Performance of Listed Pesticide Companies in the First Half of 2015

By Han Yongqi

In a global economy with a slowdown of pesticide demand growth both in China and abroad, the pesticide industry in China was stable in the first half of 2015. The main-business revenue of the pesticide sector reached RMB154.78 billion, an increase of 7.2% over the same period of last year. The total profit reached RMB10.79 billion, an increase of 5.7%. The total growth of chemical pesticide profits was 4.0%. The total profit growth of biochemical pesticides and microbial pesticides was 24.0%, much higher than the total profit growth of chemical pesticides.
The briskness of import and export trade was down, and the balance was less favorable to China. According to statistics from the General Administration of Customs, the total import and export value of pesticides was US$2.53 billion in the first half of 2015, a drop of 10.2% from the same period of last year. The favorable balance was US$1.64 billion, a drop of 14.5%. The production of pesticide producers was stable, and output increased slightly.
According to statistics from the National Bureau of Statistics, the total output of pesticides was 1.807 million tons from January to June 2015, an increase of 3.2% over the same period of last year. The output of herbicides was 884 kt, an increase of 1.5% and accounting for 48.9% of the total. The output of insecticides was 248 kt, a drop of 2.7% and accounting for 13.7% of the total. The output of fungicides was 94 kt, a drop of 8.3% and accounting for 5.2% of the total. Although the output of pesticides has maintained some growth, there are already signs of decline. The pesticide sector has entered a period of strategic adjustment.
Judging from reports for the first half of 2015 released by listed pesticide companies, the growth opportunity of the pesticide sector is limited, decline trend is already evident, and strategic integration has become inevitable.

1. Demand was flat and performances were down in some listed pesticide companies

With impacts from abnormities of climate, changes of planting technology, adjustments of planting structure and the policy for pesticide consumption reduction and pest/disease control, the demand of major products was flat, the competition was fierce and the sales revenue and the sales gross profit made drastic reduction in most of listed pesticide companies in the first half of 2015.

Hubei Sanonda Co., Ltd. (SZ: 000553) In the period of the report for the first half of 2015 the business revenue was RMB1 240 million, a drop of 27.4% from the same period of last year; profit was RMB160 million, a drop of 59.2%; net profit was RMB120 million, a drop of 59.0%. The reduction of the net profit was caused by the drop of the total profit compared with the same period of last year.

Jiangsu Lanfeng Bio-chemical Co., Ltd. (SZ: 002513) In the period of the report for the first half of 2015 the business revenue was RMB580 million, a drop of 15.8% from the same period of last year; loss was RMB9.099 million, caused by the shutdown of the production line in Ningxia Lanfeng. As the head office of the company located in Xinyi promptly readjusted production structure and sales structure in the face of falling sales, the gross profit of products increased, and net profit went up.

Shenzhen Noposion Agrochemicals Co., Ltd. (SZ: 002151) In the first half of 2015, the total business revenue was RMB1 450 million, a drop of 5.2% from the same period of last year; main-business revenue was RMB1 450 million, a drop of 5.1%; total profit was RMB260 million, an increase of 10.5%; net profit was RMB230 million, an increase of 10.2%.

Cefc Anhui International Holding Co., Ltd. (SZ: 002018) In the first half of 2015, the business revenue was RMB2 250 million, a drop of 28.0% from the same period of last year; net profit was RMB40 million, a drop of 18.8% and the basic earnings per share were RMB0.04.

Enn Ecological Holdings Co., ltd. (formerly Veyong Biochemical SH: 600803) In first half of 2015, the business revenue was RMB2 670 million. Of the total, the main-business revenue of the coal business was RMB340 million, a drop of 37.0% from the same period of last year; main-business revenue of the chemical business was RMB820 million, a drop of 35.1%; main-business revenue of the energy project business was RMB600 million, an increase of 130.3%; main-business revenue of the LNG business was RMB150 million, an increase of 6.5%; main-business revenue of the biopharmaceutical business was RMB700 billion, a drop of 5.1%. The net profit was RMB270 million, a drop of 45.5%.

2. Part listed pesticide firms showed inadequate drive for further rise

In contrast to the unsatisfactory performance of above-mentioned pesticide stocks, some listed pesticide companies managed to pick up against the stock market trend and make a wonderful scene in adjustment.

Jiangsu Changqing Agrochemical Co., Ltd. (SZ: 002391) In the first half of 2015, the total business revenue was RMB950 million, an increase of 1.9% over the same period of last year; total profit was RMB160 million, an increase of 9.8%; net profit was RMB130 million, an increase of 10.2%. The basic earnings per share were RMB0.39. The business revenue in the second quarter was RMB550 million, an increase of 2.2% over the same period of last year; net profit was RMB84.246 million, an increase of 15.9%.

Jiangsu Huifeng Agrochemical Co., Ltd.(SZ: 002496) In the first half of 2015, the business revenue was RMB1 530 million, an increase of 39.2% over the same period of last year; net profit was RMB110 million, an increase of 4.4%.

Jiangsu Yangnong Chemical Co., Ltd. (SH: 600486) In the first half of 2015, the business revenue was RMB1 800 million, an increase of 12.0% over the same period of last year; net profit belonging to shareholders of the listed company was RMB250 million, an increase of 1.3%.

