Wednesday, February 28, 2024
 
Columnist
Martin Hennecke
 
GLOBAL SWEET
HKEx Stock Code : 03889 
 
Corporate Profile
The Group is involved in the manufacture and sale of corn refined products and corn based sweetener products.

Business Review - For the year ended December 31, 2012

Upstream products

(Sales amount: HK$1,876 million (2011: HK$1,581 million))
(Gross profit: HK$49 million (2011: HK$105 million))

With respect to raw material prices fluctuations, it has always been one of the Group's main objectives to secure our corn kernel supply at the lowest cost. Subject to market movements, the Group will explore possibilities to better utilise our current corn storage facilities, further reduce corn costs and to secure our corn supply with a more comprehensive corn procurement policy and network. To achieve this, in the fourth quarter of year 2011, the Group established two silos at corn originations to procure corn directly from local farmers. It is expected that such arrangements will further secure the quality and abundant supply of corn kernel at the lowest cost.

During the Year, the revenue and gross profit of corn procurement business amounted to approximately HK$155 million and HK$10 million (2011: nil and nil) respectively. Internal consumption of corn kernels for upstream production during the Year amounted to approximately 74,000 MT (2011: Nil).

During the Year, the sales volume of corn starch and other corn refined products were approximately 270,000 MT (2011: 305,000 MT) and 294,000 MT (2011: 204,000 MT) respectively. Internal consumption of corn starch was approximately 181,000 MT (2011: 167,000 MT), which was used as raw material for production in the Group's Changchun, Jinzhou and Shanghai production sites.

The average selling prices of corn starch increased by approximately 3.0% to HK$3,400 per MT (2011: HK$3,300 per MT) while other corn refined products remained flat at HK$2,800 per MT (2011: HK$2,800 per MT) as compared to the corresponding period last year. However, cost of sales increased by approximately 14.0% which was mainly attributable to the increase in raw material costs and other manufacturing costs as a result of inflationary pressure in the PRC. In addition, the average selling price of corn starch increased slightly during the Year due to the stagnant corn starch market. Consequently, the corn starch segment recorded a gross profit margin of approximately 9.6% (2011: 17.3%) while other corn refined products segment recorded a gross loss margin of approximately 6.0% (2011: 12.7%) during the Year.

The Group's upstream business has been hammered by the slowdown of China's economic growth, weak export and excess supply in the market since the fourth quarter of 2011. This situation continued during the Year and is expected to continue in the first half of 2013.

Nevertheless, as the preliminary China Manufacturing Purchasing Managers Index rose to its 24-months high in January 2013, it is believed that this will boost the market confidence in China's outlook for year 2013. The management believes the operating environment in China will gradually improve starting from the third quarter of 2013.

Corn syrup

(Sales amount: HK$1,824 million (2011: HK$1,682 million))
(Gross profit: HK$231 million (2011: HK$274 million))

On 30 March 2012, the Group entered into an agreement for the acquisition of the remaining shareholding of jointly-controlled entities from Cargill, Incorporated (¡§Cargill¡¨). The acquired entities are principally engaged in the manufacture and sale of high fructose corn syrup 42 (¡§HFCS 42¡¨) with an annual production capacity of 120,000 MT in Shanghai. The acquisition has enhanced the Group's operational efficiency and management flexibility over production planning and human resources deployment.

Shanghai Hao Cheng Food Development Co., Ltd. (¡§Haocheng¡¨), one of the Group's subsidiaries, has developed a well-marketed brand name ¡§Haocheng¡¨ for all sweeteners products produced in Shanghai. With the success of the brand name, Haocheng sold 6,800 MT of HFCS 42 during the Year (2011: nil), generating a revenue of HK$24 million (2011: nil) approximately, with a gross profit and gross profit margin of approximately HK$3 million and 14.0% (2011: nil and nil) respectively. For the new product HFCS 55, production of which commenced in December 2011, it recorded a sales volume and revenue of approximately 25,000 MT and HK$103 million (2011: nil and nil) respectively during the Year with a gross profit and gross profit margin of approximately HK$18 million and 17.1% respectively.

