[TodayIR] GLOBAL BIO-CHEM: Global Bio-Chem Posted Interim

 [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.
 
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