CCM: Meihua Bio to focus on high value-added amino acids

  On 1 March, 2016, Meihua Holdings Group Co., Ltd. (Meihua Bio) released its 2015 financial figures. Specifically, its revenue achieved USD1.81 billion (RMB11.85 billion), up by 20.15% over 2014, while the net profit was USD65.07 million (RMB425 million), down by 14.95%. This was mainly caused by rises in sales volumes and falls in sales prices.

  - Sales volume of glutamic acid and monosodium glutamate

  
•     Small   packs: 29,000 tonnes, down by 1,600 tonnes YoY   
  
•     Large   packs: 650,000 tonnes, up by 140,000 tonnes YoY   
  
•     Glutamic   acid: very small proportion in this business   

  
This was mainly because Meihua Bio shifted the strategy from expanding terminal markets, such as supermarkets, to developing clients preferring large packs.

  
- Sales volume of other amino acids

  
•     70%   Lysine: 206,000 tonnes, up by 79,000 tonnes YoY   
  
•     98%   Lysine: 127,000 tonnes, up by 38,000 tonnes YoY   

   Thanks to the 10,000 t/a production line in Xinjiang production base, production has continued to increase since it went into operation in 2014. Moreover, Meihua Bio took up bigger shares in lysine market when Global Bio-chem Technology Group Co., Ltd.'s production line (600,000 t/a) was shut down due to the company's restructuring from March to Dec. in 2015.

  
•     Threonine:   68,000 tonnes, up by 30,000 tonnes YoY   

  
This increase was mainly promoted by the continuous capacity release of the 60,000 t/a threonine project in Xinjiang production base.

  Notably, part of the Meihua Bio's amino acids' sales prices kept falling. According to CCM's research, the average price of the company's 98% lysine in 2015 was USD1,245/t, decreasing 6% YoY; 99% threonine's sales price even declined by 50% to USD2,140/t. The gross profit margin thus fell to 15.86%, down by 4.59 percentage points, lowering the net profit.

  Meihua Bio's financial performance, 2011-2015

  Source: Meihua Holdings Group Co., Ltd.

  Meihua Bio's production and sales volume of selected products, 2015

           Note: *152,815 (output)> 145,000 t/a (designed capacity), thanks to technological upgrading in 2015, according to Meihua Bio.

  Source: Meihua Holdings Group Co., Ltd.

  Notably, part of theMeihua Bio's amino acids' sales prices kept falling. According to CCM's research, the average price of the company's 98% lysine in 2015 was USD1,245/t, decreasing 6% YoY; 99% threonine's sales price even declined by 50% to USD2,140/t. The gross profit margin thus fell to 15.86%, down by 4.59 percentage points, lowering the net profit.

  Monthly market prices of 98.5% lysine and 99% threonine in China, 2014-2015

  Source: CCM

  Meihua Bio shifted its focus from glutamic acid and monosodium glutamate to other amino acids. From 2011 to 2015, the percentage that glutamic acid and monosodium glutamate took up in the total revenue fell from 56% to 42%, whereas the percentage of other amino acids, especially lysine and threonine, rose from 22% to 38%. Meihua Bio has stood firm in the monosodium glutamate and glutamic acid market, accounting for 35% of the sales in 2015. Therefore, the company will mainly focus on the business of high value-added amino acids to seek new profit growth and construct a global-scale amino acid production base.

  Meihua Bio believes, "The trend of 'oligopoly' will be more obvious in amino acid market in 2016.' In 2015, China's amino acids were under oversupply. For instance:
Lysine:

  
•     Capacity:   1.8 million t/a   
  
•     Output:   1.3 million tonnes   

  
Threonine:

  
•     Capacity:   580,000 t/a   
  
•     Output:   300,000 tonnes   

  
Consequently, enterprises compete for bigger shares in the overseas market to increase sales. Several lysine and threonine giants have emerged after capacity expansion and intense market competition. At present, Ningxia EPPEN Biotech Co., Ltd., Global Bio-chem Technology Group Co., Ltd. and Meihua Bio are the top three lysine giants in China, combined to take up 70%+ of the sales. The top two threonine giants include: Fufeng Group Co., Ltd. and Meihua Bio, combined to take up 60%+ of the sales.

  For this, in 2016, Meihua Bio plans to:

  
•     Improve   manufacturing techniques to lower production cost   
  
•     Develop   end clients like feed mills and big clients in the overseas market to   boost sales and realize the goal of zero stock   

  Meihua Bio's product structure by revenue, 2011-2015

  Source: Meihua Holdings Group Co., Ltd.

    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. More about CCM, please visit www.cnchemicals.com.