Source: Baidu

According to CCM’s research, Jiangsu Greenport is the only domestic enterprise engaged in activities along the entire modern vegetable production industry chain. Its main businesses include specialised breeding, the growing and sale of vegetables; R&D and sale of cutting-edge modern agricultural technologies and facilities as well as the design and construction of agricultural industrial parks.

Notably, it is up to 5-6 years ahead of its domestic competitors in terms of vegetable production technologies. These technologies include fertigation technology (fertiliser delivered via irrigation water), coconut coir dust culture technology, and phased fertilising technology, all self-developed and promoted by the company.

"Acquiring Jiangsu Greenport will help us to develop into a comprehensive modern agricultural enterprise and diversify our strategic development to include areas such as the internet, chemical engineering, agriculture and finance'," said Xinyangfeng Fertiliser, "The acquisition is also in line with the optimisation and adjustment of our products and services which should enhance our competitiveness."

According to CCM's research, in early 2014 Yang Caixue, president of Xinyangfeng Fertiliser, put forward the idea of industry transition from traditional phosphate fertiliser to modern agriculture. Progress on the transition was slow in 2014 and 2015, but Xinyangfeng Fertiliser began to hasten the process back in Jan. 2016.

In Feb. and March 2016, it announced plans to invest USD7.52 million (RMB50 million) and USD15.04 million (RMB100 million) respectively to establish two wholly-owned subsidiaries: Beijing Xinyangfeng Modern Agriculture M&A Investment Co., Ltd., and Hubei Xinyangfeng Modern Agricultural Development Co., Ltd.

Once operational, they would engage in the R&D and production of new agricultural products and agricultural technologies whilst providing comprehensive market services.

On 5 April, 2016, the company announced the acquisition of a mixed farming enterprise (Kenorwal) covering an area of 2,300 ha in southern New South Wales, Australia for over USD3.84 million (AUD5 million), laying a foundation for the exploration of the agricultural market and the import of fertilisers from the Australian market.

On 10 July, 2016, it signed respective Strategic Cooperation Agreements with 110 first-level distributors (distributors which purchase products directly from manufacturers). These distributors will cooperate with Xinyangfeng Fertiliser at a deeper level by establishing joint ventures in the modern agricultural business.

CCM believes that severe overcapacity in the domestic compound fertiliser industry and the withdrawal of policy support are the main factors behind Xinyangfeng Fertiliser's industrial transition.

"Currently, national production capacity of compound fertilisers in China totals 200 million t/a. However, annual output and sales are only 50 million to 60 million tonnes each. In other words, the operating rate of the industry is less than 30%,” said Chen Hongkun, director of the National Engineering Research Center of Compound Fertilisers. “In the meantime, policy support for the industry in terms of things like railway freight, the prices of electricity and natural gas, and value-added tax has been gradually withdrawn since 2015."

Faced with depressed market conditions, Xinyangfeng Fertiliser formulated a strategy for development - industry transition. Despite a delay of two years in making headway with the process, Xinyangfeng Fertiliser is still the most likely company to accomplish such a transition.

According to CCM’s research, few large-scale phosphate fertiliser and compound fertiliser enterprises have taken steps in this direction in the past three years, only Xinyangfeng Fertiliser, Kingenta Ecological Engineering Group Co., Ltd., which sells the highest proportion of compound fertilisers in the domestic market, and Stanley Fertiliser Co., Ltd., which occupies the leading position in high-tower compound fertiliser manufacturing.

CCM believes that a diversified development strategy, including development in areas such as Internet, chemical engineering, agriculture and finance, and outstanding profitability from both ammonium phosphate and compound fertiliser businesses will enable Xinyangfeng Fertiliser to perform better financially in the near future.

In 2015, most Chinese fertiliser enterprises recorded declining profits. However, through vigorously development of new functional fertilisers and innovation of marketing methods, Xinyangfeng Fertiliser witnessed profit growth against the depressed market. According to its 2015 financial report, the company's net profit increased significantly by 30.69% YoY to USD112.19 million (RMB746 million) and its revenue rose by 15.17% to USD1.45 billion (RMB9.62 billion).

Notably, Xinyangfeng Fertiliser’s financial performance should also be boosted when the company's 2 million t/a new-type compound fertiliser and 600,000 t/a nitro-compound fertiliser project, currently under construction, is put into production. This is expected to happen at the end of 2016, after which time the project is estimated to contribute an annual profit of USD50.68 million (RMB337 million) to the company.

In early 2016, Yang Huafeng, general manager of Xinyangfeng Fertiliser, said: "Our fertiliser production capacity is expected to reach 6 million to 7 million t/a by 2020, with new-type fertilisers accounting for over half of all capacity. By that time, our sales should reach USD2.26 billion-3.01 billion (RMB15 billion-20 billion) and our profit margin should hit 12-15%. The agricultural sector in particular is expected to bring in USD75.19 million (RMB500 million) for the company that year."

This article comes from Phosphorus Industry China Monthly Report 1607, 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.

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Tag: phosphorus   fertilisers

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