Sweeteners China News - cnchemicals.com · Welcome to the April issue of Sweeteners China News...

Sweeteners China News

VOL.4 Issue 4, April.28, 2014

Copyright © Guangzhou CCM Information Science & Technology Co.,Ltd

345555666777889

10111414161720212122222626

Contents

HeadlineEditor's NoteBrief News

Yucheng government and Shangdong University strengthen cooperationBaolingbao obtains patent certificate for starch sugar in March 2014QHT obtains Chinese National Well-known Trademarks certificationSBF launches new zero-calorie cola with stevia sweetenerImports of liquorice at Xinjiang ports increases during Jan.-Feb. 2014Nanning Sugar suffers net loss in Q1 2014Guitang suffers loss in Q1 2014Xinnong Licorice gets subsidy for exploiting international market in 2013China's sucrose imports rises in March 2014

Market DynamicsPrice war of neotame is comingIntegration of Chinese starch sugar industry still progressing under depressed marketLevel of concentration in China's acesulfame-K increases in 2013Liquorice imports increases sharply in 2013

Company DynamicsGlobal Sweeteners' performance declines significantly in 2013Longlive Bio-technology's revenue decreases but operating profit increases in 2013QHT's revenue and net profit increases in 2013Shandong Bailong cooperates with Healingbio

Import & Export AnalysisExport overview of some sweeteners and raw materials in China, February 2014

Consumption Trend & CompetitivenessComparsion on 2013 annual report of three main sugar companies

Price UpdateEx-factory prices of sweeteners in China in April 2014

Sweeteners China News 1404CCM Newsletter

www.cnchemicals.comCopyright Guangzhou CCM Information Science & Technology Co., Ltd.E-mail: [email protected]

2/28

http://www.cnchemicals.com

HeadlineWith the expiration of neotame patent and its capacity expansion in China, there may occur a price war in Chinese neotameindustry.

Although starch sugar industry was in a downturn, the sales volume of some large starch sugar companies still increased and theyexpanded their capacity in 2013, compared with the previous year. Starch sugar industry's consolidation may be completed underthis situation.

In 2013, due to the domestic acesulfame-K overcapacity, Chinese producers adopted a price reduction in order to salespromotion. And the level of concentration in China's acesulfame-K industry was increased accordingly.

China's imports of liquorice witnessed YoY growth in 2013, due to shortage of liquorice resources and growing internationaldemand for liquorice. Moreover, the scale of Chinese liquorice by artificial planting keeps growth.

On 31 March, 2014, Global Sweeteners reported an unsatisfactory performance in its 2013 annual report. The company alsodecided to temporarily suspend the production of corn refined products, beginning on 31 March, 2014.

On 26 March, 2014, Longlive Bio-technology released its 2013 annual report, showing a decrease in revenue from the previousyear in spite of growing operating profits. In the first few months of 2014, Longlive Bio-technology has completed a series ofprojects that will generate more profits.

On 17 April, 2014, QHT released its 2013 annual report, showing a rise in revenue and net profit, mainly due to a sales growth in itsleading products. As for the company's development in 2014, QHT will focus on the development of prebiotic products and tortoisejelly.

On 12 April, 2014, Shandong Bailong signed a cooperation agreement with Healingbio. Owing to the similarities in theirbusinesses, the two company may carry out future cooperation in areas including functional food, animal feed additives,biopesticides, and animal health product.

Export overview of some sweeteners and raw materials in China, February 2014

A rise in sucrose imports and a fall in sucrose sales price greatly affected performances of some sucrose enterprises in 2013.Promotion of fine varieties application and mechanization in sugarcane planting were included in the 2014 business plan of manysucrose producers. Besides, development of high-added value products were also their focuses, according to their annual reports.

Ex-factory prices of sweeteners in China in April 2014



3/28


Editor's NoteWelcome to the April issue of Sweeteners China News (Vol. 4 Issue 4 2014) published by CCM, a professional consulting

company which has been extensively and intensively focusing on the dynamics of China's sweetener industry.

A rise in sucrose imports and a fall in sucrose sales price greatly affected performances of some sucrose enterprises in 2013.

Because of profit received from sucrose import business, COFCO Tunhe saw a noticeable improvement in its performance in

2013. By contrast, other sucrose companies, like Nanning Sugar and Guitang, were adversely affected in 2013. Profit margins of

their sucrose businesses were pushed down by the fall in sucrose price.

Starch sugar manufacturers were also impacted by declined sucrose price. Global Sweeteners disclosed a drop in its both sales

volume and profit margin of starch sugar in 2013. However, some other large companies, like China Agri saw an YoY rise in sales

volume of starch sugar. The recession of China's starch sugar industry provided opportunities for these companies to improve their

market shares as they have scale advantage and strong ability of resisting risk.

Similar integration also happened in China's acesulfame-K in 2013. Accumulative export volume of the top 3 producers'

acesulfame-K increased in 2013 following the price war.

Development of China's oligosaccharide producers slowed down in 2013, as shown in the annual reports of some companies

including QHT and Longlive Bio-technology. Except for the product structural adjustment, some company like Longlive Bio-

technology began to explore overseas market. Besides, Shandong Bailong recently signed a cooperation agreement with

Healingbio (a South Korean biotech company).

To be noticed, the RMB/USD exchange rate in this issue is is 6.15 while HKD/USD is 7.757 (source: The People's Bank of China),

and all the prices mentioned in this newsletter include the VAT unless otherwise specified. If there are any specific topics you would

like us to cover or any subjects you would like us to investigate in more details, please contact us by +86-20-3761 6606, or

[email protected].



