The recent sluggishness of the glyphosate market has troubled several glyphosate-oriented
companies in China. Among them, Nantong Jiangshan is planning to conduct
M&A to try escaping the restraints of glyphosate.
China’s glyphosate market has been in a bad shape since Oct. 2013, when it
started displaying prices constantly decreasing. Even now, after two years, the
prospective of the 2016 glyphosate market still looks grim to the industry
insiders. Those companies whose main business consists in glyphosate ended all
up having downfall, as they struggle to get rid of the shackles of glyphosate.
One of the listed glyphosate companies, Nantong Jiangshan Agrochemical &
Chemical Co., Ltd. (Nantong Jiangshan), announced to restructure its assets, operation
which may involve assets purchase by stock issuing. Nantong Jiangshan has been
listed on the Shanghai Stock Exchange in Jan. 2001 and this is the first time
that the company is seen performing mergers and acquisitions (M&A) in the
past 15 years since it was listed. Therefore, this may represent a major
historical turning point for the company. Employees of the company disclosed
that Nantong Jiangshan is ready to acquire assets related to its main business.
The efforts that Nantong Jiangshan is making to try to get rid of the shackles
of glyphosate by M&A implementation follow the trend of the capital market.
Data confirmed that about 50-60% of Nantong Jiangshan’s total revenue derives from
the sales of glyphosate and, consequently, potential raises and falls in the
prices influence directly its performance. The market price of glyphosate has fluctuated
greatly in these past few years. The period of time following Q4 2013 witnessed
a dramatic fall of prices, which greatly affected the overall profitability of
Nantong Jiangshan. It is estimated that the market price is bound to go, in the
future, through large undulations both in its own territory and abroad. The
main cause for these undulations seems to be the changing supply-demand
relation and, in order to maintain a stable profitability and get rid of the
constraints of glyphosate, Nantong Jiangshan needs, for the moment, to seek new
points of profit growth.
As the leading product of Nantong Jiangshan, glyphosate used to once grant large
profits to the company, dragging also down, though, its performance. The constant
fall of market prices in year 2015 completely reverses Nantong Jiangshan’s
performance when compared to 2013. The market price of glyphosate technical has
nowadays dropped to its lowest levels, USD2,768/t (RMB18,000/t), since 2007,
suffering a slump of 60% over USD6,920/t (RMB45,000/t), the highest level
reached in 2013.
According to its Q3 financial report of 2015, Nantong Jianshan’s total profit in
Jan.-Sept. has registered a YoY drop of 94.36%, the main reason of this
probably being the slump in gross profit of glyphosate. Notably, its net profit
was reported to be -USD780,000 (-RMB5.09 million) in July-Sept.
The glyphosate market did not show any sign of recovery in Q4 and the
transaction price persisted in its continuous decline. If Nantong Jiangshan will
not be able to make profit from alternative businesses, the company is very
likely to suffer from loss in Q4. Nantong Jiangshan has actually predicted, basing
on the Q1-Q3 performance and the current market condition, that its net profit
from 2015 will almost surely undergo a large YoY fall when compared to last
year.
In early 2013, when the glyphosate market was still prosperous, Nantong Jiangshan’s
pesticide revenue achieved a YoY rise of 22.8% thanks to the boost provided by
the increased glyphosate technical revenue. In addition, the average sale price
of glyphosate registered in 2013 a considerable hike, helping Nantong
Jiangshan’s glyphosate gross profit margin to reach 30.40%, a YoY rise of 19.96
percentage points. This also expanded its overall gross profit margin by 10.84
percentage point year on year.
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Tag: Nantong Jiangshan, glyphosate