Thursday, May 10, 2012

Domestic Tomato Processing Industry Sees Overcapacity

China, a world's leading tomato paste producer, apart from the U.S. and Italy, witnessed continuous gloom of tomato processing industry in 2011, mainly caused by domestic overcapacity and slack sales in overseas market. The sluggish tomato processing industry would probably reduce the operating rate of tomato processing enterprises and lower farmers' enthusiasm for planting processing tomato in 2012, according to CCM International’s April Issue of Seed China News.

For tomato processing enterprises, 2011 was a tough year, with operating results inferior to previous years.

For example, Xinjiang Chalkis Co., Ltd. (Chalkis), a listed company specialized in tomato paste producing and marketing, predicted on 31 Jan. 2011 that it would have an unbelievably poor performance in 2011, with net loss hitting USD136.25 million (RMB880 million). Chalkis mainly contributes its heavy loss to the depressed export price of tomato paste and the soaring production cost.

COFCO Tunhe Co., Ltd. (COFCO Tunhe), the largest tomato processor in China, also suffered unsatisfactory performance in tomato processing business, with the operating profit margin decreasing from 20.31% in 2010 to 14.55% in 2011. The company blames its decreased profit in tomato paste to continuous price downturn, increasing cost and sluggish overseas market. In 2011, COFCO Tunhe totally achieved net profit of USD5.01 million (RMB32.38 million), thanks to considerable government subsidies and investment returns.

Gansu Dunhuang Seed Co., Ltd. (Gansu Dunhuang), a dominant seed company, also witnessed deficit in tomato paste business in 2011. Revealed by Gansu Dunhuang, its subsidiary engaged in tomato paste processing presents a net loss of USD1.28 million (RMB8.27 million) in 2011, heavier over the previous year, mainly owing to domestic overcapacity and decreased export.

Leading tomato processors were so depressed in 2011, not to mention small and medium ones which generally suffered serious deficits in 2011, even facing business failures.

According to industry insiders, tomato processing companies have made rapid capacity expansion during the past few years, causing the current overcapacity and intense competition. Since most tomato paste produced by domestic companies is sold abroad, the sluggish tomato paste market in Europe and the U.S. has made their performance even worse in 2011. Moreover, the depressed price and the soaring cost have posed greater challenges to domestic tomato processors.

In view of the slack sales and oversupply, tomato processing companies would significantly cut their production capacity in 2012. It is expected that most tomato paste manufacturers would have to deal with large stocks to return funds.

It is released that at present COFCO Tunhe Co., Ltd. (COFCO Tunhe) whose capacity of tomato paste is over 350,000t/a, still has a large number of stocks of tomato paste, with constant downturn in export. Actually, COFCO Tunhe has planned to put more efforts to enhance its sugar processing business in future.

As for Gansu Dunhuang Seed Co., Ltd. (Gansu Dunhuang), it has already transferred most of the investment originally in tomato processing project into corn seed business at the end of 2011.strong resistance and high quality will be continuously promoted for the protection of food security in China.

The gloomy tomato processing industry would seriously affect farmers' enthusiasm for planting processing tomato. It can be predicted that the planting area of processing tomato in 2012 would keep declining, following the significant decrease in 2011.

In China, processing tomato planting is mainly concentrated in Xinjiang, Gansu and Inner Mongolia. Xinjiang, as the largest production base of processing tomato at home, owns planting area of processing tomato of around 64,000 ha. In 2011, the output of processing tomato reached 4.35 million tonnes in Xinjiang, accounting for 15% of the world's total yield. With more than 110 tomato processing companies, Xinjiang annually exports over 700,000 tonnes of tomato paste to over 100 countries and regions in the world.

Source: Seed China News 1204

Content of Seed China News 1204:
Winall Hi-tech vigorously expands business 2011
Shandong Denghai: both revenue and net profit increase in 2011
Hefei Fengle's net profit down 39.21% in 2011
WanXiang Doneed: sharp growth in net profit 2011
Domestic tomato processing industry sees overcapacity
Corn single-grain sowing technology promoted rapidly in Huang-Huai-Hai Plain
Longping High-tech suspends listing for asset restructuring
Grand Agriseeds to control a large rice seed company
Vegetable seed technological innovation incubator opened in Shouguang, Shandong
Domestic scientists successfully transplant oil palm plantlet

Seed China News, a monthly publication issued by CCM International on 30th of every month, offers timely update and close follow-up of China’s seed industry dynamics, analyzes market data and finds out factors influencing market development

About CCM International
CCM International is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals. CCM International offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all through its new proprietary product ValoTracer.
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