4/28


Brief NewsYucheng government and Shangdong University strengthen cooperation

On 28 March, 2014, officials from Yucheng's government (Shandong Province) and heads of some sweetener producers came to

School of Life Science, Shandong University, making cooperation with these aspects: R&D and student training. This partnership

will benefit for both parties. On one hand, it will be conducive to the related products' R&D and talent introduction for the companies;

on the other hand, it will help the transformation of scientific & technological achievements and cultivation of students for Shandong

University and National Glycoengineering Research Center (NGRC).

It's known that Yucheng is the core area of national high-tech biological industry base and there are some key enterprises of

functional sugar located in this city, such as Baolingbao Biology Co., Ltd. (Baolingbao), Shandong Longlive Bio-technology Co.,

Ltd. (Shangdong Longlive) and Shandong Futaste Pharmaceutical Co., Ltd (Shandong Futaste).

Shandong University is the supporting institution of NGRC, which mainly focuses on sugar engineering's R&D with regard to energy

resource sugar, drug sugar and functional sugar, and sets production bases in Baolingbao, Shandong Longlive and Shandong

Futaste.

Baolingbao obtains patent certificate for starch sugar in March 2014

On 28 Mar. 2014, Baolingbao Biology Co., Ltd. (Baolingbao) issued an announcement that the company has recently obtained a

patent certificate granted by the State Intellectual Property Office of the People's Republic of China (SIPO). According to

Baolingbao, the patent titled "Saccharification Process and Equipment for Starch Sugar" has a 20-year validity period

beginning 30 Nov., 2011. The patent number is "ZL 201110389410.6". Data from SIPO showed that this invention provides a

saccharification process and corresponding equipment for starch sugar capable of carrying out continuous saccharification.

Compared with the traditional process, this new process can shorten the time of saccharification in starch sugar production, reduce

the usage of enzyme preparation,and save the cost of stirring device, and increase the degree of saccharification of starch sugar.

QHT obtains Chinese National Well-known Trademarks certification

On 2 April 2014, Quantum Hi-Tech (China) Biological Co., Ltd. (QHT) announced that its trademark QHT ® and the image obtained

"Chinese National Well-known Trademarks" certification granted by Trademark Office of The State Administration For Industry &

Commerce of the People's Republic of China. The trademark belongs to Class 30 of the International Classification of Goods and

Services for the Purposes of the Registering Trademarks and its corresponding products are natural sweeteners

(oligosaccharides). This certification will not only be beneficial for QHT brand protection, but also enhance QHT brand awareness

and oligosaccharides' promotion among consumers.



5/28


SBF launches new zero-calorie cola with stevia sweetener

As reported on 7 April, 2014, Suntory Beverage & Food Limited (SBF) said that it has launched a new zero-calorie cola named

"Pepsi NEX". The old product was sweetened with aspartame, acesulfame-K, sucralose and other artificial sweeteners, whereas,

the new one contained stevia sweetener, which sells at about USD1.47 (JPY151) per 500ml bottle. SBF has the franchise of

PepsiCo in Japan. According to the company's 2014 strategy for key brands in Japan, SBF intends to use stevia sweetener to

improve cola products' aftertaste, and "Pepsi NEX" will become No.1 in zero-calorie cola category with its unrivaled taste.

In Feb. 2014, PepsiCo said that new cola products sweetened with stevia and sucrose would hit the market this year, and these

new ones' test results were promising so far. The launching of "Pepsi NEX" is supposed to a part of new cola product plan.

Imports of liquorice at Xinjiang ports increases during Jan.-Feb. 2014

According to China Customs' data, the import volume of liquorice at Xinjiang ports reached about 6,000 tonnes during Jan.-Feb.

2014, increased by 38.9% YoY. And its import value was USD9.22 million, a year-on-year growth of 59.1%. The average import

price was USD1,489.1/t during Jan.-Feb. 2014, with 14.5% year-on-year growth rate; and the average import price was

USD1,508.0/t, hitting the peak since Jan. 2013.

Due to the shortage of raw materials, domestic liquorice processors have increased imports to meet the demand for liquorice-

processed products since 2013. Under this situation, the import price of liquorice also saw an obvious increase during this period.

Kazakhstan is one of the main import origins of liquorice for China. As for Xinjiang ports, the import value of liquorice from

Kazakhstan was USD3.04 million (RMB18.56 million) during Jan.-Feb. 2014, up by 34.8% YoY, accounting for 33% of the total

import value. Meanwhile, the import value from Uzbekistan and Afghanistan reached USD2.17 million (RMB13.24 million) and

USD2.08 million (RMB12.73 million), respectively, accounting for 23.5% and 22.6% of the total separately.

Nanning Sugar suffers net loss in Q1 2014

On 12 April, 2014, Nanning Sugar Manufacturing Co., Ltd. (Nanning Sugar) released its pre-announcement of performance of Q1

2014, showing that the company suffered net loss of USD6.8 million-USD12.4 million (RMB42 million-RMB76 million). The

unsatisfactory performance was primarily due to a decline in sales volume and average per-unit sales price of its machine-

processed sugar during this period.

