Singapore, 6 August 2008 – SGX Mainboard-listed China Sun Bio-Chem Technology Group Co. Ltd, the top modified starch producer and one of the leading corn starch manufacturers in China, today reported further business expansion for the first half-year ended 30 June 2008.
Highlights of 1H08 results:
Sales grew 37% to RMB1.1bn
�� Increase in selling prices of corn starch and by-products (4% and 37% respectively)
�� Cushioned lower demand as some customers temporary suspended purchases in the run-up to an impending manufacturing halt during the Beijing Olympic Games as part of control measures imposed by China government.
�� Contributions of RMB286m from new non-fuel ethanol plant and Tieling corn starch plant.
Gross profit fell 18% to RMB203m
�� Gross margin fell to 19% (1H07: 31%) pressured by higher raw material prices, and low margin and loss from low utilisation of new Tieling corn starch plant and non-fuel ethanol plant respectively.
�� Higher by-products gross margin due to rising demand for high-value by-products
like protein and germs moderated margin squeeze.
�� Excluding start-up losses of the Teiling plant and ethanol plant, gross profit and gross margin from the Group’s continuing operations would have been higher at RMB224.2 million and 28% respectively.
Total profit dropped 41% to RMB91m
�� Inflationary raw material and operating costs, and expansion-driven higher expenses.
�� Group would have recorded a total profit from continuing operations of RMB120.6 million, 24% below the RMB158.4 million in 1H2007, if the effects of accounting of convertible bonds (non-cash) and losses of the start-up Teiling plant and ethanol plant have been excluded.
Strong financial positions backs further expansion
�� Cash balance of RMB1.1bn. Working capital of RMB1.3bn. Current ratio of 3.9 times. Net cash of RMB268m. Gearing of 0.6 times.
Business expansion remains on track to capitalize on robust demand
�� Ongoing efforts and progress in improving utilization, selling price and profit margin of ethanol operations.
�� New Suzhou 120,000-tonne corn sweetener plant and additional 80,000-tonne capacity targeted for completion in 2H2008.
�� New Tieling corn starch production plant to ramp up utilisation and add additional 100,000 tonnes capacity per annum by 1Q2009.
�� Robust pent-up demand expected in 4Q08 after Beijing Olympic Games.
Sales grew 37% to RMB1.1 billion in 1H2008 as the Group managed to partially passed down higher corn price to customers by increasing the selling prices of corn starch and by-products by 4% and 37% respectively. This helped to cushioned adverse demand condition during the period as some customers temporary suspended purchases in the run-up to an impending manufacturing halt during the Olympic Games as part of control measures imposed by China government. The new Shenyang non-fuel ethanol plant and Tieling corn starch plant also added RMB144 million and RMB142 million respectively to revenue in 1H2008.
Corn starch remained the largest sales contributor accounting for 40% (1H2007:45%) of Group sales in 1H2008. Modified starch, ethanol and by-products constituted the remaining 28% (1H2007: 38%), 10% (1H2007: 1%) and 22% (1H2007: 16%) of 1H2008 sales.
The Group registered average utilisation rates of 67% (1H2007: 96%), 93% (1H2007: 90%), 51% (1H2007: 16%) and 60% (1H2007: 98%) respectively for corn starch, modified starch, ethanol and by-products production capacities in 1H2008. Average utilisation rates of corn starch and by-products fell significantly due to temporary fallen orders prior to manufacturing restrictions by China government for the Beijing Olympic, as well as the low utilization of the new Tieling corn starch plant which registered a start-up utilisation rate of 36% during the period.
Gross profit fell 18% to RMB203 million in 1H2008 as gross margin dipped to 19% (1H07: 31%) pressured by higher raw corn, starch and chemical prices, and low margin and loss from low utilisation of new Tieling corn starch plant and non-fuel ethanol plant respectively. The margin squeeze was moderated by higher gross margin of by-products driven by rising demand for high-value by-products like protein and germs. Excluding start-up losses of the Tieling plant and ethanol plant, gross profit and gross margin from the Group’s continuing operations would have been higher at RMB224.2 million and 28% respectively, which was slightly lower than the 31% gross margin recorded in 1H2007.
The Group’s sales and profits from its continuing and new operations in 1H2008 are broken down as follows:
