Nanning sugar industry stops sugarcane planting business 08-02-2019

According to Beijing news, Nanning sugar industry has announced on July 23 that it will no longer operate a sugarcane farm and neither compete with Guangxi Sugarcane Production Service Company.

On July 13th, Nanning Sugar Industry Holdings Ltd. (Nanning Sugar) revealed in its “Signing the Sugarcane Planting Contract and Partner Negotiations Announcement” that that it has signed the “Sugarcane Planting Contract” with Guangxi Sugarcane Production Service Company Ltd. (Sugarcane Service Company), in which Nanning Sugar agreed to lease 9624.63 acres of sugarcane farmland to Sugarcane Service Company. The contract requires Nanning Sugar to assist Sugarcane Service Company in planting sugarcane. Furthermore, Nanning Sugar has agreed to purchase the sugarcane in wholesale after it is harvested by Sugarcane Service Company, after which Nanning Sugar will be responsible for the processing, refinement, and sale of the sugarcane. The companies have not yet agreed upon the wholesale price of the sugarcane.

Nanning Sugar will no longer be a competitor of Sugarcane Service Company

In light of this contract, the Shenzhen Stock Exchange inquired about whether or not Sugarcane Service Company is still considered a competitor of Nanning Sugar. Nanning Sugar responded that due to the trend of sugarcane planting and specialized management of sugarcane harvest, from the beginning of 2019, it would gradually reduce and ultimately cease operation of its own sugarcane farm, and it would fully outsource its sugarcane farm operation. Furthermore, Nanning Sugar announced that it would cease operation of its own sugarcane farms by the end of June 2019 and would not open any new sugarcane farms. The company concluded that it henceforth will no longer be a competitor of Sugarcane Service Company.

Additionally, Nanning Sugar majority shareholder Guangxi Agricultural Investment Group Ltd. revealed on April 13 in its “Nanning Sugar Acquisition Report” that in order to avoid competition with Nanning Sugar, if production competition between Guangxi Agricultural Investment Group Ltd. and Nanning Sugar is unavoidable, then Guangxi Agricultural Investment Group Ltd. will invest in the development of Nanning Sugar or cease involvement with competing businesses.

Nanning Sugar Industry estimated to lose about USD 77.13 million in the first half of 2019

On July 12, Nanning Sugar issued a performance forecast for the first half of 2019. The company projected a net loss of USD 69.85 million to USD 77.13 million (RMB 480 million to RMB 530 million) during the reporting period. In comparison, Nanning Sugar lost RMB 496 million during the same period last year.

The Company stated that the profit loss in the first half of 2019 was due to the following reasons:

During the reporting period, the market price of foods with machine-processed sugar as the main product in the first half of 2019 continued to be low, while the purchase price of sugarcane set by the price department was relatively high. The lack of a profit margin resulted in net losses in the sale of machine processed sugar. Due to the price of sugar falling below the cost, and due to the high planting cost of the two story sugarcane farm, the Nanning Sugar made preparations for a price reduction of processed sugar storage.

For more information about China’s sugar and sweeteners market, please check our resources at Sugar & Sweeteners.

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