In 2013, Nanning Sugar achieved profitability, with net profit reaching USD8.03 million (RMB49.37 million). On one hand, the

company increased sugarcane yield in 2013 so as to decrease the cost. On the other hand, the output and the sales volume of its

machine-processed sugar respectively rose by 27.68% and 71.25% year on year. However, China's sucrose witnessed YoY

increase in import volume during Jan.-Feb. 2014, as international sucrose price fell sharply. According to data from China

Customs, China's import volume of sucrose respectively increased by 18.76% and 103.28% in Jan. and Feb. 2014. And low import

price of sucrose greatly impacted on the sales volume and sales price of domestic sucrose.



6/28


Guitang suffers loss in Q1 2014

On 14 April, 2014, Guangxi Guitang (Group) Co., Ltd. (Guitang) released its pre-announcement of performance of Q1 2014. The

company predicted that its net loss for Q1 2014 would be USD0.73 million-USD1.09 million (RMB4.5 million-RMB6.7 million), lower

than the figure of USD3.99 million (RMB24.6 million) in the same period of 2013.

Guitang's unsatisfactory performance in Q1 2014 was mainly due to the following factors. On one hand, the leading product,

machine-processed sugar, witnessed YoY decrease of 14.8% in sales price, leading to a net loss in Q1 2014. On the other hand,

the production cost declined by 19.17% year on year, reducing the company's loss over 2012. Besides, the sales volume of

machine-processed sugar saw a year-on-year fall of 6.45%. A similar case is paper product business.

According to Guitang's annual report of 2013, it suffered net loss of USD17.25 million (RMB106.1 million). And its gross profit rate

was severally affected by oversupply of sucrose and intense competition of paper industry in 2013. The company revealed that it will

focus on reduce cost of sales to improve business performance in 2014.

Xinnong Licorice gets subsidy for exploiting international market in 2013

Xinjiang Alar Xinnong Licorice Industry Co., Ltd. (Xinnong Licorice) got subsidy of USD23,000 (RMB141,800) granted by the

government for exploiting the international market in 2013.

Xinnong Licorice, a leading company of liquorice in China, respectively obtained export quota of 30 tonnes and 60 tonnes for

glycyrrhizin and liquorice extract in 2013, compared with the figure of 10 tonnes and 30 tonnes in 2012. Moreover, according to its

parent company (Xinjiang Talimu Agriculture Development Co., Ltd.)'s annual report of 2013, its export agency fee witnessed YoY

increase of 218%, mainly for liquorice products and cotton products. This indicated a growth in the company's foreign trade.

Set up by the Ministry of Finance of the People's Republic of China, the subsidy was used for related companies participation in

overseas activities, such as attend overseas trade fairs, patent application in foreign countries, trademark registration in overseas

market, etc. Priority should be given to support for expansion in Latin America, Africa, the Middle East, Eastern Europe, Southeast

Asia, Central Asia and other emerging international markets.

China's sucrose imports rises in March 2014

It was reported that China imported 411,132 tonnes of sucrose in March 2014 increasing by 100.4% YoY and 150.98% MoM. In

detail, the import volumes of sucrose from Brazil, Cuba, South Korea, Thailand and India were about 289,288 tonnes, 95,097

tonnes, 17,965 tonnes, 6,522 tonnes, and 1,300 tonnes respectively in March 2014. In Q1 2014, China has already imported a total

of 863,563 tonnes of sucrose, up by 63.28% YoY. By the end of March 2014, China's sucrose imports amounted to 2.48 million

tonnes during the extraction season of 2013/2014 (begin from Sept. 2013), with a year-on-year growth rate of 96.39%. Meanwhile,

the average imported price was USD442.88/t in March 2014, USD5.06/t higher than Feb.



7/28


Market DynamicsPrice war of neotame is coming

Summary: With the expiration of neotame patent and its capacity expansion in China, there may occur a price war in Chinese

neotame industry.

It seems that a price war of neotame began in China The average ex-works price of neotame kept falling since 2014, especially in

March, 98% neotame's ex-works price declined to about USD60,000/t, down by 15% month on month.As neotame patent has

already expired in China by the end of 2013, many Chinese manufacturers are trying to enter into this market. Considering the

coming intense competition, manufacturers may reduce the product's price to capture market share.

In fact, at present, large number of neotame manufacturers have controlled mature production techniques, and their product quality

can reach the international advanced level. However, due to patent restrictions, Chinese manufacturers cannot produce netotame

on a large scale before the expiration of neotame patent in China. CCM estimated that the total domestic output of neotame was

about 40 tonnes in 2013, some of the compound sweetener manufacturers still depended on imports. Since neotame's output is still

very small, it has huge development potentials, which has attracted many manufacturers to enter this market. For example, Beijing

North Sunlight Food Additive Co., Ltd. revealed that it plans to build a neotame production line, whose main businesses are

essence and compound sweeteners.The domestic capacity expansion and increasing number of manufacturers will certainly lead

to a price war of neotame in China.

Several enterprises have already made preparations for the challenges. During 25 -27 March, 2014, Food Ingredients China 2014

(FIC2014) was held in Shanghai, a director form Wuhan Huatian Co., Ltd. (Huatian) stated that the company will focus on expanding

its overseas markets within the next two or three years and will no longer find trading company to agent its neotame business. It's

known that Huatian is awarded as the world's largest neotame manufacturer, whose target capacity is 1,000 t/a, and is participating

in the drafting Food Safety National Standards of neotame.

