A number of feed manufacturers have predicted financial growth in H1 2016, mainly due to increased demand from the pig farming industry and owing to a larger proportion of highly profitable products being sold and low production costs of raw materials.
Fosun Pharma acquired the Indian pharmaceutical producer Gland for no more than USD190.26 million (RMB1.26 billion), an acquisition cost breaking record high. At present, more enterprises are marching into the rapidly developing acetylcysteine market.
Adisseo announced a surge in H1 2016 net profit by 109% YoY, mainly thanks to increase of methionine production capacity, large rise in VA price and decrease in crude oil prices.
By-health suffered a YoY fall of 13.94% in net profit, mainly affected by the surge in brand promotion expenses. The company, focusing on developing vitamin healthcare products, has only one amino acid product. Meanwhile, it also faces fierce competition in this market.
In H1 2016, Meihua Bio recorded fall in revenue but rise in net profit, affected by the falling sales prices and reduction in production costs of raw materials. Given the further decreased corn price and higher environmental pressure confronted its rivals, the company may continue enjoying favorable business development condition in the coming period, according to analyst CCM.
On 19 Aug., 2016, Yongan Pharmaceutical released its financial report for H1. In particular, its net profit recorded significant growth thanks to the increased sales volume and price of its leading product, taurine.
In H1 2016, Fufeng Group's gross profit increased slightly, mainly thanks to the well-performed threonine and premium amino acid businesses. In the coming period, the company plans to break into the cosmetics industry through further developing its premium amino acids.
In early Aug. 2016, domestic lysine producers slightly reduced their quotations, mainly affected by the weakening demand and tightening supply. Analyst CCM predicted that this situation is likely to go on for a short term but the lysine price may rebound in the coming period.
In H1 2016, China's export volume of lysine ester & salt rose by 13% YoY, mainly supported by the low export price and the increased export to the Netherlands. Notably, H1 also saw increases in export volume of many other amino acids.
Yongan Pharmaceutical: significant rise in H1 2016 net profit
On 19 Aug., 2016, Qianjiang Yongan Pharmaceutical Co., Ltd. (Yongan Pharmaceutical) released its financial figures for H1:
- Revenue: USD44.06 million (RMB292.00 million), down 3.04% YoY
- Net profit: USD5.28 million (RMB35.00 million), up 180.65% YoY
- Net profit with extraordinary items deducted: USD3.47 million (RMB23.00 million), up 462% YoY
Specifically, the revenue from ethylene oxide wet down by 51.9% YoY to USD4.98 million (RMB33.00 million), dragging down the total revenue. On the contrary, the company's sales of taurine reached USD35.01 million –RMB234.00 million (80% of the total), up 14.4% YoY. Thanks to the increased sales volume and price of taurine and the reduction in financial loss brought by ethylene oxide business (gross profit margin at -55.9%), Yongan Pharmaceutical realised great growth in net profit.
Taurine, a non-protein amino acid, is not only widely applied in milk powder, dairy products, functional drinks, healthcare products and composite monosodium glutamate, but also started to be used in the fields of agriculture, aquaculture and chemical industry. It is largely demanded in European and American countries / regions as well as Japan. Every year, around 50,000 tonnes of taurine is needed in Europe and America, of which 45% were for drinks, 30% for pet food, 14% for healthcare food, 8% for feed and 2% for pharmaceuticals.
The Chinese taurine market is of great potential. At present, merely 5,000-6,000 tonnes were consumed in China every year. This figure can mount to 40,000 tonnes, if the annual consumption per capita among the 1/3 of the 380 million Chinese children reaches 300 g (vs. 500+ g among Japanese children).
So far, European and American countries / regions have stopped production of taurine out of environmental concerns. China and Japan are the two leading producers – global production capacity stands at 80,000-90,000 t/a, output at around 70,000 tonnes, of which 10,000+ tonnes were produced Japan and approximately 50,000 tonnes by China.
According to CCM's research, over 40 Chinese enterprises obtained production licenses for taurine. Yet, the production is highly concentrated: the top three manufacturers account for 90%+ of the national output. Besides Yongan Pharmaceutical (50%+ of the global sales, about 80% of its products exported), other leading producers include Jiangsu Yuanyang Phamaceutical Co., Ltd. and Huibei Grand Fuchi Pharmaceutical & Chemicals Co., Ltd.
As the taurine market further develops and increasing consumers incline to healthy diets, demand for taurine increases year by year. As a result, market supply started to get tight, directly pushing up the market price. According to CCM's price monitoring, the taurine market price went up steadily in Q1 2016 and to Aug., the figure mounted to USD3,018-3,319/t (RMB20,000-21,000/t), up 15% over the average price in 2015. Prior to this, taurine price stayed low in the past few years. Yongan Pharmaceutical quoted as low as USD2,188/t – RMB14,500/t (tax excluded) in 2015. Thanks to the increased taurine price in H1 2016, Yongan Pharmaceutical's gross profit margin of taurine business rose by 6.9 percentage points to 35.1%.
Yongan Pharmaceutical's core competitiveness lies in its patented production technique for taurine through introduction of ethylene oxide. This high-tech preparation method, different from the traditional interval production technique that requires normal temperature and pressure, realised consecutive production under specific temperature and pressure. It not only lowers production costs and improves product quality and production efficiency, but also reduces influence on the environment.
In Sept. 2015, the company upgraded this technique and obtained a patent named Method for Preparing Taurine through Solid Isethionic Acid Sodium Salt (patent No.: CN201510410992.X). Thanks to this new method, taurine content in crude products reaches 93%+ and the mother liquid can also be well utilized.
Notably, Yongan Pharmaceutical has vigorously developed taurine healthcare products. In H1 2016, the company's wholly-owned subsidiary in charge of this business, Yongan Kangjian Pharmaceutical (Wuhan) Co., Ltd.,
- Obtained the High-Tech Enterprise Certificate in March
- Finished renewing business range of its healthcare product production license
- Launched its key taurine healthcare products "Yongan Kangjian?Yijia Effervescent Tablet", and taurine powder
- Applied for production licenses for 11 healthcare products, of which 3 was obtained, 3 in technical review, 3 under evaluation by the Inspection Centre of the China Food and Drug Administration and 1 in preparation of application materials
- Applied for 13 trademarks and had obtained 37 (in 12 categories)
At present, the nation is imposing stringent environmental regulations. In this context, the heavily polluting taurine producers may cut down their output. Therefore, analyst CCM predicted that the tight supply of taurine may go on and its market price is likely to continue rising.
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