Wednesday, September 4, 2013

Shandong Denghai achieves sharp growth in H1 2013

Shandong Denghai Seeds Co., Ltd. (Shandong Denghai) achieves sharp growth in both revenue and net profit during H1 2013, mainly owing to the increasing sales of corn variety Denghai605 and the contribution from key subsidiaries, according to CCM’s latest issue, Seed China News 1308.
According to Shandong Denghai's semi-annual financial report released on 26 Aug., the company generated USD98.81 million (RMB610.64 million) of revenue and USD24.81 million (RMB153.33 million) of net profit during H1 2013, an increase of 90.45% and 121.85% respectively year on year.

Shandong Denghai primarily attributes its sharp growth in H1 2013 to the increased sales of Denghai605, a leading variety bred by the company itself. As a national approved corn variety released in 2010, the variety has seen rapid growth in the past few years. With prominent advantage of lodging resistance and high yield, Denghai605's promotion area is estimated to reach over 533,333 ha. (8 million mu), mainly covering the summer corn growing regions, such as Shandong, Henan and Hebei.
Better performance of Denghai605 in last summer due to favorable weather has promoted its seeds sales in the marketing season of 2012/2013. (Editor: Shandong Denghai, a leading corn seed supplier for summer corn regions, usually takes the marketing season from Nov. to next June). Moreover, the lucrative rebates that Shandong Denghai provides for distributors has also greatly promoted the sales of Denghai605.

Good performance of the subsidiaries' also contributed to Shandong Denghai's sharp growth in H1 2013. Take for example Shandong Denghai-Pioneer Seeds Co., Ltd. (Denghai-Pioneer). The 51:49 joint venture of Shandong Denghai and DuPont Pioneer achieved four times YoY growth in net profit, reaching USD20.12 million (RMB124.33 million) in H1 2013 (Note: Denghai-Pioneer adjusted the marketing strategy in the marketing season of 2012/2013 by reducing the seed sales to distributors in Q4 2012 and increasing the carry-over ratio for the latter half of marketing season, which help promote its performance in H1 2013).
Xianyu335, the leading corn variety of Denghai-Pioneer, has shown a slight rebound after the sales decrease in the previous year, with an promotion area estimated to be around 1.53 million ha. (23 million mu) by Denghai-Pioneer this year. To make profits under the serious oversupply of corn seeds in the market, Denghai-Pioneer has greatly reduced the output of Xianyu335 to clear its inventories and slightly raised the selling price when the demand increased for the variety. After all, Xianyu335 has obvious performance advantages over most corn hybrids in the market.
Besides, Dandong Denghai Liangyu Seed Industry Co., Ltd. (Denghai Liangyu), another 51%-holding subsidiary of Shandong Denghai, also maintains a performance growth in H1 2013 following the sound performance in previous year, mainly relying on the leading variety Liangyu99, which has seen rising sales in the northeast market. With the outstanding traits covering lodging resistance, anti-plaque resistance and strong resistance to stem borer, the variety has become hot among corn growers in Northeast China, despite a higher selling price in single grain.

Shandong Denghai's leading corn variety Denghai605 is expected to see a further rapid growth in the coming 2-3 years, bringing profit growth to Shandong Denghai. During H1 2013, Denghai605 was successfully introduced to Shaanxi and Shanxi, two important provinces in the summer corn planting regions of Huang-Huai-Hai Plain. Besides, Shandong Denghai is making efforts to promote Denghai605 in the spring corn planting regions such as Inner Mongolia, located in Northeast China.
However, there are also still some challenges or risks affecting the further growth of Denghai605—serious oversupply in corn seed market, extreme weather conditions in these regions, etc. Moreover, Denghai605 variety has some shortcomings such as late maturing and slow dehydration, revealed by Zhang Shihuang, Chief Scientist of National Corn Industrial Technology System.
Nevertheless, the strong variety breeding capacity will stimulate the long-term development of Shandong Denghai. Apart from Denghai605, some other new varieties have also been developed by the company, such as Denghai618 and Denghai3737, which already passed the approval by Shandong Province. The company has invested annually over RMB4.05 million (RMB25 million) in R&D in the past few years, much higher than the most domestic rivals.

Recently, Shandong Denghai has been rather frequently setting up subsidiaries for business expansion. After setting up a subsidiary named Shandong Denghai Huayu Seeds Co., Ltd. in this June (for more details please refer to Shandong Denghai to set up another corn seed subsidiary in Seed China News 1306, Page 11), Shandong Denghai  on 22 August, 2013 announce its plan to establish a wholly-owned subsidiary. The new subsidiary, temporarily named Qingdao Denghai Seeds Co., Ltd. that was established with USD16.18 (RMB100 million) of registered capital in Qingdao, Shandong's developed coastal cities,, is expected to act as a high-tech breeding plateform of Shandong Denghai by absorbing top talents and cutting-edge technical resources.

Table of Contents of Seed China News 1308:
Hefei Fengle: both revenue and net profit fall in H1 2013
Longping High-tech achieves sound performance in H1 2013
Gansu Dunhuang: heavy losses continue in H1 2013
Shandong Denghai achieves sharp growth in H1 2013
Prospect of Guangdong's peanut seed market becomes good
Liaoning Dongya's Dongdan4243 yields poor harvest in southern Sichuan
Winall Hi-tech transfers corn seed subsidiary to cut losses
Anhui Wanken collaborates with CAS's affiliated institute on wheat breeding
Westrup Denmark cooperates with Kaifeng Maosheng on supplying seed processing equipment in China
China approves large-scale import of Argentina's GMO corn for first time
China's first insurance project on hybrid rice seed production launched in Chengdu
China's rapeseed import up 14.81% in first seven months of 2013
Origin reports revenue decrease for three months by June 30, 2013
BGI: sorghum genomic research to benefit genetic improvement

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