Moreover, a Food Safety National Standards of food-additive N-[N-(3,3-Dimethylbutyl)-L-α-aspartyl]- L-phenylalanine 1-methyl ester

will be taken effect on 1 June, 2014. This standard took Joint FAO/WHO Expert Committee on Food Additives (JECFA) for

reference, in line with the international advanced level, which helps to ensure the competitiveness of China neotame industry.



8/28


Figure 1: Ex-works price of 98% neotame in China, July 2013-Mar. 2014

Note: The price is an average of different manufacturers' quotations including VAT.

Source: CCM

Integration of Chinese starch sugar industry still progressing underdepressed market

Summary: Although starch sugar industry was in a downturn, the sales volume of some large starch sugar companies still increased

and they expanded their capacity in 2013. Starch sugar industry's consolidation may be completed under this situation.

Due to weak demand from downstream industries and low price of its competitive product–sucrose, the domestic starch sugar

price remained low and starch sugar enterprises' operating rate was also low in 2013. However, some large starch sugar

enterprises still maintained a high sales volume. For example, on 26 March, 2014, China Agri-Industries Holdings Limited (China

Agri) released its annual report of 2013, showing that its sales volume of starch sugar reached 578,000 tonnes in 2013, with 64.9%

year-on-year growth. Similar to China Agri, according to the annual report of 2013 of China Starch Holdings Limited (China Starch),

its sales volume of starch sugar increased from 86,081 tonnes in 2012 to 93,055 tonnes in 2013.

On the contrary, sales price of these enterprises' starch sugar decreased to different extents. For instance, the average sales price

of China Starch's starch sugar declined from USD394.5/t (RMB2,426/t) in 2012 to USD379.8/t (RMB2,336/t) in 2013. China Agri

also reduced the sales price of starch sugar, which helped greatly increase its sales volume of starch sugar. In fact, other large-

scale enterprises adopted price reduction strategy for the product, such as Baolingbao Biology Co., Ltd. (For more details, please

refer to Sweeteners China News 1403: Baolingbao's revenue and net profit witness a decline in 2013). The cost advantage

brought by scale economy made them lower the sales price. Furthermore, since starch sugar price remained low and many small

starch sugar companies' operating rate declined in 2013, this created opportunities for large enterprises to expand market share in

starch sugar industry.

In order to capture market share, starch sugar enterprises still expanded their capacities in recent years, although starch sugar

industry was in a downturn. A case in point is that the capacity of China Agri' starch sugar increased from 550,000 t/a at the end of



9/28


2011 to 1.04 million t/a at the end of 2013. During 25 -27 March, 2014, Food Ingredients China 2014 (FIC2014) was held in

Shanghai, an exhibitor–Shandong Scents Jianyuan Bio-Tech Co., Ltd. revealed that it intends to raise high fructose corn syrup's

capacity from 50,000 t/a to 450,000 t/a. In addition, China Starch is raising corn starch's capacity from 500,000 t/a to 600,000 t/a in

Shandong factory, which is the production base of starch sugar for China Starch. The expanded corn starch's capacity has laid a

solid foundation for its starch sugar capacity expansion.

Large enterprises increased their capacities and sales volume, indicating a narrowing market space for small-sized enterprises,

Chinese starch sugar industry may complete the integration under the depressed market.

Level of concentration in China's acesulfame-K increases in 2013

Summary: In 2013, due to the domestic acesulfame-K overcapacity, Chinese producers adopted a price-cut strategy in order to

promote sales. The market concentration was lifted accordingly.

In 2013, Chinese acesulfame-K producers adopted price cuts to push sales. A case in point is Anhui Jinhe Industrial Co., Ltd.

(Anhui Jinhe). On 20 March, 2014, the company released its annual report of 2013, showing its revenue from acesulfame-K

business increased by 8.72% year on year. According to CCM's investigation, the ex-works price of acesulfame-K produced by

Anhui Jinhe decreased by USD800/t in Dec. 2013, compared with Jan. 2013. The price reduction strategy had indeed promoted

Anhui Jinhe's revenue; however, the gross profit margin of its acesulfame-K business declined to only 4.34% in 2013, a drop of

13.34 percentage points over the same period in 2012.

In recent two years, Chinese acesulfame-K producers adopted price reduction strategy, due to overcapacity. The output of

acesulfame-K was less than 15,000 tonnes in both 2012 and 2013, with operating rate lower than 45% as estimated. It's worth

noting that Anhui Jinhe launched a 5,000 t/a acesulfame-K production line in July 2012, further intensifying the overcapacity of both

the company and the whole industry. Although the capacity greatly increased, the company's revenue from its acesulfame-K

business witnessed a YoY decrease of 16.09% in 2012. Thus, Anhui Jinhe gave priority to sales promotion and its quoted price of

acesulfame-K was the lowest among the domestic producers in 2013.

Besides, data from China Customs showed that China's export price of acesulfame-K declined from USD6.73/kg in July 2012 to

USD5.25/kg in Dec. 2013. As the export volume of acesulfame-K have accounted for about 60% of the total output since 2012, the

fluctuation in export price can clearly reflect price competition in the domestic acesulfame-K industry.



