Xinfu Pharmaceutical Saw a Promising Future     

Zhejiang Hangzhou Xinfu Pharmaceutical Co., Ltd. (Xinfu Pharmaceutical, SZ: 002019) is a comprehensive high-tech listed company integrating medicines, health-care foods and biological chemicals. Besides vitamin B5 (D-calcium pantothenate) and provitamin B5 (D-panthenol), major products of the company include innovative products in bone nutrition and osteoporosis prevention, new-generation pure-natural products for blood fat reduction and new traditional Chinese medicines for acute apoplexy.
   After purchasing Huzhou Lion Fine Chemical Co., Ltd. - its major competitor in the domestic market - in 2005, Xinfu Pharmaceutical's pantothenic acid serial products reaped much more market share at home and abroad. From the end of 2006 to late 2007, overseas main D- calcium pantothenate suppliers cut their production by various degrees with a tight supply in the international market, thus the price of D- calcium pantothenate rose significantly. Benefiting from the increase of both the price and sales volume, Xinfu Pharmaceutical earned sales revenue of RMB763.1435 million, up 120.30% from 2006. The gross profit margin of its D- calcium pantothenate shot to 66.98% in 2007 from 33.99% in 2006.
   The price of D- calcium pantothenate had begun to recede from its peak since 2008, especially in the second half-year, influenced by the international financial crisis, both the price and sales volume dropped dramatically, seriously affecting the company's operating results. In 2008, its sales revenue was RMB476.3718 million, down 37.58% from 2007, and net profit dropped by 82.83%, the comprehensive ratio of margin and the gross profit margin of D- calcium pantothenate decreased by 21.91 and 18.48 percentage points respectively.
  Xinfu Pharmaceutical's sales revenue in the first half of 2009 was RMB194.3581 million, decreased by 33.84% from the first half of 2008, within which the D- calcium pantothenate business contributed more than RMB145.77 million. And its trading profit, gross profit and net profit fell by 82.43%, 76.19%, 72.12% respectively. But since early 2009, the company has done lots of work to control production costs and improve management, so its sales volume of D- calcium pantothenate has begun to rise. Xinfu Pharmaceutical's new 6 000 t/a D- pantolactone project began to run in full operation in early 2009, greatly cutting the feedstock cost of D- calcium pantothenate and D-panthenol production in the first quarter of 2009 by 25.24%, 15.54% compared to the same period of 2008. The sales volume of D- calcium pantothenate and D-panthenol in the first half of 2009 rose by 44.92% and 0.50% respectively, from the second half of 2008, with gross profit margins of 34.17% and 25.58% respectively.
   In 2008, Xinfu Pharmaceutical ran a wet commissioning on its 20 000 t/a fully biodegradable material polybutylene succinate (PBS) project and 6 000 t/a D- pantolactone project and the matching project for 3 000 t/a glycolic acid (or hydroxyacetic acid). These three projects now are in full operation.
   Xinfu Pharmaceutical believes that PBS has the best performance among the numerous biodegradable materials and has a promising future wherein biodegradable materials may achieve a 10% global plastic products market share in the next few years. China, of course, also follows this trend, with demand for biodegradable materials in packaging, agricultural and forestry, daily necessities industry and the medical industry increasing rapidly in recent years.
   Construction of the 20 000 t/a PBS project was conducted in two phases. The first phase 3 000 t/a facilities went on production in 2008. Xinfu Pharmaceutical says it will expand the PBS capacity to 20 000 t/a after the popularization of its first-phase PBS products in the global market.
   At present, the company is devoting itself to research and development of microorganism zymo-technics for producing succinic acid, one of the main raw materials for PBS production. Microorganism zymo-technics features high technology, is environmentally friendly and has a lower cost compared with the method of extracting succinic acid from petroleum. The succinic acid project using this method is already in a pilot scale.
   The 6 000 t/a D- pantolactone project, which was constructed by its wholly owned subsidiary Chongqing Xinfu Chemical Co., Ltd. at Chongqing Changshou Chemical Industry Park in May 2007, run in full operation in early 2009 and is making full use of the natural gas resources in southwestern China to cut feedstock cost for D- pantolactone production.
   Glycolic acid mainly serves as a new fine chemical product in cleaning agent, disinfectant, biodegradable new materials and daily use chemicals. While meeting the needs of above sectors, the 3 000 t/a glycolic acid project of the company is also able to provide high-purity glycolic acid for cosmetic use, much the same as its D-panthenol product.
   In 2008, Xinfu Pharmaceutical manufactured 1 358 tons of D- pantolactone and 142 tons of glycolic acid, and in the first half of 2009, it manufactured 2 636 tons of D- pantolactone, with no glycolic acid produced.
   To address the global economic crisis, Xinfu Pharmaceutical will continue to explore new markets, strengthen cost controls, speed up operation of new projects and enhance sales management.