On 22 Nov., 2012, Anhui Huaxing Chemical Industry Co., Ltd. (Anhui Huaxing) released an announcement which claimed that Anhui Huaxing has successfully transferred its 51% equity of Anhui Huaxing Construction Investment Co., Ltd. (Anhui Huaxing Construction Investment), by listing at a reserve price of USD13.28 million (RMB82.72 million), to Guoneng Business Co., Ltd. (Guoneng Business) in Anhui Shares Exchange on 21 Nov., 2012. Besides, Anhui Huaxing also transferred Anhui Huaxing Construction Investment's total creditors' right of about USD8.45 million (RMB52.61 million) to Guoneng Business. After the completion of this deal, Anhui Huaxing will divest real estate business and receive about USD21.73 million (RMB135.33 million), according to CCM’s December Issue of Glyphsoate China Monthly Report.
This is the second time for Anhui Huaxing to transfer its equity of Anhui Huaxing Construction Investment. After this equity transfer, Anhui Huaxing will not hold any equity of Anhui Huaxing Construction Investment, and the shareholders of Anhui Huaxing Construction Investment will be Guoneng Business and Jiangsu Lugang Real Estate Co., Ltd. (Jiangsu Lugang).
There are three important reasons for Anhui Huaxing to transfer the rest equity of Anhui Huaxing Construction Investment this time, namely centralizing resources to develop its main business, shortage of working capital and the uncertain deal with CEFC Shanghai Oil Group Co., Ltd. (CEFC Shanghai).
Firstly, developing main business for Anhui Huaxing becomes one of the most important things due to bad operating performance. The operating performance of its main business–glyphosate business has been bad since 2009. Except in 2009, Anhui Huaxing suffered huge operating losses in 2010 and 2011. In Q1-Q3 2012, glyphosate market has improved greatly, but Anhui Huaxing still suffered an operating loss of about USD0.36 million. The revenue from glyphosate business has also decreased year by year since 2009, but the cost has been kept at a high level, making profitability decline sharply in glyphosate business, and the gross profit margin in glyphosate business was about -0.12% and -2.21% respectively in 2010 and 2011.
Secondly, shortage of working capital is very hard to improve. Since 2009, Anhui Huaxing's working capital has been decreasing year by year. In H2 2012, glyphosate market has improved and the average ex-works price of glyphsoate technical reached about USD5,200/t, up by about 30% compared to H1 2012, which, however, still can't prevent an decline of its working capital. Specifically, Anhui Huaxing's working capital has fallen to about -USD0.2 million as of March 2012 and it decreased sharply to about -USD3.78 million as of Sept. 2012. Besides, the structure of assets and liabilities of Anhui Huaxing has been becoming unreasonable since 2009 and financing difficulty has been increased accordingly, which will be a challenge for Anhui Huaxing to conduct business stably and sustainably and deteriorate Anhui Huaxing's shortage of working capital in turn.
Thirdly, the uncertain deal between Anhui Huaxing and CEFC Shanghai. Anhui Huaxing cosigned an agreement with CEFC Shanghai On 19 July, 2012, which promised that Anhui Huaxing would receive a cash investment of about USD308.99 million from CEFC Shanghai by issuing its additional shares of 452.25 million to CEFC Shanghai. After the deal, the total shares of Anhui Huaxing will be 746.11 million shares, and CEFC Shanghai will hold 60.61% of the total. But so far, the deal hasn't been approved by China Securities Regulatory Commission (CSRC). "The issuing proposal has been approved by the board of directors and shareholders. Besides, the application materials of this issuing proposal have been submitted to CSRC, and our company has received CSRC's formal acceptance notice now but heard nothing about the approval of the proposal at present ," said the Securities Affairs Representative of Anhui Huaxing.
Anhui Huaxing transferred 49% equity of Anhui Huaxing Construction Investment to Jiangsu Lugang on 5 Nov. 2009 at about USD10.62 million, with a value-added rate of 192.21%, and Anhui Huaxing achieved a value-added rate of 263.48% from the 51% equity transfer of Anhui Huaxing Construction Investment.
Anhui Huaxing Construction Investment, set up in June 2009 with a registered capital of USD8.03 million, is engaged in the development and sales of real estate, estate management and housing agency. As of 30 June 2012, the total assets and net assets of Anhui Huaxing Construction Investment were USD28.41 million and USD7.16 million respectively, and its net assets was assessed to be USD26.04 million with an assessed appreciation of USD18.87 million. Anhui Huaxing Construction Investment has not achieved operating revenue and it suffered a net profit loss of about USD0.09 million as of 30 June, 2012. The most important asset of Anhui Huaxing Construction Investment is the land use right of 100,000 m2 with 70-year validity located in the Economic Development Zone of Hexian County, Ma'anshan City, Anhui Province, and Anhui Huaxing obtained the land use right on 2 June, 2009 at USD7.42 million and hasn't developed the land up to now.
Source: Glyphsoate China Monthly Report 1212
http://www.cnchemicals.com/Newsletter/NewsletterDetail_14.html
Content of Glyphsoate China Monthly Report 1212:
Zhejiang Wynca achieves great performance in Q3 2012
Nantong Jiangshan still faces funding chain crisis under sound performance
Anhui Huaxing turns loss into gain in Q3 2012
Nufarm’s operating performance continues to improve in fiscal year 2012
Glycine market doesn’t improve essentially in Q1-Q3 2012
Overview of three listed glyphosate companies' operating performance in Q1-Q3 2012
Total sales of eight glyphosate companies takes up 17.81% of the total sales of China top 100 pesticide companies in 2011
Glyphosate price keeps stable in Nov. 2012
Export price of glyphosate technical up 10.18% MoM in Sept. 2012
Analysis of glyphosate export in Q3 2012
Glyphosate China Monthly Report, a monthly publication issued by CCM on 20th of every month, will keep track of latest dynamics, hotspots and competitiveness analysis, and forecasts on market trends of China’s glyphosate industry.
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