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.