At the end of Feb., 2016, Zhejiang NHU Co., Ltd. (Zhejiang NHU) released its 2015 preliminary financial report, which showed that the company’s revenue has dropped slightly YoY, whilst the net profit has dropped dramatically. Zhejiang NHU attributed the decline to the sharp drop in price of its major product vitamin E (VE).

Zhejiang NHU is an important supplier of vitamins over the world. Its main products cover vitamin E (15,000 t/a), vitamin A (VA) (6,000 t/a) and vitamin D3 (VD3). The sales revenue from vitamin business accounts for about 60% of the company’s total revenue.

In recent years, Zhejiang NHU’s profitability continued to decline. It is noted that the company’s revenue has increased slowly while its net profit has dropped continuously.

Zhejiang NHU, a leading company in raw material vitamin industry, has suffered from overcapacity and the sustained low market price of vitamins. It led to a decline in the company’s gross profit. In H1 2015, Zhejiang NHU’s gross profit from vitamins fell by 20 percentage points to 28%.

Zhejiang NHU's performance in 2015, USD

Source: Zhejiang NHU Co., Ltd.

Zhejiang NHU's revenue and net profit, USD, 2010-2015

Source: Zhejiang NHU Co., Ltd.

Zhejiang NHU’s major vitamin products are mainly for export, which accounts for more than 65% of the company’s total revenue. In recent years, the continuous drop of VE export price also led to the drop of the company’s export profit.

To avoid being too dependent on vitamin business, Zhejiang NHU is looking for new profit growth points to reverse the decline in profit.

In July 2015, Zhejiang NHU’s subsidiary, Shandong NHU Amino Acids Co., Ltd. (located in Weifang City, Shandong Province) launched the construction of a 100,000 t/a methionine project. The 1^st –phase project (50,000 t/a) is to go into pilot production in 2016. Given Zhejiang NHU’s rich experience in producing and selling animal nutrition, Zhejiang NHU is likely to gain some market shares in domestic methionine market.

In May 2015, Zhejiang NHU signed an agreement with DSM on establishing a joint venture for the R&D, production and sales of polyphenylene sulfide (PPS) compounds. Zhejiang NHU holds 40% shares in this joint venture. The cooperation will help accelerate the development of downstream market and extend the application fields for PPS compounds.

Zhejiang NHU began to produce PPS polymer since Sept., 2013, with a capacity of 5,000 t/a. Currently, the company is preparing to expand a new capacity of 10,000 t/a.

“At present, most of the capacity in our company is for fiber grade PPS,” said Zhejiang NHU. In the future, the joint venture will target at high-end applications, and its injection molding materials will be supplied to vehicles, electric and electronic markets.

Zhejiang NHU is expected to improve its business performance in 2016.

Since the beginning of this year, the price of Zhejiang NHU’s major product VA has increased substantially. In addition, the price of VE also witnessed an increase. Hopefully, these will help push up Zhejiang NHU’s operating profit.

“We believe that the price of VA will continue its rise in the short term,” said Zhejiang NHU, on an investment platform on 9 March. Besides, thanks to the increase in the prices of Zhejiang NHU’s main products, investors thought highly of the company, leading to a continuous rise in its stock price during late Feb. - early March.

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