Singapore, November 13, 2007 – Luzhou Bio-chem Technology Limited (“Luzhou” or “the Group”), one of the PRC's leading producers of corn sweeteners, today reported that the Group's revenue increased by 42.3% to RMB1.5 billion for the nine months ended September 30, 2007 (“9MFY2007”), driven by the Group's strategy to focus on higher value corn sweetener products.
Fueled by strong demand for its corn sweetener products and increased production capacity, revenue from corn sweetener products surged 54.5% to cross the RMB1 billion mark to reach RMB1.1 billion in 9MFY2007, contributing 72.1% of total revenue during the period under review.
This was attributed to the across-the-board increase in demand from customers in all industries. Sales from the food and beverage industries increased 38.3% to RMB1.0 billion, while sales from the fermentation industry jumped 59.5% to RMB245.4 million. Sales from customers in other industries also posted a strong growth of 44.0% to RMB250.7 million.
With increased production of corn sweeteners, sales contribution from corn starch fell 39.9% to RMB97.7 million, accounting for 6.5% of total revenue in 9MFY2007. By-products and Other products registered a 66.9% revenue increase to RMB323.8 million, making up the remaining 21.4% of 9MFY2007 revenue.
The Group’s revenue growth was also attributed to the commencement of operations of its new plants in Yishui, Shandong Province and Pengshan, Sichuan Province in January 2007, which contributed to a 33.8% increase in annual production capacity from 650,000 tonnes to 870,000 tonnes.
The Group’s overall gross margin decreased from 18.3% in 9MFY2006 to 12.3% in 9MFY2007, mainly due to rising corn prices.
Managing Director of Luzhou, Mr Niu Jixing, said: "Although corn prices have increased, we have been enhancing our capabilities since 2006 in order to produce higher value corn sweetener products, thereby mitigating the effects of the increase. Our enhancement programme is still ongoing and we expect to see the full results in 2008. However, during the interim, given the uncertainty of corn prices, our profit in the second half of FY2007 may not be higher than that for the first half. Nevertheless, the Group remains optimistic about the demand for corn sweeteners in the PRC, especially from the food and beverage industry.
To enhance our competitiveness, the Group will continue to focus on our long term strategy to expand our range of higher value products, increase production capacity and improve operating efficiencies."
In line with its strategy to enhance its product mix, the Group has commenced construction of new production lines to produce 30,000 tonnes of high fructose syrup per annum. Construction is expected to be completed by the second quarter of 2008. To further add value to its by-products, the Group plans to construct a special animal feed additive production line in its Shandong plant, to further process corn by-products into higher value animal feed additives. With an expected production capacity of 20,000 tonnes, construction is expected to be completed in the second half of 2008.
The Group is also in the midst of adding an additional production capacity of 70,000 tonnes per annum at its Sichuan plant, which will commence production in the first quarter of 2008. The Group’s total annual production capacity is expected to increase from the current 870,000 tonnes to 1,010,000 tonnes in 2008.
To improve its operating efficiency, the Group will also install a 6MW thermoelectricity generator in each of its production facilities in Shaanxi and Liaoning. The thermoelectricity generators are scheduled to commence operations at its Shaanxi and Liaoning plants in 2008.
About Luzhou Bio-chem
Established in 1988, Luzhou Bio-chem Technology Limited ("Luzhou") is a leading corn refiner and one of the largest producers of corn sweeteners in the PRC.
Luzhou currently operates five production facilities in the PRC, with a total production capacity of 870,000 tonnes per annum. Luzhou has two production facilities in Yishui, Shandong Province, and one each in Fushun, Liaoning Province, Xingping, Shaanxi Province and Xiping, Henan Province, which straddle key corn and agricultural producing provinces to cover most parts of the PRC market and are near sources of raw materials. The Group’s latest plant in Sichuan Province is expected to be fully completed by 1Q FY2008 and will have an annual production capacity of 140,000 tonnes.
Luzhou’s strength lies in its strong research and product development capabilities. Its products are used by its domestic and overseas customers as additives or ingredients in the manufacture of their products. Luzhou serves a diverse customer base in industries such as the food, beverage, fermentation, medical and pharmaceutical. Some of its customers include Tsingtao Brewery Co., Ltd, Beijing Wangwang Food Co., Ltd, Dujiangyan Plant Oil Factory, China Resources Breweries Liaoning Co., Ltd and Henan Lian Hua Wei Jin Co., Ltd.
Luzhou was listed on the Main Board of the Singapore Exchange Securities Trading Limited in February 2006.