Hunan Haili Chemical Co., Ltd. (Sh: 600731) In the first half of 2015, the business revenue was RMB590 billion, an increase of 1.5% over the same period of last year; total profit was RMB20.7 million, an increase of 19.7%; net profit was RMB11.19 million, an increase of 45.9%.

Lier Chemical Co., Ltd. (SZ: 002258) In the first half of 2015, the business revenue was RMB810 million, an increase of 11.0% over the same period of last year; net profit was RMB80 million, an increase of 22.1%. The main reason for the increase of the business revenue was that the company further strengthened market expansion and the market sales of glufosinate-ammonium were also sound. The net profit was RMB88.55 million, an increase of 22.1% over the same period of last year.

Nantong Jiangshan Agrochemical & Chemicals Co., Ltd. (SH: 600389) In the first half of 2015, the product structure was adjusted and optimized. The proportion of glyphosate in the total revenue of the company was reduced from 61.4% in the same period of last year to 54.5%. The sales amount, the revenue and the gross profit of amide products all increased drastically. The total gross profit of other products except glyphosate was RMB140 million, an increase of 33.8% over the same period of last year.

Lianhe Chemical Technology Co., Ltd. (SZ: 002250) In the first half of 2015, the business revenue was RMB1 920 million, an increase of 8.0% over the same period of last year; net profit was RMB300 million, an increase of 25.4%. In main businesses the revenue of the industrial sector was 24.3% higher than the same period of last year, and the gross profit was basically equal to the same period of last year. The revenue of pharmaceutical intermediates and the revenue of pesticide intermediates grew 42.3% and 25.9%, respectively, the projected profit margin of the pharmaceutical sector was still 5.9 percent points higher than the pesticide sector, and the profit-making ability will still grow in the future.

Shandong Shengli Co., Ltd. (SZ: 000407) In the first half of 2015, business revenue was RMB1.49 billion, an increase of 14.6% over the same period of last year; net profit was RMB17.144 million, an increase of 6.8%. The main reason was that the revenue of the natural gas sector made a sustained increase.
The growth of achievements by different degrees in above-mentioned listed pesticide companies has become a bright spot in the pesticide market. The main reason is the adjustment to the product structure and the sales structure or the transformation of the pesticide sector. The effect of industrial restructuring is still being shown, but the drive for pesticide stocks to rise further is inadequate.

3. Environmental protection and e-commerce become focuses for listed pesticide companies in strategic adjustment

The situation of environmental protection is getting harsher today. Strengthening environmental control is the base point in the strategic adjustment of listed pesticide companies. The head office of Jiangsu Lanfeng Bio-chemical Co., Ltd. located in Xinyi is pushing the construction, completion and operation of several environment-friendly renovation projects such as the acephate waste water project and the pyrethroid waste water project, and positive results have been produced. Ningxia Lanfeng has upgraded the ability for comprehensive treatment on the basis of its original waste water treatment unit and improved the waste water comprehensive treatment unit with an average capacity of 1 800 t/d. The company has constructed two MVR desalting units and achieved up-to-standard emission under the new deal.
At the time of laying focus on environmental protection, e-commerce has also captured the attention of listed pesticide companies. Shenzhen Noposion Agrochemicals Co., Ltd. started to make planning for countryside internet at the beginning of the year and launched pilot projects in Yantai, Yueyang and Jiaozuo. Jiangsu Huifeng Agrochemical Co., Ltd. is vigorously promoting work on all aspects of e-commerce, making mode innovation, management innovation and technology innovation and strengthening research and development. The company applied for 8 patents in the first half of 2015 and a total of 59 patents have been granted. It submitted nearly 100 new applications for product registration and 17 applications have been approved. The vigor for the sustainable development of the company is therefore ensured.

4. The declining trend forces listed pesticide companies to make structural adjustment

The overall demand in the agrochemical sector is flat in 2015. Faced with a severe market environment, quite a few listed pesticide companies have vigorously promoted adjustment to product structure and actively expanded market.
After the adjustment made to the product structure, the demand for glyphosate in Lier Chemical has kept brisk. The company’s glyphosate capacity has increased constantly, reaching 1.6 kt/a. The product price is stable at RMB340 000-350 000/t, and gross profit has reached RMB80 000-100 000/t. With the constant expansion of the glyphosate capacity, achievements to be made in the company will have a drastic upgrading.
Jiangsu Yangnong Chemical Co., Ltd. has completed market integration between Yangnong Group and its listed pesticide company, established a specialized team for the sales of pesticide formulations and strengthened the internet sales of pesticide formulations. The sales in the domestic market reached RMB740 million in the first half of 2015, an increase of 44.8% over the same period of last year.
Most of reports for the first half of 2015 prepared by listed pesticide companies revealed a declining trend. It is inevitable for the pesticide sector to make strategic adjustments. The economic functioning of the pesticide industry in China was on the whole stable in the first half of 2015, and the first half of the year was the brisk season for the pesticide market. Judging from the overall status, however, various major economic indexes of the pesticide sector have both ups and downs. The pesticide sector displays an overall trend of low prices.