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Public company info - Global Sweeteners Holdings Ltd. , 03889.HK
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Global Sweeteners Holdings Ltd., 03889.HK - Company Profile
Chairman Zhang Zihua(Acting Chairman)
Share Issued (share) 1,528,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Agricultural, Poultry & Fishing Production
Corporate Profile Business Summary: The Group is principally engaged in the manufacture and sale of corn refined products and corn sweeteners. Performance for the year: As a result, the Group’s consolidated revenue decreased significantly by approximately 60.7% to approximately HK$769.0 million (2019: HK$1,956.8 million), with gross profit declined by approximately 62.5% to approximately HK$77.9 million (2019: HK$207.6 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 each of the products and their respective substitutes in the market and the variety of product specifications. During the Year, the COVID-19 pandemic continued to put pressure on the global economic environment. Suspension of business operations, disrupted supply chains and stringent lockdown measures in the first quarter of the Year 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 2020, 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. The operating environment of the Group remained challenging throughout the Year. As disclosed in the 2020 Interim Report, the lockdown in the PRC in the first quarter of 2020 significantly lowered the demand for feed products. In addition, competition in the PRC sweeteners market intensified as market shrank. The situation escalated as the extra tariff on out-of-quota sugar imports expired in May 2020. Sugar imports in China surged from 3.39 million metric tonnes (“MT”) in 2019 to 4.35 million MT in 2020 as a result. In light of the challenging operating environment, the Group has suspended the operations of most of its production facilities in the PRC during the Year. For details of the suspensions, please refer to the Company’s announcements dated 24 September 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 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 increased 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 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, the Group has 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”) starting from the second quarter of 2020. Consequently, the performance of the Group’s upstream business was adversely affected during the Year. The Group will continue to monitor the 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. As for the sugar market, global production volume for 2019/20 was about 166.2 million MT. Although the COVID-19 pandemic had an impact on sugar consumption, industry estimates still show demand growth for sugar in 2020/21. In addition, the decrease in sugar production in Thailand, the second largest sugar exporter in the world, the speculation about a possible sugar shortage and tight supply of shipment containers due to 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 an 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 market of sweeteners 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 operation efficiency until market recovers. The Group will continue to utilise its research and development capabilities to improve operational efficiency to lower cost and at the same time, develop products that better suit market needs to cope with market changes. The operating environment of the Group in 2021 will continue to be challenging as the PRC corn price is expected to remain high in 2021. On top of this, the continued impact of the COVID-19 pandemic and the intensified market competition will further add pressure on the already lackluster market. 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 will ensure the 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 utilising its brand name, strive to provide excellent customer service and be customer-oriented to understand better their ever-changing demands and product requirements, and further improve cost effectiveness and product mix through continuous research and development efforts. Prospects: In order to maintain the competitiveness of the Group, the Group will optimise its production while maintaining its market presence, diversify its product mix and enhance its capability in developing high value-added products and introduce strategic business alliance with prominent market leaders. 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 and the intensified market competition will further add pressure on the already lackluster market. 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 will ensure the operation of the Group’s subsidiaries to resume as soon as possible to the extent practicable so that the Group could maximise the synergistic effects amongst its various production sites for the supply of raw materials and serving their respective markets. In the long run, the Group will continue to strengthen its market position utilising its brand name, strive to provide excellent customer service and be customer-oriented to understand better their everchanging demands and product requirements, and further improve cost effectiveness and product mix through continuous research and development efforts. With respect to the financial position of the Group, the management will endeavour to facilitate the materialisation of the debt restructuring plan to improve the financial position of the Group and adopt a prudent approach in face of the current market condition.

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