24 September 2007 - In a statement sent to FLEXNEWS, Vietnamese MSG and glutamic acid manufacturer Vedan said that its net profit for the first half of 2007 leaped a substantial 32.1% from USD 6 million on the year. H1 turnover amounted to USD 146.7 million, up 3.7% as compared to H1 2006.
By product, glutamic acid (GA) and starch recorded 20% and 29% increases in turnover respectively. Affected by pricing strategy concern, turnover from MSG dropped slightly by 0.7%, to USD 95.65 million.
“Although affected by international supply and demand situations, the average selling price of MSG and GA only had slight downward adjustments during the period. The resilience of the profit from MSG was mainly attributable to the drop in price of the major raw material molasses and the Group’s improved production efficiency. The Group also increased sales of higher margin MSG in its retail mix, resulting in enhanced overall gross profit of this product during the period. The drop in gross profit of GA in China was mainly due to surge in corn price and drop in the selling price of GA in China. In Vietnam, however, the gross profit of GA went up as the costs of major raw materials softened”, said Vedan.
Chinese MSG was affected by the ongoing rise in corn prices since 2006 and still climbing in the first half of 2007. This has resulted in surge in production cost of MSG and GA, and increased pressure on the profitability of MSG and GA producers in China including the Group’s joint venture Shandong Vedan Snowflake.
The higher production cost in China and the Chinese authorities’ decision to abolish export tax rebates as of 1 July 2007, nevertheless benefited the Group’s operation in Vietnam.
“The products output in Vietnam have gained competitive edges and are expected to see good growth in turnover and profit from export in the second half of the year. A major Korean MSG producer had given the Group a big volume of contracts for delivery starting the second half of this year and a Thailand MSG producer had doubled their contract volume”, said Vedan.
Vedan, however, believes its Chinese MSG business is expected to pick up again in the second half of this year.
The company’s Chinese joint venture Shangdong Vedan Snowflake has commenced the installation of production facilities, which were acquired from Mao Tai factory, added Vedan. The plant will have an additional annual production capacity of 24,000 tons and is expected to begin production this November, bringing the company’s total capacity of MSG production to 45,000 to 50,000 tons annually.
“Expanding business in China is still a major task of the Group. The GA and MSG segments in China are going through transformation and consolidation. The Group will actively look for and evaluate possible strategic alliances to expand business in China. Expanding and strengthening the foothold of modified starch for food applications in the China market is another major focus of the Group”, Vedan additionally said.