At the end of July 2016, Hubei Xingfa Chemicals Group Co., Ltd. (Hubei Xingfa)
released its financial figures for the first half of 2016 (H1 2016).
Specifically:
-
Revenue: USD997.93 million (RMB6.61
billion), down 0.84% YoY
-
Net profit: USD5.28 million (RMB35
million), down 32.72% YoY
Source: Baidu
Hubei Xingfa attributed its fall in net profit mainly to the increasingly
depressed phosphate fertiliser market in China which was resulting from the
falling prices of agricultural produce and the persistently stagnant global
market.
Take monoammonium phosphate (MAP), 57% powder, as an example. As of June 2016,
the market price in East China dropped to USD261.03/t (RMB1,730/t) from
USD331.94/t (RMB2,200/t) in the corresponding period of last year. This has led
to a YoY decline in the gross profit margin of Hubei Xingfa's phosphate
fertiliser business in H1 2016 – from 13.44% to only 5.23%.
Additionally, its
subsidiary engaged in phosphate fertiliser production, Yidu Xingfa Chemical
Co., Ltd., also suffered a loss of USD8 million (RMB53.02 million) in H1 2016.
Contrary, Hubei Xingfa's phosphorus chemical business (covering phosphorus ore,
yellow phosphorus and its downstream products) performed relatively stable in
H1 2016. Key figures were:
-
Revenue: USD243.52 million (RMB1.61
billion), down 21.15% YoY
-
Gross profit margin: 32.10%, up 7.05
percentage points YoY
Though the traditional phosphorus chemical business continued to be stagnant,
Hubei Xingfa has begun to profit from its phosphorus-silicone integrated
business in H1 2016. According to its financial report, its 100,000 t/a
silicone project and 60,000 t/a glyphosate project were put into production
during the report period.
In spite of depressed market conditions, the gross
profit margin of its glyphosate business managed to stand at 13.31%, showing remarkable
competitiveness. In addition, its chlor-alkali and silicone business also
recorded a significant YoY increase of 52.25% in revenue and a YoY growth of
2.24 percentage points in gross profit margin (from 11.13% to 13.37%) in H1
2016.
According to CCM's research, Hubei Xingfa
has been making successive investments in recent years. These huge investments
were not only into glyphosate, silicone and phosphate fertiliser businesses,
but also into the phosphorus ore resource business as well. For instance:
-
In April 2016: an investment of USD150.88
million (RMB1 billion) into a new 3 million t/a low grade collophanite
benefication and deep-processing project
-
In June 2016: an investment of USD73.93
million (RMB490 million) for acquisition of 49% of shares in Yichang Fengye
Chemical Co., Ltd.
CCM believes that a complete business layout covering the whole phosphorus
chemical industry chain as well as a phosphorus-silicone integrated development
strategy will help Hubei Xingfa stand out among Chinese phosphorus chemical
enterprises.
With more and more new projects put into production, synergistic
effects from diversified businesses are expected to boost Hubei Xingfa's
profitability in the future. The company predicted a YoY increase of 12.17% in
its revenue to USD2.10 billion (RMB13.90 billion) in the whole of 2016,
according to its H1 financial report.
This article comes from Phosphorus Industry China Monthly Report 1608, CCM
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Tag: phosphorus phosphate