According
to CCM’s latest
newsletter, Sweeteners China News
1310, Two Chinese
erythritol producers, namely Baolingbao Biology Co., Ltd. (Baolingbao, whose
production capacity of erythritol is 4,000t/a in China) and Shandong Binzhou
Sanyuan Biotechnology Co., Ltd. (Binzhou Sanyuan, production
capacity of erythritol is 5,000t/a in 2013), showed contradicting performance
in erythritol sales in H1 2013. It is worth mentioning that Baolingbao is a
leading functional sugar producer in China having several functional sugar
products, while the erythritol business of Binzhou Sanyuan's contributed the
total revenue for the company.
Data
from the 2013 semi-annual report of Baolingbao revealed that its erythritol
business performed poorly in H1 2013. The gross profit of Baolingbao's
erythritol reached as high as USD0.81 million in H1 2012, but it decreased by
71% YoY to USD0.23 million in H1 2013. Baolingbao expressed that the poor
performance of its erythritol was mainly attributed to the negative effect of
the RMB appreciation and the demand decrease from several foreign countries.
The appreciation of RMB caused the lower RMB export price (relative to the
fixed dollar price for erythritol), reducing the gross profit margin. The gross
profit margin of the company's sugar alcohol business decreased to 7.66% in H1
2013 from 15.87% in H1 2012. Besides, Baolingbao also indicated that some
political factors caused decreases in its export volume. For example, the export
volume to Japan and Philippines decreased in H1 2013 compared to H1 2012, due
to the political disputes between China and these two countries.
Baolingbao
could not explain well the poorer sales performance of its erythritol in
comparison to that of Binzhou Sanyuan's. According to the 2013 semi-annual
report of Binzhou Sanyuan, the revenue of the company's erythritol increased to
USD1.37 million in H1 2013, with a YoY up of 36.10%. Binzhou Sanyuan was honest
to express that the RMB appreciation also brought negative effects on its
product's export price in H1 2013 but the company focused on cost reduction and
product quality. For example, the company actively established a cooperation
with the well known Chinese research institutions to improve its R&D ability
and hence its revenue growth. The year-on-year increase rate of erythritol's
cost of sales in H1 2013 was just 16.93%, far lower than the one of its revenue
at the same time. And the gross profit margin of erythritol of Binzhou Sanyuan
also increased to 17.89% in H1 2013.
It
is crucial that Baolingbao invest in the R&D in line with Binzhou Sanyuan.
As a producer exclusively engaging in the production of erythritol, Binzhou
Sanyuan devotes its energy to the research and sales of its erythritol. On the
contrary, due to its diverse product range, Baolingbao cannot focus entirely on
erythritol's sales. As a result, under the adverse conditions such as the RMB
appreciation in H1 2013, Binzhou Sanyuan could depend on product's high quality
to attract more downstream customers from overseas market, enjoying more profit
compared to the same period of 2012.
For
domestic erythritol producers, the objective conditions are the same.
Subjective factors, such as more investment in quality improvement and market
exploration, will become the determinants to obtain good performance,
especially under the bad objective conditions. As an export-oriented industry,
the export volume of China's erythritol decreased sharply, from over 2,800
tonnes in the first five months of 2012 to just about 1,900 tonnes in the same
period of 2013. Under the negative export conditions, domestic erythritol
producers should have a positive attitude to solve their problems.
Table of Contents of Sweeteners
China News 1310:
H1
2013 still tough for domestic crystalline glucose industry
Starch
sugar producers selling more corn starch threatens domestic corn starch
industry
Functional
oligosaccharide business of three oligosaccharide giants: challenges hidden
behind good performance
Two
domestic erythritol producers have contradicting erythritol sales performance
in H1 2013
Guilin
Layn turns loss into gain in H1 2013
PureCircle:
sales performance good while suffering continous losses in FY2013
Export
overview of some sweeteners and raw materials in China, August 2013
YoY
growth rate of export volume of China's sucralose drops sharply in H1 2013
China's
aspartame export not as optimistic as it showed under independent HS code
China's
mannitol export: both volume and price increase in Jan. -Aug. 2013
International
and domestic factors together impact China's sucrose price in Q4 2013
Ex-factory
prices of sweeteners in China in September 2013
Wanfu
Biotechnology continues to suffer losses in H1 2013
Zhaoqing
Coruscate's starch syrup project starts to build in Sept. 2013
Guangxi
government introduces policies to promote health development of its sucrose industry
Sweeteners China News, issued
by CCM on 5th every month, offers timely update and close follow-up
of market and company dynamics based on China
CCM is dedicated to market research in China
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