CCM: Global Sweeteners: turnaround in full-year 2015 financial performance

  On 25 April, 2016, Global Sweeteners Holdings Limited (Global Sweeteners) released its full-year 2015 financial report. Accordingly,

  Sales: USD21.26 million (HKD1.65 billion, USD/HKD exchange rate @ 0.1289 on 26 April, 2016, sourced on hexun.com), down by 43.5% YoY

  Gross profit: +USD11.34 million (HKD88 million), vs. -USD24.49 million (HKD190 million)

  
The decline in sales can be mainly attributed to decreased sales, which further resulted from the fallen output of corn starch and corn starch sugar (incl. glucose syrup, maltose syrup, high fructose corn syrup - HFCS, crystalline glucose and maltodextrin) caused by the production suspension of its production base in Lvyuan Dist., Changchun City, Jilin Province (Changchun plant hereinafter), and the lowered operating rate of its production base in Jinzhou City, Liaoning Province (Jinzhou plant hereinafter). Specifically:

  Corn starch: sales at 83,000 tonnes, down by 68.10% YoY

  Corn syrup (incl. glucose syrup, maltose syrup and HFCS): sales at 143,000 tonnes, down by 40.90% YoY

  
The turnaround in profit can be ascribed to the better performance of its corn starch business. In 2015, thanks to the decreased corn price (by 15% YoY) and the increased sales price (by 2.9% YoY to USD428/t - HKD3,322/t), Global Sweeteners achieved the gross profit margin of +5.8%, vs. -21.2% in 2014.

  
Notably, the company did not perform well in its starch sugar business in 2015. Accordingly,

  
- Corn syrup

  Sales at USD67.41 million (HKD523 million), down by 38.7% YoY

  Gross profit at USD6.45 million (HKD50 million), down by 94.0% YoY

  Gross profit margin at 9.5%, down by 1.9 percentage points YoY

  
The fall in sales was caused by the decline in sales volume, by 40.7% YoY, which can further be put down to the production suspension of its Changchun plant. Meanwhile, the downs in gross profit and gross profit margin resulted from the lowered operating rate of its Jinzhou plant, which pushed up the production costs by 5.4%.

  
- Corn starch sugar (solid)

  Sales at USD35.83 million (HKD278 million), down by 50.6% YoY

  Gross profit at USD3.09 million (HKD24 million), down by 60.7% YoY

  Gross profit margin at 8.7%, down by 2.1 percentage points YoY

  
The slump in sales was on account of the decline in sales volume, by 45.9% YoY, which was also because of the production suspension of its Changchun plant. Meanwhile, the drops in gross profit and gross profit margin were the results of the decreased average sales price, by 7.9% YoY to USD418/t (HKD3,245/t).

  
In 2016, Global Sweeteners will seize the opportunity (plant relocation) to adjust the production capacity.

  
On 14 April, the company announced to relocate its Changchun plant from Lvyuan Dist. to Xinglongshan Town. Accordingly, the removal of the upstream production facilities set in April 2014 originally was reset in Q2 2017, and that of the downstream ones set in Q4 2015 was reset in April 2016.

  In order to reduce the breaks in production and operation, Global Sweeteners plans to carry out the relocation in phases. In addition, it will optimise the production capacity.

  
This will be favourable for the company to cut down the production costs and meanwhile to create new profit growth points by developing high added value products based on market demand.

  
Global Sweeteners' plan to relocate Changchun plant, April 2016