10/28


Figure 2: Export trend of acesulfame-K in China, 2012-2013

Source: China Customs & CCM

The level of concentration in China's acesulfame-K industry was increased by intense competition. The market share accounted by

large enterprises rose gradually, while the market share of small enterprises got smaller. As for export, accumulative export volume

of the top 3 producers' acesulfame-K accounted for 95.5% of the total exports in 2013, up by 4.3 percentage points compared with

2012. In detail, Suzhou Hope Technology Co., Ltd., Anhui Jinhe, Beijing VitaSweet Co., Ltd. witnessed YoY increase of 4.0%,

22.4% and 47.1% in export volume in 2013, respectively. By contrast, Shandong Minghui Food Co., Ltd. and Zhejiang Hangzhou

Sanhe Food Co., Ltd's export volume in 2013 declined by 43.2% and 63.8% year on year respectively. It's estimated that the level

of concentration in Chinese acesulfame-K industry will be further enhanced in the future, as competition continues.

Table 1: Exports of top five manufacturers of acesulfame-K in China, 2012-2013

2012 2013

Manufacturer Quantity (tonne) Price (USD/kg) Manufacturer Quantity (tonne) Price (USD/kg)

Suzhou Hope Technology Co., Ltd. 4,188 6.47 Suzhou Hope Technology Co., Ltd. 4,355 5.59

Anhui Jinhe Industrial Co., Ltd. 2,581 5.94 Anhui Jinhe Industrial Co., Ltd. 3,160 5.00

Beijing VitaSweet Co., Ltd. 588 8.85 Beijing VitaSweet Co., Ltd. 865 6.92

Shandong Minghui Food Co., Ltd. 460 6.13 Shandong Minghui Food Co., Ltd. 261 5.52

Zhejiang Hangzhou Sanhe Food Co., Ltd. 190 9.41 Zhejiang Hangzhou Sanhe Food Co., Ltd. 69 9.23

Others 62 6.22 Others 66 5.48

Total 8,069 6.52 Total 8,776 5.53


Liquorice imports increases sharply in 2013

Summary: China's imports of liquorice witnessed YoY growth in 2013, due to shortage of liquorice resources and growing

international demand for liquorice. Moreover, the scale of Chinese liquorice by artificial planting keeps growth.

Chinese liquorice processing industry is more and more dependent on imported liquorice. According to data from China Customs,



11/28


China has imported 51,395 tonnes of liquorice in 2013, a year-on-year increase of 75.7%. Affected by China's rising demand for

liquorice, the average import price of liquorice reached USD1,348/t in 2013, up by 20.6% from the previous year. It's worth noting

that the import price of liquorice kept increasing since 2014, and its import price reached USD1,514/t in Feb. 2014.

Most of liquorice imported at Xinjiang ports. The import volume of liquorice at Xinjiang ports reached 50,771 tonnes in 2013, up by

98.3% YoY, accounting for 98.8% of the national total. In 2013, the top three import origins were Kazakhstan, Uzbekistan and

Azerbaijan; and the import volume from the three countries increased YoY of 98.1%、36.7% and 229.1%.

Increasing demand for liquorice-processed products from international market, Xinjiang ports has imported liquorice worth of

USD39.79 million through processing trade in 2013, a year-on-year rise of 88.4%, accounting for 35.1% of the total import value.

Moreover, the proportion accounted for 61.1% of the total import value during Jan.-Feb. 2014, indicating increasing influence on

domestic liquorice processing industry. Large amount of imported liquorice guaranteed the supply for liquorice processing

enterprise, thus China's liquorice-processed products witnessed an obvious growth in export volume in 2013. Take liquorice sap

and extract for example, according to data from China Customs, China exported 6,653 tonnes, a shocking YoY increase of 70.4%.

Furthermore, the average export price of the product was USD6,798/t in 2013, realizing a YoY rise of 12.3%.

Different from liquorice imports, in 2013, China's export volume of liquorice was 3,345 tonnes, only up by 2.8% year on year; and

the export price was USD7,483/t, up by 10.6% year on year. Due to the shortage of liquorice, its export volume kept stable in recent

years; while the increasing demand from international market made the export price increase.

Besides, the governmental policy also impacted on the import & export of liquorice.

On one hand, China has set export quotas for liquorice. According to the Ministry of Commerce of the People's Republic of China's

notification, the export quotas for liquorice were 3,600 toones (in 2011), 3,600 tonnes (in 2012), 4,060 tonnes (in 2013),

respectively.

On the other hand, China eliminated import tariffs on liquorice since 2008, encouraging liquorice processing enterprises to

increase imports.

Table 2: Top 5 import origins of liquorice in China, 2012 and 2013

2012 2013

Source Quantity (tonne) Price (USD/kg) Source Quantity (tonne) Price (USD/kg)

Kazakhstan 14,502 1.05 Kazakhstan 28,734 1.39

Uzbekistan 7,866 1.25 Uzbekistan 10,751 1.28

Afghanistan 2,149 0.91 Azerbaijan 6,445 1.24

Azerbaijan 1,958 1.31 Afghanistan 3,026 1.61

Pakistan 1,664 1.25 Kyrgyzstan 1,314 0.66

Others 1,108 1.01 Others 1,125 1.69

Total 29,247 1.12 Total 51,395 1.35

Source: China Customs



12/28


Table 3: Top 5 export destinations of China's liquorice sap and extract, 2012 and 2013

2012 2013

Destination Quantity (tonne) Price (USD/kg) Destination Quantity (tonne) Price (USD/kg)

The US 2,394 5.92 The US 4,496 6.74

Germany 598 5.09 Germany 852 5.87

The Netherlands 228 4.78 France 565 7.65

Taiwan 197 7.41 The Netherlands 307 5.37

France 103 5.50 Taiwan 140 8.12

Others 381 8.60 Others 292 9.58

Total 3,901 6.05 Total 6,652 6.80


Table 4: Top 5 export destinations of China's liquorice, 2012 and 2013

2012 2013

Destination Quantity (tonne) Price (USD/kg) Destination Quantity (tonne) Price (USD/kg)

