CCM: Hubei Xingfa: 168 percent YoY rise in revenue and YoY fall of 22 percentage points in gross profit margin of glyphosate 06-23-2016

China's glyphosate market has been in a bad shape during 2015, with the consequence of dragging down the performance of several glyphosate enterprises. One of them, Hubei Xingfa Chemicals Group Co., Ltd. (Hubei Xingfa), realized for instance a YoY soar in the revenue from glyphosate business, but this inconvenient caused its gross profit margin from this segment to record a YoY slump.


Hubei Xingfa released, on 8 March, 2016, the full-year financial report of 2015, which showed that its glyphosate revenue reached USD212.68 million (RMB1.39 billion), a proportion of 11.38% to the revenue from main business and a YoY soar of 167.53%.


In year 2014, Hubei Xingfa acquired Hubei Taisheng Chemical Co., Ltd. (Hubei Taisheng), obtaining in this way a glyphosate capacity of 70,000 t/a. By March 2016 Hubei Xingfa holds 75% of equity in Hubei Taisheng, 51% of which for direct holdings and 24% for indirect holdings.


At the same time the company put its 60,000 t/a glyphosate expansion project into operation in Q4 2015 and its glyphosate capacity amounts so far to 130,000 t/a.It should also be noted that Hubei Xingfa sold 77,400 tonnes of glyphosate in year 2015 (about 10,000 tonnes for end-of-year inventory of 2014), a YoY rise of 91.11%. All this seems to confirm that Hubei Xingfa has a very high utilization rate of glyphosate capacity.


Hubei Xingfa, if compared to other glyphosate enterprises, has a relatively complete up- and down-stream industrial chain for glyphosate, which results in a strong competitiveness in glyphosate business among the industries. In addition, its glyphosate device based on the industrial chain of circular economy in the industrial park enjoys significant cost advantage, which enables the company to rank top in the industry regarding the production cost control.




Hubei Xingfa's glyphosate business, though, happens to result less profitable due to the constant market downturn. China's glyphosate market has been damaged in 2015 by many negative factors, namely oversupply, overstock of downstream clients and centralized release of domestic capacity which led to fierce market competition and YoY falls in product prices.


According to Hubei Xingfa's 2015 financial report, its gross profit margin from glyphosate business has decreased by 21.68 percentage points year on year, until reaching a mere 14.90%. In order to increase the profitability of products, the company planned to further reduce the energy consumption of products by technical transformation and to timely adjust the sales strategy based on downstream clients' needs.


On a note, when Hubei Xingfa acquired Hubei Taisheng for glyphosate capacity, Zhejiang Jinfanda Bio-Chemical Co., Ltd. (former parent company of Hubei Taisheng) committed that if Hubei Taisheng does not achieve the expected profit in 2014-2016, it will have to compensate Hubei Xingfa to some extent. This helped preventing Hubei Xingfa from being damaged by the depressed market.


Some industry insiders disclosed that the glyphosate industry is now suffering from serious overcapacity with outstanding imbalance between supply and demand. The policy executive strength of the Chinese government is going to be the key point helping the glyphosate market to get out of downturn, unless the market demand largely rises.

                                                            Hubei Xingfa's financial performance, 2015

Item

Revenue (million USD)

YoY change (%)

Cost of sales (million USD)

YoY change (%)

Gross profit margin (%)

YoY change (percentage point)

By industry

Chemical

1,868.74

8.73

1,596.91

6.86

14.55

1.50

By product

Trade

751.53

-6.69

730.58

-6.61

2.79

-0.08

Fine phosphate

373.42

6.98

302.96

8.16

18.87

-0.89

Fertilizer

275.91

14.32

238.82

5.08

13.44

7.61

Glyphosate

212.68

167.53

181.00

258.97

14.90

-21.68

Phosphorus ore

145.82

29.23

49.10

27.36

66.33

0.50

Organosilicone

60.93

-12.95

61.52

-15.3

-0.96

2.81

Chlor-alkali

40.15

-24.33

28.31

-27.25

29.48

2.83

Others

8.29

11.08

4.63

12.04

44.2

-0.48

                                                                                     Source: Hubei Xingfa



                                                                  Hubei Xingfa's production and sales of glyphosate, 2015

Product

Output (tonne)

YoY change (%)

Sales volume (tonne)

YoY change (%)

Inventory (tonne)

YoY change (%)

Glyphosate

77,600

114.96

77,400

91.11

7,600

-32.74

                                                                               Source: Hubei Xingfa


This article comes from Glyphosate China Monthly Report 1603, CCM




About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.


Tag: glyphosate


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