Source: Baidu

Specifically, the company and its subsidiaries each granted a guarantee in favour of the Bank of China for the benefit of a long term supplier (Supplier Guarantees) for a maximum guaranteed amount of USD373.09 million-447.71 million (RMB2.50 billion-3.00 billion). Yet, it neither made any disclosure in its 2010-2014 financial reports nor issued any announcement, circular or sought independent shareholders' approval for the Supplier Guarantees.

“There was no proper risk assessment carried out in respect of Supplier Guarantees, despite the fact that when the Supplier Guarantees were first entered into, the company's financial position was stronger than present. The company will be exposed to substantial financial risk if the supplier defaulted on the significant loans,” stated the HKEX.

Just a week before the denouncement (15 Sept., 2016), Global Bio-Chem released its interim financial report for 2016, showing the company was still in the red despite the improvements.

• Total revenue: +USD265.80 million (+HKD2.06 billion), up 30% YoY

• Gross profit: +USD10.81 million (+HKD83.90 million)

• Net profit: -USD77.27 million (-RMB599.50 million), vs. -USD132.37 million (-RMB1.03 billion) in H1 2015

* Exchange rate: USD1.00=HKD7.7588 on 11 Oct., 2016, sourced from hexun.com, similar hereinafter

Global Bio-Chem's financial performance, H1 2015 & H1 2016

Source: Global Bio-Chem Technology Group Co., Ltd.

The company mainly involves in production and sale of:

• Upstream products: corn starch, corn gluten meal, corn oil and other corn refineries

• Amino acids: mainly lysine, protein lysine and threonine

• Polyol chemicals: mainly anti-freezing products and liquid ammonia

• Corn sweeteners: mainly corn syrup, malt syrup, high fructose corn syrup, crystalline dextrose and maltodextrin

- Upturn in amino acid business

In H1 2016, Global Bio-Chem’s amino acid segment, in the place of upstream products which used to be the core business, was the largest contributor to the total financial performance:

• Revenue: +USD133.22 million (+HKD1.03 billion), significantly up 183% YoY, 50.12% (H1 2015: 23.03%) of the company’s total

• Sales volume: 18,800 tonnes, up 261.50% YoY, thanks to the resumption of lysine production in Nov. 2015

• Gross profit: +USD14.87 million (+HKD115.00 million), vs. -USD15.65 million (-HKD121.00 million) in H1 2015

• Gross profit margin: +11.20%, vs. -33.20% in H1 2015

- Increased loss from upstream products

• Revenue: +USD95.01 million (+HKD737.00 million), almost unchanged over the same period last year

• Gross profit: -USD9.21 million (-HKD71.50 million), vs. -USD7.36 million (-HKD57.10 million) in H1 2015

Despite the rises in sales volume – corn starch rose by 24% YoY to 144,000 tonnes and other corn refineries up by 40% YoY to 188,000 tonnes, the company continued suffering loss from upstream products. This was mainly due to the decreased sales prices. According to the company’s report, its sales prices for corn starch and other corn refineries averaged USD308.55/t (HKD2,394/t) and USD270.27/t (HKD2,097/t), down 25.30% and 20.40% respectively.

Global Bio-chem's revenue by product structure, H1 2015 & H1 2016

Source: Global Bio-Chem Technology Group Co., Ltd.

This article comes from Amino Acids China E-News 1610, 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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