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Public company info - Global Bio-chem Technology Group Co. Ltd. , 00809.HK
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Global Bio-chem Technology Group Co. Ltd., 00809.HK - Company Profile
Chairman Zhang Zihua
Share Issued (share) 8,907,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Fertilisers & Agricultural Chemicals
Corporate Profile Business Summary: The Group is principally engaged in the manufacture and sale of corn refined products and corn based biochemical products. Performance for the year: The consolidated revenue of the Group for the Year dropped significantly by 81.4% to approximately HK$848.9 million (2019: HK$4,561.4 million). Business Review The selling prices of the Group’s products are affected by the prices of their raw materials (principally corn kernels and corn starch), the demand and supply of the products and their respective substitutes in the market and the variety of product specifications. During the Year, the operating environment of the Group remained challenging. The COVID-19 pandemic continued to put pressure on the global economic environment. Suspension of business operations, disrupted supply chains and stringent lockdown measures have led to stagnant demand and significant economic slowdown. As a result, the gross domestic product of China shrank by 6.8% for the first quarter of the Year, which was the first decline since 1992. Starting from the second quarter of the Year, China’s economy slowly recovered and recorded a growth rate of 2.3% for the full year. Nevertheless, the growth rate was far below the initial estimates before the outbreak of COVID-19. In light of the challenging operating environment, the Group has suspended its production operations in the Harbin, Dehui, Xinglongshan and Jinzhou sites to reduce operating cash outflow and secure sufficient financial resources until the market conditions improve. For details of the abovementioned suspensions, please refer to the Company’s announcements dated 24 September 2019, 16 December 2019, 10 February 2020 and 29 May 2020 (collectively, the “Suspension of Operation Announcements”). With respect to corn supply, global corn production for the year 2020/21 is estimated at 1,133.9 million metric tonnes (“MT”) (2019/20: 1,116.6 million MT), according to the estimates from the United States Department of Agriculture in January 2021. The high demand from China together with shrinking supply from major exporters such as Argentina have driven up the international corn price. International corn price surged from 608 US cents per bushel (equivalent to RMB1,670 per MT) at the end of 2019 to 718 US cents per bushel (equivalent to RMB1,844 per MT) by the end of 2020. In the PRC, corn harvest in 2020/21 is estimated to produce approximately 264.7 million MT (2019/20: approximately 260.8 million MT) of corn, with consumption volume estimated at 288.2 million MT for 2021 (2020: 278.3 million MT). A shortage of corn of approximately 20 million MT is expected in the PRC in 2021. In addition, the PRC grain traders have been piling up their grain reserves due to the concerns with regard to food security in light of the continued impact of the outbreak of COVID-19 pandemic on the global economy. All these factors have contributed to the surge in the domestic corn price during the Year. As a result, corn price in the PRC rose to RMB2,529 per MT (end of 2019: RMB1,850 per MT) by the end of 2020. Apart from the rising corn cost, the economic slowdown and shrunken demand for the Group’s products have made it not commercially viable to continue with the production operation for the upstream corn refinery. To mitigate the situation, apart from the suspension of the Group’s upstream operations in the Harbin, Dehui and Xinglongshan sites, the Group has also suspended the production operation of 錦州元成生化科技有限公司 (Jinzhou Yuancheng Bio-chem Technology Co., Ltd.*) (“Jinzhou Yuancheng”) since the second quarter of the Year. Consequently, the revenue for the Group’s upstream cornrefinery business dropped significantly during the Year. The Group will continue to monitor market conditions and be cautious in making decisions on the Group’s business strategies so as to optimise the operation of the Group’s production facilities to maintain relatively healthy cash flow while balancing its market presence. During the Year, the impact of the outbreak of the African Swine Fever (the “ASF”) continued to affect the husbandry and feed industries in China. The pig herd in China shrank by at least 40% at the beginning of the Year as compared to that prior to the outbreak of the ASF in 2018. During the first quarter of the Year, the slack season after the consumption peak during the Chinese New Year together with the lockdown in most of the cities in the PRC have kept the demand for feed products including lysine low. The feed market remained stagnant during the first half of the Year. As the Group has suspended its amino acid production operation since August 2019, only insignificant amount of sales was recorded during the Year. Nevertheless, the swine husbandry industry has started to recover at pace faster than expected starting from the end of the second quarter of the Year. Driven by tightened corn supply and herd recovery, the demand for lysine products started to recover slowly in the second half of the Year. As a result, domestic lysine price has improved, ranging from RMB6,600 to RMB10,500 per MT during the Year. However, the increased corn cost has also posed pressure on the profit margin of the amino acid products. Moreover, the tight operating cash flow of the Group. All these factors have contributed to the continued suspension of its amino acids production operation during the Year. Consequently, the Group’s lysine segment recorded a significant decrease in revenue for the Year. However, with the huge demand of pork in the PRC, pork producers were keen to increase pork production, it is expected that the swine husbandry industry will continue to recover in 2021. Construction of large-scale pig farms with better management than traditional