Global Sweeteners Sees 28.1% Increase in 20171H Revenue to HK$597.7 Million Gross Profit Rose Substantially by 109.4%

Global Sweeteners Holdings Limited ("Global Sweeteners" or the "Company", stock code: 03889) together with its subsidiaries (the "Group") reported its unaudited consolidated interim results for the six months ended 30 June 2017 (the "Period") with recorded revenue and gross profit of HK$597.7 million (six months ended 30 June 2016: HK$466.5million) and HK$82.7 million (six months ended 30 June 2016: HK$39.5 million) respectively.

Benefiting from the improvement of upstream market sentiment and the introduction of agricultural subsidies in Liaoning province since the fourth quarter of 2016, the Group saw a substantial gross profit increase of approximately 109.4%. During the Period, the Group recorded EBITDA of HK$5.4 million as compared to the LBITDA of HK$ 26.0 million for the corresponding period last year. In spite of the improved operation, the high finance cost and the low utilisation rate of the Group's downstream production facilities in Jinzhou as a result of intermittent production and the suspension of the Group's production facilities in Changchun pending for the relocation to the Xinglongshan site have dragged down the Group's profitability. As a result, the Company still recorded a net loss during the Period, though substantially narrowed by 22.0% year on year to HK$53.5 million. .

The Board has resolved not to recommend the payment of any interim dividend for the Period (six months ended 30 June 2016: Nil).

Capitalising on the agricultural subsidies from the provincial government since the fourth quarter of 2016 and the lower raw material cost as a result of the PRC agricultural policy reform, the overall performance of the Group's upstream business improved with segment gross profit turned around to HK$30.3 million during the Period (six months ended 30 June 2016: gross loss: HK$2.4 million).

During the Period, revenue of corn syrup increased by 21.6% to approximately HK$247.5 million (six months ended 30 June 2016: HK$203.5 million). Such increase was mainly attributable to the increase in sales volume by 33.3% as a result of the resumption of Jinzhou production facilities since the last quarter of 2016. Although domestic sugar price retreated from its peak of RMB7,119 per metric tonne ("MT") in 2016, the PRC sugar price continued to stay high at RMB6,654 per metric tonne ("MT") at the end of June 2017. The increased sugar price in contrast with the decreased corn price has widened the cost difference between cane sugar and corn sweeteners, thus raising customers' incentive to switch to corn sweeteners. The cost advantage of corn sweeteners over cane sugar further improved the performance of the Group's downstream segments. As such, the corn syrup segment recorded a gross profit of approximately HK$45.7 million (six months ended 30 June 2016: HK$33.9 million), representing a 34.8% increase when compared to that of the previous year, with an increased gross profit margin of 18.5% (six months ended 30 June 2016: 16.7%).

No sales of crystallised glucose were recorded during the Period as a result of the suspension of the Changchun production facilities. As such, sales of the Group's corn syrup solid for the Period were contributed by the sales of maltodextrin. With the drop in the average selling price of maltodextrin, the revenue and gross profit of corn syrup solid segment decreased by approximately 4.1% and 20.5% respectively to HK$83.4 million and HK$6.2 million respectively (six months ended 30 June 2016: HK$87.0 million and HK$7.8 million respectively).

During the Period, revenue and gross profit of the amino acids trading segment increased by 34.8% and 150.0% respectively to approximately HK$6.2 million and approximately HK$0.5 million respectively (six months ended 30 June 2016: HK$4.6 million and HK$0.2 million respectively), with a gross profit margin of 8.1% (six months ended 30 June 2016: 4.3%). The trading business has created synergistic effects to the Group's business and allowed the Group to offer more diversified product mix to its customers.

During the Period, the Group's export sales of upstream corn refined products and corn sweeteners amounted to approximately HK$35.9 million and approximately HK$0.2 million respectively (six months ended 30 June 2016: HK$39.5 million and HK$0.7 million respectively). As the Group recorded a 28.1% increase in sales revenue during the Period, export sales to the Group's revenue dropped to 6.0% (six months ended 30 June 2016: 8.6%). The normalised corn price in China enhanced the competitiveness of Chinese corn refined products and other related downstream products in the overseas market, which could help ease the pressure from overcapacity in the domestic market.

