Sichuan
Hebang Co. Ltd. (Sichuan Hebang), a listed chemical company in China with soda
ash and ammonium chloride as its main products, claimed that it planned to
construct a 50,000t/a glyphosate production project with a total budget of
USD81.81 million (RMB501 million). Besides, at present Sichuan Hebang owns the
production equipment and production technique which equals to 50,000t/a
glyphosate production capacity. Notably, this project's start time is uncertain
now due to the uncertainty to obtain the glyphosate production and operating
license, according to Glyphosate China Monthly
Report issued by CCM in September.
According
to the investment announcement released by Sichuan Hebang on 10 Sept. 2013,
Sichuan Hebang planned to construct the 50,000t/a glyphosate production project
by self-finance, and the project construction time is planned to be one year.
When this project is completed, Sichuan Hebang expects the total revenue and
total profit of this project to reach USD326.60 million (RMB2 billion) and
USD45.07 million (RMB276 million) respectively, according to the current
glyphosate price in China.
The
announcement also revealed that the goal of this project was to enrich Sichuan
Hebang's product variety and create a circular economy industrial chain, which
would lead to huge investment return. Sichuan Hebang's main products are soda
ash and ammonium chloride, each of whose current capacity is
800,000t/a. The revenue from soda products makes up about 95% of the total in
2012 and 93% in H1 2013 respectively.
In
order to complete this project, Sichuan Hebang has purchased the production
equipment and production technique which equals to 50,000t/a glyphosate
production capacity from its joint stock company—Sichuan Shuncheng Chemical Co.
Ltd. (Sichuan Shuncheng) with the price of USD12.97 million (RMB79.41 million)
on 7 Sept. 2013. But the equipment hasn't been installed. The purpose of
purchasing glyphosate related asset is to achieve benefit maximization. Mr. Mo,
the board secretary of Sichuan Hebang, stated that Sichuan Hebang only owns 49%
equity of Sichuan Shuncheng and does not hold controlling interest, which
prevents Sichuan Hebang from achieving benefit maximization.
There
are two main obstacles for Sichuan Hebang to accomplish its glyphosate project.
One
is that Sichuan Hebang has no glyphosate production and operating license at
present. Sichuan Hebang's business includes production and sales of soda ash,
ammonium chloride, ammonia, calcium carbonate, etc., but not glyphosate.
Whether Sichuan Hebang can obtain glyphosate production and operating license
is uncertain now. Mo stated that Sichuan Hebang's glyphosate production project
needs the approval from the National Development and Reform Commission,
People's Republic of China and the Ministry of Environmental Protection,
People's Republic of China, according to current glyphosate related policies
and regulations. But whether Sichuan Hebang can obtain the approval from the
above two departments is uncertain.
The
other obstacle is fund shortage. According to 2013 semi-annual report of
Sichuan Hebang, Sichuan Hebang has huge fund, with its cash and cash
equivalents up to USD79.85 million (RMB489 million) in total by the end of H1
2013. Sichuan Hebang has been constructing three big projects, including 6 turn
to be 9 project (namely the project of 600,000t/a soda co-production capacity
transforms to 900,000t/a soda co-production capacity), phosphate development
project and Wujun glass project, all of which are by self-finance. At present,
these three projects have been invested a little more than 30% of total
investment fund, which means that these three project still need the remaining
total investment of about USD381.09 million (2.33 billion). Undoubtedly,
according to its current fund situation, it's very hard for Sichuan Hebang to
invest in the glyphosate project.
However,
Sichuan Hebang is still trying its best to solve the two main obstacles.
As
for the glyphosate production and operating license, Mo stated that Sichuan
Hebang will actively apply to the local related government departments.
Furthermore, if Sichuan Hebang fails to apply for glyphosate production and
operating license, it may purchase a small glyphosate manufacturer which has
glyphosate production and operating license in Sichuan Province.
As
for the fund shortage, Sichuan Hebang can solve it by many ways, such as equity
pledge financing, bank loans, directional stock issuance financing, etc.
According to the announcement released by Sichuan Hebang on 7 Sept. 2013,
Sichuan Hebang Investment Group Co., Ltd. (Sichuan Hebang Investment), Sichuan
Hebang's controlling shareholder, has made a deal with Hong Yuan Securities
Co., Ltd. (Hong Yuan Securities) that Sichuan Hebang Investment pledges 39.1
million shares of Sichuan Hebang to Hong Yuan Securities for financing.
Although Sichuan Hebang Investment didn't reveal the equity pledge financing
amount, it may be more than USD81.65 million (RMB500 million). According to
Sichuan Hebang's average stock price in H1 2013, the value of 39.1 million
shares is about USD86.26 million (RMB528.25 million). It's estimated that the
fund from Sichuan Hebang Investment's equity pledge financing will be invested
in Sichuan Hebang's glyphosate project.
If
the two main obstacles are solved successfully, Sichuan Hebang's glyphosate
project is expected to be launched by the end of 2014 or at the beginning of
2015. Whether glyphosate market at that time is still thriving or not is
uncertain, so glyphosate project will be a high risk investment project for Sichuan
Hebang.
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Wynca successfully turns loss into gain in H1 2013 YoY
Nantong
Jiangshan's operating profit increases by 4,113.88% in H1 2013
Anhui
Huaxing's revenue increases by 38.08% in H1 2013
Jiangsu
Yangnong achieves strong profits largely due to its glyphosate business in H1
2013
Sichuan
Hebang to construct 50,000t/a glyphosate production project
Operating
performance comparison among Zhejiang Wynca, Nantong Jiangshan and Anhui
Huaxing in H1 2013
Glyphosate
becomes operating performance booster of Chinese pesticide companies
Six
glyphosate registrations in Aug. 2013
Glyphosate
technical price increases moderately in Sept. 2013
Export
volume of glyphosate technical decreases by 5.63% in July 2013 MoM
Glyphosate China Monthly Report, a monthly publication issued
by CCM on 20th, will keep track of latest dynamics, hotspots and
competitiveness analysis, and forecasts on market trends of China
CCM is dedicated to market research in China
Guangzhou CCM Information Science & Technology Co., Ltd.
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