On 27 April, 2016, Zhejiang Wynca Chemical Industry Group Co., Ltd. (Zhejiang Wynca, stock code: 600596) released its 2015 financial report, which showed that its total revenue amounted to USD1.14 billion (RMB7.35 billion) due to a YoY fall of 4.78%. It's worth noting that this is the first time that the company suffers a loss over the past decade. In 2015, its net profit slumped by 636.69% YoY, a loss equivalent to USD41.33 million (RMB266.82 million).

Source: Baidu

Since Q2 2015, Zhejiang Wynca started suffering losses. Net profit in 2015:

Q1: USD600,000 (RMB3.86 million)

Q2: -USD5.86 million (-RMB37.85 million)

Q3 & Q4: both over -USD17 million (-RMB110 million)

Zhejiang Wynca's major financial figures, 2015, million USD

                                  Source: Zhejiang Wynca Chemical Industry Group Co., Ltd.

Zhejiang Wynca'sfinanical performance by quarter, 2015, million USD

                                   Source: Zhejiang Wynca Chemical Industry Group Co., Ltd.

- The slumping glyphosate price is one of the main reasons for the downfall of the performance

In 2015, the price of glyphosate TC dropped by over 20% YoY, resulting in a significant reduction of the glyphosate industry's profit margin. According to CCM's price monitoring, the average ex-works price of 95% glyphosate TC was USD2,965/t in Dec. 2015, after dropping down by 27.22% over Dec. 2014, mainly because of the overcapacity and oversupply.

Since glyphosate is Zhejiang Wynca's main product, the large YoY slump in its sales price in 2015 led to a 5.17 percentage points loss in the gross profit margin (only 8.74%) of Zhejiang Wynca's agrochemical products. As a result, the company's net profit was largely dragged down.

Specifically, the revenue from agrochemical products was USD553.71 million (RMB3.58 billion) in 2015, 49.73% of the total revenue, USD35.62 million (RMB230 million) lower (down by 6.05%) than the USD589.33 million (RMB3.81 billion) earned in 2014.

- The falling gross profit margin of agrochemical products reduced the gross profit margin of overseas sales

Zhejiang Wynca's gross profit margin of overseas sales was 5.67% in 2015, 8.52 percentage points lower than the 14.19% of 2014. Meanwhile, its overseas sales dropped by 9.65% YoY, amounting to 36.26% of the total revenue in that year; the domestic sales accounted instead for 63.74%, showing a decrease of 1.38% YoY.

- The increasing revenue from organic silicon couldn't save the performance

Thanks to the complete-industrial-chain strategy, Zhejiang Wynca managed to improve the profitability of organic silicon. In 2015, the revenue from organic silicon raised to 41.33% of the total revenue, an increase of 1.6% YoY. What's more, the gross profit margin from this business climbed up by 0.31 percentage point YoY, reaching 11.67%.

Zhejiang Wynca's revenue from main businesses, 2015, million USD

Source: Zhejiang Wynca Chemical Industry Group Co., Ltd.

In response to the loss in 2015, Zhejiang Wynca plans to obtain a revenue of USD1.24 billion (RMB8 billion) from main business, and to generate expenses and costs of USD1.23 billion (RMB7.93 billion) to reduce the loss.

In 2016, the increasingly stricter environmental policy brings about the supply-side structural reform to the agricultural industry, making the industry return to orderly competition; while the business mode transformation will, in the meantime, provide a large grow-up space for Zhejiang Wynca's performance.

In 2015, Zhejiang Wynca built the Nongfeike Platform through external equity investment to enter into the agriaviation area. Also, the company set up a business operating mode of "platform + tool + terminal + service" based on information technology and the Internet.

Compared with traditional manual spraying and mechanical spraying, crop protection by unmanned aerial vehicle (UAV) grants a better efficiency, a stronger penetrability and less drift, which can improve the safety of pesticide spraying and significantly reduce the use of pesticides and water. UAV spraying is in line with the country's policy on limiting the use of pesticides.

This article comes from Glyphosate China Monthly Report 1605, CCM

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

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Tag: glyphosate  agrochemical

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