[TodayIR] GLOBAL BIO-CHEM: Global Bio-Chem Posted Interim Revenue of HK$5.1 Billion Slowdown in economic growth in Mainland China, together with the outbreak of bird flu had affected the unaudited interim results for the six months ended 30 June 2013 (the “Period”) of Global Bio-chem Technology Group Company Limited (“Global Bio-chem” or the “Company” stock code: 00809) and its subsidiaries (the “Group”). The Group reported a consolidated revenue of HK$5.1 billion for the Period (2012 same period: HK$6 billion) and a net loss attributable to owners of the parent of HK$1,566 million (2012 same period: net loss of HK$99 million), mainly due to a gross loss in polyol chemicals segment and a provision of closing inventories of polyol chemicals of HK$334 million and an impairment loss of HK$581 million for the polyol chemicals production facilities. The board of directors has resolved not to declare an interim dividend for the six months ended 30 June 2013 (2012 same period: nil). The decline in operating results was mainly attributable to rising raw material costs and decrease in the average selling prices (“ASP”) and demand of the Group’s products, among which lysine products were adversely affected by the emergence of bird flu in China. In addition, owing to decreased selling prices and unfavourable market conditions, the Group recorded impairment loss for the inventory of the polyol chemicals products and the relevant production facilities. As a result, the Group posted a gross loss of HK$214 million (2012 same period: gross profit: HK$863 million). To better allocate its resources, the Group restructured its business segments since 2013, and integrated the corn refined products segment with its value-added downstream products segment. Accordingly, the Group’s operations for the Period comprised amino acids segment, polyol chemicals segment and corn sweeteners segment. The amino acids segment consisted of major product lines (“Major Products”) such as lysine, protein lysine, threonine, arginine, and other products including modified starch and by-products – corn refined products. The revenue and gross profit of amino acids segment for the Period decreased by approximately 24 per cent and 85 per cent year-on-year to HK$3.1 billion and HK$109 million respectively. The decrease in performance was mainly attributable to the heavy pressure on ASP and inflating cost of corn. The fall in ASP was mainly triggered by additional capacity released in the market and adverse impact of the H7N9 bird flu outbreak. When taking into account only the Major Products, the revenue and gross profit of the amino acids products amounted to approximately HK$2.5 billion (2012 same period: HK$3.2 billion) and approximately HK$160 million (2012 same period: HK$754 million) respectively. Nevertheless, the Group managed to sustain a 7 per cent growth in lysine sales volume, by capitalising on the steady growing demand from the animal feed market. With regard to modified starch and corn refined products within the amino acids segment, they recorded a gross loss of HK$2 million (2012 same period: gross profit HK$13 million) and HK$56 million (2012 same period: gross loss HK$38 million) respectively for the Period, mainly due to rising costs. During the Period, unfavourable market conditions in the chemical industry led to a decline in selling price of polyol chemicals. As a result, the Group’s polyol chemicals products generated a revenue of approximately HK$79 million (2012 same period: HK$184 million) and reported a gross loss of approximately HK$398 million (2012 same period: HK$75 million) for the Period. Moreover, the Group had to make an additional provision of closing inventories of polyol chemicals of approximately HK$334 million as at 30 June 2013 (2012 same period: HK$58 million). In view of the challenging operating conditions of the polyol chemicals business, this segment operation has been temporarily suspended since June 2013. The Group’s corn sweeteners segment is operated by a listed subsidiary, namely Global Sweeteners Holding Limited. During the Period, the operating environment of corn sweeteners was depressed by increasing raw material costs. The revenue and sales volume of the corn sweeteners division dropped by approximately 7 per cent and approximately 6 per cent as compared with those of the same period of last year. As such, the gross profit from this segment decreased to approximately HK$98 million (2012 same period: HK$181 million). Looking into the second half of the year, Mr Liu Xiaoming, Chairman of Global Bio-chem, said: “As the global economic condition remains uncertain, the Group will continue to adopt cautious strategies in consolidating its existing operations. The recent collaboration with Archer Daniels Midland Company, a company incorporated in Delaware US and which is one of the world’s largest livestock producing areas, will enable us to extend our market reach to the South American continent. With regard to an increasing market competition of the amino acids industry, the Group will gradually increase volume sales according to market demand and pursue prudent strategies including improvements in technology know-how, production efficiency and cost controls to maintain our leading position in the market.” For the polyol chemicals business, the resumption of the operation of the production facilities with an annual capacity of 200,000 metric tonnes will be endorsed by meliorating market conditions. However, the second phase construction with an annual production capacity of 500,000 metric tonnes in Xinglongshan will be halted in 2013. Considering the challenging market outlook, the Group will persist with its cautious approach in managing its financial resources and optimising its production operations. Capital expenditure will be controlled to focus on equipment and facilities maintenance. Other expenses will also be minimised to maintain a sound financial position to weather volatile market environment.
[TodayIR] GLOBAL BIO-CHEM: Global Bio-Chem Posted Interim
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