To: Business Editor
|To: Business Editor
||28 August 2017
Global Bio-chem Gross Profit Quadrupled to HK$356.8 Million with EBITDA of HK$85.0 Million in 1H2017
Global Bio-chem Technology Group Company Limited ("Global Bio-chem" or "the Company", stock code: 00809) together with its subsidiaries (the "Group") reported its unaudited interim consolidated results for the six months ended 30 June 2017 (the "Period") with recorded revenue of HK$2,017.1 million (2016: HK$2,062.3 million). Benefiting from lower raw material costs, recovery of the lysine business and optimisation of operation, the Group's gross profit surged by 325 per cent year-on-year to HK$356.8 million, and reported a EBITDA of HK$85.0 million as compared to LBITDA of HK$24.9 million for the corresponding period in 2016, which marked a significant improvement in the Group's performance.
Despite the improved operation performance, due to the low utilisation rate of the Xinglongshan site and high debt level of the Group, the Company still recorded a net loss of HK$333.0 million (2016: HK$599 million) for the Period, which was nevertheless substantially narrowed by 44.5% as compared to last year.
The board of directors of Global Bio-chem does not recommend the payment of any interim dividend for the Period.
During the Period, the Group's upstream business recorded a revenue of approximately HK$675.4 million (2016: HK$737.2 million). As the direct subsidies to local corn farmers gradually took effect coupled with the provincial subsidies to corn refiners since October 2016, the Group's cost of raw materials for the Period had been substantially lowered. As a result, the Group's upstream business recorded a gross profit of approximately HK$90.5 million for the Period as compared to a gross loss of HK$71.5 million for the corresponding period last year.
The amino acids segment recorded a revenue of approximately HK$1,006.0 million (2016: HK$1,033.6 million) during the Period. Despite a slight decrease in sales volume, benefiting from the cost savings resulting from the facility upgrade and the re-adjustment of product mix to suit market needs, the gross profit of amino acids segment increased by 80.7% to approximately HK$208.5 million (2016: HK$115.4 million), with a gross profit margin of 20.7% (2016: 11.2%) during the Period.
The widened cost advantage of corn sweeteners versus cane sugar in China had enhanced the competitiveness of corn sweeteners. Customers were increasingly convinced to switch from cane sugar to corn sweeteners, coupled with the resumption of downstream production in the Group's Jinzhou sites since November 2016, sales volume of corn sweeteners increased by 26.7% , with revenue increased by 14.6% to approximately HK$332.8 million (2016: HK$290.5 million). As a result, the corn sweeteners segment recorded a gross profit of approximately HK$55.1 million (2016: HK$40.6 million).
During the Period, due to the increase in demands of anti-freeze products, the revenue of polyol chemicals segment increased by 190.0 per cent to approximately HK$2.9 million (2016: HK$1.0 million). As substantial provision in relation to the closing inventories of polyol chemicals had been made in previous years, the polyol chemicals segment recorded a gross profit of approximately HK$2.7 million (2016: gross loss: HK$0.6 million).
During the Period, as a result of the decrease in raw material price which enhanced the competitiveness of the Group's products, the export sales of upstream corn refined products, amino acids, polyol products and corn sweeteners amounted to approximately HK$111.2 million (2016: HK$56.9 million), HK$460.0 million (2016: HK$381.6 million), HK$64,000 (2016: nil) and HK$0.2 million (2016: HK$0.7 million) respectively, altogether accounted for 28.3% of the Group's revenue.
In March 2017, the Company announced a change in shareholding structure of its controlling shareholder. Immediately after the restructuring, 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, has become an indirect controlling shareholder of the Company. 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 agricultural sector. The Group has received a written confirmation from Nongtou that it would 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.
On 21 July 2017, the Group entered into an agreement (the "S&P Agreement") with Global Sweeteners Holdings Limited ("GSH") and together with its subsidiaries ( the "GSH Group") for the purchase of the entire equity interest of two subsidiaries of GSH, 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 the Group are situated while all other production facilities of the GSH Group are situated elsewhere in the PRC. As such, the Transaction would enable the Target Companies to be managed under the ambit of the Group in Changchun, which could enhance the cost and operational efficiency, and create potential synergies between the Group and the GSH Group. As the Target Companies own part of land which accounts for approximately one-fifth of the total site area in Luyuan District, it would be more efficient for the Group to be in charge of the negotiation, valuation of land and execution of the land transfer as quicker decision making process and less administrative hurdles are expected if only one party is involved. The management is expected that the purchase of the Target Companies could help expedite the process of negotiation with the potential purchaser, as well as the process of completion as such transaction would only be handled by the management of the Group without involving the management of the GSH Group.
To strengthen the financial position of the Group, following the publication of the "Opinions on Stabilising the Leverage Rate of Enterprises" ãéæ¼ç©æ¥µç©©å¦¥éä½ä¼æ¥æ§æ¡¿ççæè¦ã, (the "Opinions") by the State Council of the PRC in October 2016, which aimed at promoting the long-term sustainable economic development of the State, the Group and the GSH Group have been actively studying the feasibility of the debt-equity swap. A proposal of debt-equity swap had been submitted to the Jilin Provincial Government for consideration. During the Period, the management of the Group had been working with relevant professional parties on fine-tuning the proposal. The management believes that the Group's financial position will improve substantially if the proposal is materialised.
Looking forward, Mr. Kong Zhanpeng, the Chief Executive Officer of Global Bio-chem, said: "To improve the financial performance and financial position of the Group, our management focused their efforts in accelerating the relocation of the production facilities from Luyuan District, Changchun to the Xinglongshan site in order to free up the land for disposal and to optimise operation efficiency in the Xinglongshan site, actively studying the feasibility of the debt-equity swap to lower the debt level of the Group, and lowering the cost of raw material through collaboration with Jiliang by the entering of the corn procurement contracts. In order to maintain the competitiveness of the Group, the Group will strive to maintain its market position, diversify its product range and enhance its capability in developing high value-added products and new applications through in-house research and development efforts and strategic business alliance with prominent international market leaders."
About Global Bio-chem
Global Bio-chem (stock code: 00809.HK) has been listed on the Main Board of the Stock Exchange of Hong Kong Limited since 2001. The Group is principally engaged in the manufacture and sale, research and development of corn-based biochemical products in the People's Republic of China ("PRC"). Headquartered in Hong Kong and with its production facilities based in various provinces in the PRC, Global Bio-chem is one of the leading corn-based biochemical product manufacturers worldwide. Global Bio-chem is also the parent company of Global Sweeteners Holdings Limited (stock code: 03889.HK), one of the largest corn sweeteners producers in the PRC, which is also listed on the Main Board of The Stock Exchange of Hong Kong Limited.
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Issued by: Global Bio-chem Technology Group Company Limited
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