pig farms were underway with the expectation to combat the possible return of the ASF. It is expected that the operation of these new farms will create increased demand for feed products including lysine. The Group will continue to observe market conditions and optimise operation, utilise its research and development capabilities to improve operational efficiency and develop other amino acid products complementary to its current product mix to better serve its customers. As for the sweeteners market, global production volume for 2019/20 was about 166.2 million MT. Although the COVID-19 pandemic had an impact on sugar consumption, the industry still saw a demand growth for sugar in 2020. In addition, the decrease in sugar production in Thailand, the second largest sugar exporter in the world, and the speculations about a possible sugar shortage and tight supply of shipment containers as a result of lockdowns in major ports have caused sugar price to soar since the third quarter of the Year. As a result, international sugar price increased to 15.49 US cents per pound (equivalent to RMB2,232 per MT) (end of 2019: 13.42 US cents per pound, equivalent to RMB2,070 per MT) by the end of 2020. In the PRC, domestic sugar production remained at similar level at 10.7 million MT in 2019/20 harvest, while consumption stayed at around 15.4 million MT. However, the expiry of the extra tariff on out-of-quota sugar imports in the PRC in May 2020 has led to the increase in sugar imports into China and dragged down the domestic sugar price to RMB5,356 per MT (end of 2019: RMB5,900 per MT) by the end of 2020. In addition, as a number of users in Huadong area has opted for vertical integration and expanded upstream to secure their feedstocks, the sweeteners market has shrunk and competition has further intensified. As such, the Group has suspended the operation of the downstream sweeteners production facilities in the Jinzhou and Xinglongshan sites and consolidated its resources into the Shanghai production site which has higher operational efficiency until market recovers. The operating environment for the Group’s polyol chemical business continued to be challenging during the Year. The Group’s research and development team is proactively looking at the possibility to restructure its product portfolio to include high value-added products in response to changing market needs. The Group will continue to observe the market and take a prudent approach before resuming its polyol chemical business. The operating environment of the Group in 2021 will continue to be challenging as corn price is expected to remain at high level in 2021. On top of this, the COVID-19 pandemic will continue to impact the global economy. In the short run, the Group will continue to monitor closely the development of the COVID-19 pandemic, the market conditions as well as the financial conditions of the Group and ensure the production operation of the Group’s subsidiaries to resume as soon as possible to the extent practicable. In the long run, the Group will continue to strengthen its market position by utilising its brand name, strive to provide excellent customer service and be customeroriented to understand better their ever-changing demands and product requirements, further improve cost effectiveness and product mix through continuous research and development efforts; and at the same time, optimise utilisation rate to achieve operational efficiency in response to market changes. With respect of the Group’s financial position, leveraging on the synergies as a result of the introduction and participation of the resourceful shareholder with state-owned enterprise background, the Group will endeavour to implement the debt restructuring plan with the aim to achieve the significant improvement of the financial position of the Group. Prospects: In order to maintain the competitiveness of the Group, the Group will strive to maintain its market position, diversify its product range and enhance its capability in developing high value-added products and new applications through in-house research; internally, the Group will endeavour to materialise the debts restructuring plan to improve the financial position of the Group and introduce strategic investors to form business alliance for sustainable development. The operating environment in 2021 is expected to be challenging as the COVID-19 pandemic will continue to affect the global economy. The tension between China and the US will pose uncertainties to the economy and the pace of recovery. On top of this, the economic slowdown will further add pressure on the already lackluster market. In the short run, the Group will continue to monitor closely the development of the ASF and COVID-19 pandemic, the market conditions as well as the financial conditions of the Group and will ensure the production operation of the Group’s subsidiaries to resume as soon as possible to the extent practicable. The Group will also take the opportunity of the relocation of its production facilities to the Xinglongshan site to readjust its product mix and capacity to adapt to market changes, and at the same time, enhance operational efficiency through continuous research and development efforts to lower operating costs. The relocation plan of the Group will be financed by the Group’s internal resources, the proceeds from the compensation for land resumption and through collaboration with industry players. The Directors are of the view that the existing technology know-how of the Group is sufficient for the relocation of production facilities. In the long run, the Group will continue to strengthen its market position by utilising its brand name, strive to provide excellent customer service and be customer oriented to understand better their ever-changing demands and product requirements, further improve cost effectiveness and product mix through continuous research and development efforts. The Board will optimise its risk/return decision with respect to capital expenditure and will take a prudent approach in relation to capacity expansion.

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