On 21 July 2017, the Group entered into an agreement (the "S&P Agreement") with Global Bio-chem Technology Group Company Limited and together with its subsidiaries ( the "GBT Group") for the disposal of the entire equity interest of two subsidiaries of the Group, namely Changchun Dihao Foodstuff Development Co., Ltd. ("Dihao Foodstuff") and Changchun Dihao Crystal Sugar Industry Development Co., Ltd. ("Dihao Crystal Sugar", together with Dihao Foodstuff, the "Target Companies") (the "Transaction"). The Target Companies are both situated in Changchun, where the major production facilities of GBT Group are situated while all other production facilities of the Group are situated elsewhere in the PRC. As such, the Transaction would enable the Target Companies to be managed under the ambit of GBT Group in Changchun, which could enhance the cost and operational efficiency, and create potential synergies between the Target Companies and the GBT Group. The Target Companies have been loss-making since 2014 and the Group has suspended/ optimised operation of the Target Companies since then. The Transaction will relieve the Group's financial burden from relocation of the production facilities in Changchun and the uncertainties as the result of the New Financial Guarantee Contracts, and will also enable the Group to direct its resources to high value-added markets.

In March 2017, Jilin Agricultural Investment Group Co., Ltd. ("Nongtou"), an entity controlled by the State-owned Assets Supervision & Administration Commission of the People's Government of Jilin Province, became the indirect controlling shareholder of the Group's parent company Global Bio-chem. The involvement and participation of Nongtou not only provide support to the Group's operation, but also create synergies between the Group and the other investments of Nongtou in the agriculture sector. The Group has received a written confirmation from Nongtou that it will provide financial support to the Group for its operation on a going concern basis. In addition, the Group also signed a corn purchasing agreement with Jilin Jiliang Assets Supply Chain Management Co., Ltd., a subsidiary of Nongtou in May 2017, to ensure a stable supply of corn kernels and allow longer credit period to ease the pressure of the Group's cash flow.

The Group's relocation of production facilities in Luyuan District to Xinglongshan is in progress. The construction of the 60,000 mtpa glucose/ maltose production facilities has completed in March 2017 and commenced trial run during the Period. Other relocation projects are still in the process of obtaining the necessary approvals from the relevant bodies and finalising facilities designs. Subject to the completion and finalisation of the Transaction, the Group will take the opportunity of the relocation to re-adjust its product mix and capacity. It is the long-term goal of Global Sweeteners to seek continuous improvement through engaging in continuous research and development to enhance operation efficiency and diversify product mix to suit market needs.

Looking into the future, Mr. Kong Zhanpeng, Chairman of Global Sweeteners, said: "Although the Company still recorded net loss during the Period, it is encouraging to see substantial improvements in operating results and operating cash flows. Continuous efforts will be made to enhance the financial position of the Company as well as operation efficiency. In the short run, the Group will consolidate its resources towards the development of the Shanghai production base, leveraging on the synergistic effect with the Jinzhou production base for the supply of raw materials and sweeteners products to serve the respective Huadong market. However, the Group will continue to strengthen its market position leveraging on its brand name and add value to the current product mix through the introduction of new high value-added products in the long run."

About Global Sweeteners
Global Sweeteners (stock code: 03889.HK) is listed on the Main Board of The Stock Exchange of Hong Kong Limited in September 2007 and is principally engaged in the production and sale of corn refined products (including corn starch, corn oil, gluten meal and fibre); and various corn sweeteners (including glucose and maltose syrup, HFCS, crystallised glucose and maltodextrin) for food and beverage, chemical, confectionery, daily, cosmetics and pharmaceutical products manufacturers. Global Sweeteners is a non-wholly owned subsidiary of Global Bio-chem Technology Group Company Limited (stock code: 00809.HK), the issued shares of which are listed on the Main Board of the Stock Exchange of Hong Kong Limited.

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