In July 2016, Shandong Luba Chemical Co.,
Ltd. (Shandong Luba) announced that, in order to increase the working capital,
the company had borrowed USD30.18 million (RMB200 million) from the bank
through equity pledge. This is the second financing Shandong Luba conducted in
less than a year after successfully entering the New Third Board (=NEEQ,
National Equities Exchange and Quotations), and barely a month after the
company made its latest financing.
Source: Baidu
In fact, in June 2016, Shandong Luba
conducted a non-public-pricing issuance of 7,000,000 A-share in order to raise
USD19.90 million (RMB112 million). "These two financing is aimed to
supplement our working capital, enhance market extension and speed up business
development," explained Shandong Luba.
This caused industry insiders to raise
questions: Is Shandong Luba's frequent financing due to lack of funds or does
it aim to start some big projects?
On one hand, Shandong Luba needs working
capital to supplement financing gap. After the company entered the NEEQ on 10
Nov., 2015, it released the 2015 financial report at the end of April 2016,
which showed that its gross profit margin, total revenue and net profit largely
decreased:
-
Total revenue: USD194.49 million (RMB1.29
billion), down by 14.75% YoY
-
Net profit: USD30.33 million (RMB201
million) in 2015, down by 43.40% YoY
-
Comprehensive gross profit margin: down by
11.01 percentage points, influenced by the falling sales prices of pesticides
(down 27% YoY)
In addition, in 2015, Shandong Luba's
revenue from herbicides and domestic sales has declined by USD41.64 million
(RMB276 million) and USD33.50 million (RMB222 million) YoY respectively, which
was mainly affected by the falling paraquat price.
On the other hand, Shandong Luba needs
working capital to develop new projects as well. Shandong Luba is currently trying
to stabilize or increase its total revenue and net profit under the pressure
from both policy and market. According to the company's plans, it will continue
adjusting product structure to reduce the negative effect from the ban on
paraquat – further the construction of chloride pyridine project and the
development of substitutes for paraquat.
Therefore, Shandong Lubaauctually
needs more working capital to boost the construction of new projects, given the
weakened profitability of main products.
As of 31 Dec., 2015, Shandong Luba's total
assets and net assets were USD227.08 million (RMB1.51 billion) and USD184.23
million (RMB1.22 billion), up 12.41% and 18.83% YoY respectively.
Shandong Luba disclosed that it plans to
continue:
-
Specializing in R&D, production and
sales of high efficient, low toxic and low residual pesticides
-
Completing the product line of pyridine
pesticides and strengthening the development of downstream high efficient &
low toxic pesticides of chloride pyridine
-
Improving production techniques to become
the leading producer with clean chemical production techniques in China within
three years
-
Deepening the cooperation with
multinational pesticide enterprises
-
Consolidating existing sales channels,
strengthening management for marketing and safe production, as well as
improving innovation ability
-
Stabilizing growths in business scale,
trying to become top 10 environmentally friendly agrochemical enterprise in
China within three years
This article comes from Herbicides China News 1608, CCM
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Tag: paraquat herbicides