Japan 2,075 7.90 Japan 1,839 9.43

South Korea 311 5.23 South Korea 555 5.21

Germany 243 5.85 Germany 299 5.52

Taiwan 238 3.98 Taiwan 272 5.00

Thailand 217 3.12 Thailand 163 3.16

Others 171 5.58 Others 217 5.84

Total 3,255 6.77 Total 3,345 7.48


At present, domestic liquorice processing enterprises relieved their raw material pressure through liquorice imports. Domestic

liquorice processing enterprises take the following measures to alleviate shortage of raw materials:

Firstly, direct establishment of liquorice processing bases in Central Asia and other regions, which are rich in liquorice resources.

For example, the first batch of glycyrrhizin that Gansu Yalan (Kazakhstan) Co., Ltd. produced has been transported back to Lanzhou

City, Gansu in Feb. 2014, since Yalan Pharmaceutical Co., Ltd. (Yalan Pharmaceutical) has set up a glycyrrhizin production base in

Kazakhstan in 2010. As revealed by Dong Wanyou, the chairman of the board of Yalan Pharmaceutical, Kazakhstan enjoys

abundant liquorice resources, and Kazakhstan liquorice price is only one-third of China's domestic one. Under this situation, the

company who set up production base in foreign countries boosts cost advantage.

Secondly, some of the domestic liquorice processing enterprises started to set up artificial planting bases. A case in point is

Xinjiang Tianshan Pharmaceutical Ind. Co., Ltd., it has made an cooperation agreement with Bachu County, Xinjiang in Oct. 2013,

the latter offer about 2,670 ha (40,000 mu) for liquorice planting. According to Environment Protection Department of Xinjiang's

announcement on 11 April, 2014, the liquorice project is under the second environment impact assessment. Furthermore, it's

reported in March 2014 that Xinjiang Desun International Industry Co., Ltd. is seeking for cooperation, establishing 13,300 ha

(200,000 mu) liquorice planting base and a 1,500 t/a liquorice deep-processed plant. In fact, the scale of Chinese liquorice by

artificial planting keeps growth, and liquorice processing enterprises are also involved to guarantee the sales. Guazhou County,

Gansu Province is the largest artificial planting base of liquorice in China, which covered an area of 6,880 ha (103,200 mu) in 2013,

and the average compound growth rate of 29% since 2008. It's known that there are four liquorice processed enterprises, and two



13/28


of which have passed GMP certification. Compared with natural liquorice, the artificial planted liquorice has insufficient content of

active ingredients, such as glycyrrhizin, and it takes a certain time to completely replace natural liquorice.

Company DynamicsGlobal Sweeteners' performance declines significantly in 2013

Summary: On 31 March, 2014, Global Sweeteners reported an unsatisfactory performance in its 2013 annual report. The company

also decided to temporarily suspend the production of corn refined products, beginning on 31 March, 2014.

On 31 March, 2014, Global Sweeteners Holdings Limited (Global Sweeteners) released its annual report of 2013, disclosing

losses in its performance. The company's revenue totaled USD541.4 million (HKD4,200 million), down by 7.1% over the same

period in 2012, and the gross profit margin declined from 7.8% in 2012 to 3.3% in 2013. Net losses amounted to USD41.3 million

(HKD320 million), up by 29.6% year on year. Losses were attributed to a fall in corn starch's sales price and sweetener's sales

volume, and rising production costs.

Table 5: Global Sweeteners' performance ,2012 and 2013

Item 2012, million USD 2013, million USD YoY change

Revenue 582.7 541.4 -7.1%

Cost of sales 537.5 523.7 -2.6%

Gross profit 45.2 17.8 -60.7%

Net loss attributable to shareholders 31.8 41.3 29.6%

Source: Global Sweeteners Holdings Limited

Global Sweeteners has two main divisions: corn refined products and sweeteners.

– The corn refined division includes corn starch, corn gluten meal, corn oil, and others.

The company's Chuangchun and Jinzhou plants have a corn processing capacity of 1.5 million t/a, and are responsible for the

production of upstream corn refined products and for providing corn starch as a raw material for sweeteners. In 2013, faced with the

domestic overcapacity of corn starch, most producers adopted a price reduction strategy in order to promote sales, bringing the

average price of Global Sweeteners' corn starch to USD425.4/t（HKD3,300/t), a year-on-year fall of 2.9%. Moreover, the cost of

upstream business saw a YoY increase of 21.5% in 2013, leading to a gross loss of USD2.7 million (HKD21 million), while 2012

brought in a USD6.3 million(HKD49 million) gross profit.

– The sweetener division includes glucose syrup, maltose syrup, high fructose corn syrup, maltodextrin, crystalline glucose and

sorbitol.

Revenue from the sweetener division was USD262.2 million (HKD2,034 million) in 2013, a shocking YoY drop of 23.1%, as

sucrose's falling prices severely impacted sales volume and gross profit margins. Sales volumes of glucose syrup, maltose syrup

and crystalline glucose in particular experienced steep drops. Declining operating rates also pushed up production costs of these

three products. An exception is maltodextrin, whose sales price and gross profit margin held at the same levels as 2012.