During the Year, the average selling price of glucose syrup decreased by approximately 2.9% while the sales volume increased to approximately 302,000 MT (2011: 278,000 MT) as compared to the corresponding period last year. Consequently, the revenue of glucose syrup grew by approximately 5.6% to approximately HK$870 million (2011: HK$824 million).

The average selling price of maltose syrup during the Year remained flat while the sales volume decreased by approximately 3.3% to 234,000 MT (2011: 242,000 MT) as compared to the corresponding period last year. As a result, the revenue of maltose syrup decreased by approximately 3.6% to HK$827 million (2011: HK$858 million).

Internal consumption of glucose syrup for downstream production during the Year decreased to approximately 164,000 MT (2011: 281,000 MT) which was mainly attributable to the decrease in production volume of crystallised glucose.

As a result of the significant increase in raw material price as compared to the corresponding period last year, gross profit margins of glucose syrup and maltose syrup segments decreased to approximately 12.1% (2011: 15.9%) and 12.7% (2011: 16.6%) respectively.

During the Year, the Group sold approximately 235,000 MT (2011: 204,000 MT) of glucose syrup to the Global Bio-Chem Technology Group Company Limited (¡§GBT¡¨) and its subsidiaries (other than members comprising the Group and the Company's jointly-controlled entities, the ¡§GBT Group¡¨).

Corn syrup solid

(Sales amount: HK$820 million (2011: HK$1,012 million))
(Gross profit: HK$71 million (2011: HK$166 million))

The revenue of corn syrup solid decreased by approximately 19.0% during the Year. It was mainly attributable to the decrease in sales volume of crystallised glucose. The average selling price of crystallised glucose increased by approximately 20.0% while sales volume decreased by approximately 55.5% to 65,000 MT (2011: 146,000 MT). Consequently, the revenue of crystallised glucose decreased by approximately 46.5% to approximately HK$255 million (2011: HK$477 million).

During the Year, the average selling price of maltodextrin decreased by approximately 1.3% while the sales volume increased by 6.8% to approximately 156,000 MT (2011: 146,000 MT). As a result, the revenue of maltodextrin increased by approximately 5.6% to approximately HK$565 million (2011: HK$535 million).

Due to the drop in sales volumes and the rise in raw material cost during the Year, cyrstallised glucose segment recorded a gross profit of approximately HK$15 million (2011: HK$79 million) with a gross profit margin of 5.8% (2011: 16.5%); while maltodextrin segment recorded a gross profit of approximately HK$56 million (2011: HK$87 million) with a gross profit margin of 10.0% (2011: 16.3%).

During the Year, the Group sold approximately 8,000 MT (2011: 77,000 MT) of crystallised glucose to the GBT Group.

Retail business

(Loss from discontinued operations: HK$120 million (2011: HK$2 million)) As the Company has decided to exit its retail beef business, this segment has been presented as discontinued operation and net loss of approximately HK$120 million.

Export sales

During the Year, the Group exported approximately 73,000 MT (2011: 47,000 MT) of upstream corn refined products and approximately 15,000 MT (2011: 29,000 MT) of corn sweeteners; their export sales amounted to approximately HK$166 million (2011: HK$103 million) and HK$64 million (2011: HK$119 million) respectively, representing approximately 5.1% (2011: 5.2%) of total revenue of the Group.

Business Outlook - For the year ended December 31, 2012

It is the Group's mission to become one of the leading corn sweeteners manufacturers in Asia and a major player in the global market. To achieve this objective, the Group will strive to enlarge its market share, diversify its product mix, and enhance its capability in developing high value-added products and new applications through in-house research and development and strategic business alliance with prominent international market leaders.

As one of the largest corn sweetener producers in the PRC in terms of production capacity and production output, the Board believes that it is of the utmost importance for the Group to maintain its leading position in the market in terms of production capacity and market share.

Source: Global Sweeteners (03889) Annual Results Announcement
Chairman Kong Zhanpeng Issued Capital (shares) 1,528M
Par Value HKD 0.1 Market Capitalisation (HKD) 741M
 
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