According to the preliminary earnings estimation of Baolingbao Biology Co., Ltd. (Baolingbao) released on 25 Feb., 2013, the revenue of the company was USD155.76 million in 2012, increasing only by 2.88% compared with that of 2011. However, its net profit has witnessed a continuous increase in 2012, reaching USD10.72 million from USD8.87 million in 2011. Actually, the growth rate of Baolingbao's revenue began to decline markedly in H1 2012, and even became negative in H2 2012. However, the company's growth rate of net profit did not decrease sharply in H1 2012, and the one in H2 2012 was even higher.
As explained by an insider from the bond department of Baolingbao, a little increase of the company's revenue can be attributed to the two following reasons. First, the sales volume of the company's main products, such as functional and starch sugar products declined in 2012 because of food safety incidents from domestic downstream industries and the decreasing price of sucrose in China in 2012. Second, the application scope of the company's products was not very extensive, mainly concentrated on dairy and beverage industries, which could not improve the company's sales significantly in 2012.
Lu Zhengxin, Secretary of the Board of Baolingbao, also explained why the net profit of the company increased in 2012. The most important reason is that the company had strengthened its management to reduce operating cost. At the same time, the company had received a large number of financial subsidies from the local government. Baolingbao received a financial subsidy of USD4.05 million in Dec., 2012, which had a positive effect on the company's financial performance in 2012.
It is noteworthy that the growth rate of revenue and the net profit of Baolingbao rebounded in Q4 2012 after a drop in Q3 2012. According to Miss Lu, the company's good performance in Q4 2012 was notably based on the good performance of isomaltose oligosaccharide (IMO) as a feed additive. After the application of the IMO as a feed additive was approved by the Ministry of Agriculture of China, the company actively promoted its product to the domestic feed industry. And because of the "45-day chicken" scandal of Yum Brands Inc., more and more feed producers in China began to choose functional oligosaccharide to produce their products, which also facilitated the development of the IMO as a feed additive.
Miss Lu also expressed her confidence in the good prospect of Baolingbao's performance in 2013. First, the company's sales volume of functional sugar such as fructo oligosaccharide (FOS) and erythritol, which have a high gross margin, increased obviously in 2012 compared with that of 2011. And it is predicted that the figure will continue to increase in 2013, because the company actively explored new markets at the beginning of 2013. For example, Baolingbao is communicating with Guangzhou Pharmaceutical Company Limited, which has one new sugar-free Wanglaoji product using erythritol as sweetener. Baolingbao has confidence in its ability to become an erythritol supplier for the product.
Second, the sales volume of the IMO as a feed additive may have a significant change in H1 2013. In Q4 2012, many feed producers in China began to add the IMO into their products, which means that the sales volume was not large because it was still in an initial stage. Now almost all of them gave good feedbacks on the IMO's effect, and it is estimated that they will increase their purchasing volume in 2013.
The news above was sourced from Sweeteners China News issued by CCM in March.
Table Contents of Sweeteners China News 1303:
YoY growth of import volume of sucrose hits 71.43% in Jan. 2013
Nanning Sugar: net profit may decrease sharply in 2012
Anhui Jinhe’s revenue increases while net profit decreases in 2013
Net profit of Guangxi Guitang decreases sharply in 2012
Shandong Futaste’s L-arabinose recommended as “nutrition and health advocacy products
Review of domestic maltitol industry in 2012
HFCS producers in China may continue to face pressure on selling in H1 2013
Domestic stevia sweetener producers wish to improve their products' status
Baolingbao: revenue and net profit increase in 2012
Both revenue and net profit of Shandong Longlive decreases in 2012
Export overview of some sweeteners and raw materials in China, Jan. 2013
Export overview of some HIS in China in 2012
Import volume and price of liquorice continues to increase in 2012
Increasing demand of sweeteners from downstream industry
Guangxi launches its minimum acquisition price of sugarcane in Feb. 2013
Ex-factory prices of Chinese sweeteners in Feb. 2013
Xylitol: domestic price increases in 2011 but decreases in 2012
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