Meanwhile, Global Sweeteners' refined corn products as well as sweeteners witnessed a YoY growth in both export volume and



14/28


export value in 2013, together bringing in approximately 6.0% (2012: 5.1%) of the company's revenue. As Global Sweeteners

announced in June 2013, its parent company, Global Bio-chem Technology Group Co., Ltd., has signed a cooperation agreement

with Archer Daniels Midland Company (ADM). Under the agreement, Global Bio-chem can rely on ADM for the distribution of

sweeteners to Australia, New Zealand and some Asian regions starting in June 2013. However, there was no export transaction

done through ADM sales channel due to the low international sucrose price.

Table 6: Global Sweeteners' performance by product, 2013

Division Products Revenue, million USD YoY change Gross profit margin YoY change

Corn refined products / 279.2 15.5% -1.00% -3.6 percentage points

Sweeteners

Maltose syrup 92.2 -13.5% 4.8% -7.9 percentage points

Maltodextrin 72.8 0.0% 10.0% 0

Glucose syrup 56.2 -49.9% 8.3% -3.8 percentage points

HFCS 29.5 78.9% 14.0% -2.4 percentage points

Crystalline glucose 11.5 -65.1% 0.2% -5.6 percentage points


Table 7: Sales volume and average sales price of Global Sweeteners' products, 2013

Division Products Sales volume, tonne YoY change Average sales price, USD/t YoY change

Corn refined productsCorn starch 350,000 29.6% 425.4 -2.9%

Others 315,000 7.1% 373.9 3.6%

Sweeteners

Maltose syrup 202,000 -13.7% N/A 0.0%

Glucose syrup 158,000 -47.7% N/A -3.9%

Maltodextrin 156,000 0.0% 464.1 0.0%

HFCS 59,500 87.1% N/A -3.5%

Crystalline glucose 22,000 -66.2% N/A 1.8%


Table 8: Global Sweeteners' exports, 2013

Division Export value, million USD YoY change Export volume, tonne YoY change

Corn refined products 22.2 3.6% 76,000 4.1%

Sweeteners 10.3 25.0% 19,000 26.7%


Global Sweeteners will implement a number of measures in order to improve its performance.

Firstly, the company announced on 7 Feb, 2014, its decision to suspend production of corn refined products at the Changchun plant

for a period of nine months, beginning on 31 March, 2014, while its corn processing base is relocated. During this time, the

company will purchase corn starch for the production of sweeteners. After the relocation, the company will decide whether to

resume production of corn refined products at the Changchun plant according to market conditions, but at the moment the

suspension will help improve the company's performance.

Secondly, Global Sweeteners will focus on R&D of high-added value products, using both independent R&D capabilities and

through its cooperation with ADM.

Thirdly, as Global Sweeteners looks to explore possibilities in the global market, ADM's excellent distribution network will help the



15/28


company consolidate its overseas presence and increase exports.

Longlive Bio-technology's revenue decreases but operating profit increases in2013

Summary: On 26 March, 2014, Longlive Bio-technology released its 2013 annual report, showing a decrease in revenue from the

previous year in spite of growing operating profits. In the first few months of 2014, Longlive Bio-technology has completed a series

of projects that will generate more profits.

On 26 March, 2014, Longlive Bio-technology released its 2013 annual report. The report shows a 10.94% year-on-year drop in

revenue, caused by a narrowing of the company's business scope: in H2 2012, Longlive Bio-technology sold off its

subsidiary, Qingdao Century Longlive International Trade Co., Ltd., responsible for the parent company's starch and starch sugar

trade. However, the functional sugar business performed well, and the company still achieved a 1.46% growth in operating profits. In

2014, Longlive Bio-technology will likely bring in more profits, as the newly-constructed projects will be put into operation.

Longlive Bio-technology has four divisions: functional sugar, cellulosic ethanol, corn starch and starch sugar, and others. They

accounted for 50%, 25%, 24% and 1% of the company's total revenue in 2013, respectively.

The functional sugar division includes xylo oligosaccharide (XOS) and xylitol. They are highly profitable products that achieved

a YoY growth of 5.20 percentage points in gross profit margin . Sales of functional sugars reached about 12,447 tonnes, up by

12.25% year on year, and their revenue also rose, by 9.14% YoY. The rise in sales volume was attributed to two main reasons:

firstly, the company developed end-products, such as soybean milk powder containing XOS, which have performed well since

hitting the market in May 2013. Secondly, the company made efforts to expand its overseas market. According to Longlive Bio-

technology, its small-package xylitol has captured large market shares in Europe.

Cellulosic ethanol sales failed to meet expectations for 2013: its sales volume was 31,576 tonnes, down by 11.01% from the

previous year. Additionally, government subsidies for cellulosic ethanol have not been paid yet, causing low gross profits for the

division.

In 2013, Longlive Bio-technology trimmed its corn starch and starch sugar businesses, due to losses in 2012. Revenue from this

division consequently fell by 26.25% year on year, and falling prices pushed down gross profit margins as well. Due to overcapacity,

the 2013 average ex-works price of corn starch in Northern China was USD8.32/t lower than in 2012. In addition, affected by the

low price of sucrose (a substitute for starch sugar), the domestic starch sugar prices maintained a downtrend in 2013. For example,

the domestic average ex-works price of crystalline glucose in 2013 fell by around USD19.70/t compared with 2012.

