized.

Hubei Sanonda Co., Ltd. (SZ: 000553, 200553), the world's leading methamidophos maker, reported RMB985 million in sale revenue, a year-on-year decrease of 21.34%, and RMB44 million in net profit, down 42% from the previous year. The startup of glyphosate production lines had ever driven its profit growth in 2008 fiscal year. Reversely, with the sharply decreasing demand for pesticides in 2009, its agrochemicals business involving pesticides and fertilizers saw a 22.64% decrease in revenue, and reported a 17.29% of gross profit margin, compared with 22.73% in H1 2008. The company expects the net profit for the second half to go on dropping.

Jiangsu Yangnong Chemical Co., Ltd. (SH: 600486), China's main pyrethroids producer, continued to adjust marketing strategy to expand sales as well as cut costs in respond to the global crisis. The company achieved a 2.47% annual growth in net profit although the sale revenue fell 13.19% to RMB1.16 billion. The profit growth was driven by innovations on technologies and products although the market demand for pyrethroids lessened due to moderately-happened insect pest in China.
    Herbicide business brought RMB384 million in sales, slightly down 7.44% from a year earlier.
    Jiangsu Yangnong's insecticide business recorded revenue of RMB713 million, down 17.76%, of which pyrethroids for applications in sanitation and agriculture indicating a drop of 3.8% and 23.21% respectively.
   Jiangsu Yangnong has capability of producing 4 000 tons of pyrethroids for agricultural applications, third of them is to meet the European market. The company occupies 30% of pyrethroids market shares in China, and expects the pyrethroids demand to grow in future. The gross profit rate for insecticides and herbicides was 21.32% and 17.73% respectively.
   Jiangsu Yangnong has decided to issue new additional shares for increasing investment on its holding company Jiangsu Youth Chemical Co., Ltd., which is building a new 30 000 t/a glyphosate project. The first phase with a capacity of 15 000 t/a came on stream already, and the second phase is scheduled to start up in the second half of 2009.

Nantong Jiangshan Agrochemical & Chemical Co., Ltd. (SH: 600389) posted sales shrank 40.03% from a year earlier to RMB1.22 billion in H1 2009 and net profit plummeted 99.33% to RMB1.4 million, due to lowering sales volume and lower prices. Sales for its pesticide business alone fell 34% to RMB771.4 million. Following the new Chinese regulations that no domestic maker is allowed to produce glyphosate formulations with a purity of less than 30%, the company will upgrade its existing IDAN glyphosate line, with a total budget of RMB59.5 million.

Zhejiang Shenghua Biok Biology Co., Ltd. (Shenghua Biok, SH: 600226) saw an annual decrease of 15.25% and 58.96% in net profit and sales respectively for H1. Its pesticide business' sales plummeted 70.3% year-on-year. The gross profit rate was 12.5% for glyphosate family in the first half of 2009, and 27.61% for avermectins. Exportation contributed to RMB434.34 million, accounting for 59% of total sales.
   The board of Shenghua Biok has agreed to increase investment for its holding subsidiary Zhejiang Biok Kaipu Chemical Co., Ltd., which makes glyphosate ranges.
   The company projected loss for the third quarter.

Anhui Huaxing Chemical Industry Co., Ltd. (SZ: 002018) posted exportation was sharply down 72.43% year-on-year, to RMB220.45 million, while sales in the Chinese market rose 73.44%, to RMB210.8 million.
   The company made efforts to offer stockpile products in H1 although the weaker demand and lower prices caused by the economic turmoil and unduly expansion of glyphosate.

Shenzhen NOPOSION Agrochemicals Co., Ltd. (SZ: 002215), China's leading pesticide formulation maker based in Shenzhen of Guangdong province, gained a more than doubled growth in operating revenue and net profit for H1, like a star shinning in the darkness.
   The growth was driven by rising sale volume and new products offering as well flexible sales network. Its gross profit rate was as high as 40.59% for H1, lifting 5.9 percentage points from the previous year.  
   The company plans to issue new additional shares for financing an environmentally friendly pesticide formulation plant in southwestern China, a 10 000 t/a herbicide project in Shandong province, and a soluble fertilizer production line in Dongguan of Guangdong province.
   It expects to have a good performance for the whole year.

Nanjing Redsun Co., Ltd. (Nanjing Redsun, SZ: 000525) said the unusual climate this spring in China made the demand for pesticide decrease, and brought oversupply and lower selling prices of pesticides. The competitive insecticide and pyrethroids markets caused Nanjing Redsun's H1 pesticide sales to drop 14.36% year-on-year.
   The idle fertilizer market worldwide and 110% fertilizer export tariff effective during February - June 2009 stirred exports of fertilizers, and stretched the domestic oversupply of fertilizers, these factors caused drop of gross profit rate in its fertilizer trade business.
   For H1 2009, the pesticide business, fertilizer trade business and others contributed to 24.36%, 75.63% and 0.02% for its total sales, compared with 26.85%, 65.37% and 7.78% in H1 of 2008.

Fujian Sannong Group Co., Ltd. (Fujian Sannong, SZ: 000732) reported that sales in abroad markets plummeted 94.53% to RMB16.21 million due to the global crisis and rough-and-tu