CCM: Hubei Xingfa: fall in net profit in H1 2016 due to depressed phosphate fertiliser market 08-19-2016

At the end of July 2016, Hubei Xingfa Chemicals Group Co., Ltd. (Hubei Xingfa) released its financial figures for the first half of 2016 (H1 2016). Specifically:

  • Revenue: USD997.93 million (RMB6.61 billion), down 0.84% YoY
  • Net profit: USD5.28 million (RMB35 million), down 32.72% YoY


                                             

Source: Baidu


Hubei Xingfa attributed its fall in net profit mainly to the increasingly depressed phosphate fertiliser market in China which was resulting from the falling prices of agricultural produce and the persistently stagnant global market.


Take monoammonium phosphate (MAP), 57% powder, as an example. As of June 2016, the market price in East China dropped to USD261.03/t (RMB1,730/t) from USD331.94/t (RMB2,200/t) in the corresponding period of last year. This has led to a YoY decline in the gross profit margin of Hubei Xingfa’s phosphate fertiliser business in H1 2016 – from 13.44% to only 5.23%.


Additionally, its subsidiary engaged in phosphate fertiliser production, Yidu Xingfa Chemical Co., Ltd., also suffered a loss of USD8 million (RMB53.02 million) in H1 2016.




Contrary, Hubei Xingfa’s phosphorus chemical business (covering phosphorus ore, yellow phosphorus and its downstream products) performed relatively stable in H1 2016. Key figures were:

  • Revenue: USD243.52 million (RMB1.61 billion), down 21.15% YoY
  • Gross profit margin: 32.10%, up 7.05 percentage points YoY


Though the traditional phosphorus chemical business continued to be stagnant, Hubei Xingfa has begun to profit from its phosphorus-silicone integrated business in H1 2016. According to its financial report, its 100,000 t/a silicone project and 60,000 t/a glyphosate project were put into production during the report period.


In spite of depressed market conditions, the gross profit margin of its glyphosate business managed to stand at 13.31%, showing remarkable competitiveness. In addition, its chlor-alkali and silicone business also recorded a significant YoY increase of 52.25% in revenue and a YoY growth of 2.24 percentage points in gross profit margin (from 11.13% to 13.37%) in H1 2016.

 

According to CCM’s research, Hubei Xingfa has been making successive investments in recent years. These huge investments were not only into glyphosate, silicone and phosphate fertiliser businesses, but also into the phosphorus ore resource business as well. For instance:

  • In April 2016: an investment of USD150.88 million (RMB1 billion) into a new 3 million t/a low grade collophanite benefication and deep-processing project
  • In June 2016: an investment of USD73.93 million (RMB490 million) for acquisition of 49% of shares in Yichang Fengye Chemical Co., Ltd.


CCM believes that a complete business layout covering the whole phosphorus chemical industry chain as well as a phosphorus-silicone integrated development strategy will help Hubei Xingfa stand out among Chinese phosphorus chemical enterprises.


With more and more new projects put into production, synergistic effects from diversified businesses are expected to boost Hubei Xingfa’s profitability in the future. The company predicted a YoY increase of 12.17% in its revenue to USD2.10 billion (RMB13.90 billion) in the whole of 2016, according to its H1 financial report.

  

This article comes from Phosphorus Industry China Monthly Report 1608, 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: phosphorus  phosphate


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