Longlive Bio-technology's XOS was mainly sold in the domestic market, and it is expected to enter the US market in 2014. The

product was passed the authentication by the US Food and Drug Administration in March 2014, thus it can be added into general

food and health-care products exporting to the US. Longlive Bio-technology is China's largest producer of XOS, with a capacity of

4,000 t/a as of the end of 2013. A new XOS plant with a capacity of 6,000 t/a is expected to begin operations on 30 Sept., 2014,

raising the company's XOS capacity to 10,000 t/a.



16/28


Table 9: Performance of Longlive Bio-technology, 2012 and 2013


Revenue 146.86 164.90 -10.94%

Total cost of sales 134.27 152.72 -12.08%

Operating profit 12.59 12.41 1.46%

Net profit attributable to shareholders 11.76 11.73 0.31%

Source: Shandong Longlive Bio-technology Co., Ltd.

Table 10: Performance of Longlive Bio-technology by product, 2013

Product Revenue, million USD YoY change Cost of sales, million USD YoY change Gross profit margin, % YoY change

Functional sugar 73.13 9.14% 35.87 -1.31% 50.95% 5.20 percentage points

Cellulosic ethanol 36.54 1.69% 34.25 4.33% 6.26% -2.37 percentage points

Corn starch and starch sugar 35.67 -26.25% 36.61 -25.66% -2.63% -0.80 percentage point

Others 1.34 -89.96% 0.92 -92.61% 31.64% 24.50 percentage points

Source: Shandong Longlive Bio-technology Co., Ltd.

2014 holds new growth opportunities for Longlive Bio-technology.

Firstly, a 4,000 t/a enzymolysis lignin plant has entered the commissioning phase in Feb. 2014, and the company is currently

conducting sales promotion for the product. Enzymolysis lignin can replace phenol in the production of epoxide resin, phenolicresin

and tire rubber. It has two advantages over phenol: a lower cost and environment-friendliness, since Longlive Bio-technology uses

corn cob as the raw material for its production.

The company expects it will take the general public some time to recognize enzymolysis lignin as an interesting, innovative material.

At present, Longlive Bio-technology's enzymolysis lignins are mainly purchased by a few universities, research institutions, and

enterprises, for experiments and R&D.

Secondly, a plant for the joint production of delicate food-grade xylose and crystalline arabinose has also begun trial production in

Feb. 2014; crystalline arabinose will hit the market in April 2014. Because this is a joint production, delicate food-grade xylose will

share part of the crystalline arabinose production costs, giving the product a strong cost advantage.

QHT's revenue and net profit increases in 2013

Summary: On 17 April, 2014, QHT released its 2013 annual report, showing a rise in revenue and net profit, mainly due to a sales

growth in its leading products. As for the company's development in 2014, QHT will focus on the development of prebiotic products

and tortoise jelly.

On 17 April, 2014, Quantum Hi-Tech (China) Biological Co., Ltd. (QHT) released its annual report of 2013, The report shows the

company's revenue and net profit attributable to shareholders respectively reached USD41.74 million and USD6.46 million in 2013,

up by 7.55% and 12.62% year on year, respectively, which are mainly due to a sales growth in its leading products–fructo

oligosaccharide (FOS), Galacto oligosaccharide (GOS) and tortoise jelly.

QHT's business performance analysis is as follows:

For one thing, QHT's distribution expenses were USD5.65 million in 2013, a year-on-year rise of 40.11%. In order to promote sales,



17/28


QHT and its subsidiary Jiangmen Sunity Food Co., Ltd. (Jiangmen Sunity) increased marketing expenses. Due to an increase in

labor cost and R&D investment, QHT's administrative expenses was USD6.20 million in 2013, up by 27.26% from the previous

year, leading to a slight drop of 4.33% in operating profit.

For another, QHT got non-operating income of USD1.12 million in 2013, compared with the figure of USD0.48 million in 2012. In

addition to the increased subsidiary granted by the government, because Jiangmen Sunity didn't reached the sales goal, it got the

compensation of USD0.85 million based on the original acquisition agreement. Thus, QHT achieved YoY increase of 3.90% in net

profit in 2013, though its operating profit declined.

Table 11: QHT' performance, 2012 and 2013


Revenue 38.81 41.74 7.55%

Total cost of sales 32.10 35.60 10.90%

Operating profit 6.71 6.42 -4.33%

Net profit 5.95 6.18 3.90%

Net profit attributable to shareholders 5.74 6.46 12.62%

Source: Quantum Hi-Tech (China) Biological Co., Ltd.

Operation

It's revealed by QHT that the sales of leading three products-FOS, GOS and tortoise jelly failed to meet expectations for 2013,

though these products saw a rise in sales volume and revenue.

As for FOS, it enjoyed the highest growth of 9.24% in sales volume in 2013. In April 2013, QHT acquired the production license for

FOS as a nutrition enhancer, which is conducive to expand FOS business in the milk powder market. Meanwhile, thanks to declined

domestic price of sucrose in 2013, QHT can save a lot of raw material cost and increase FOS' gross profit margin. However, as

domestic dairy industry's rectification in 2013, the sales of GOS and FOS was severely affected, particularly GOS. In detail, two

expansion projects were put into operation in April 2013, namely, a 10,000t/a expansion project of FOS and its packaging line and

a 2,000 t/a GOS expansion project, both of which failed to reach the expected goal.

Another leading product is tortoise jelly, whose sales volume witnessed a year-on-year increase of 7.88%. QHT has made great

efforts to marketing in 2013, but tortoise jelly's expected sales target has not been reached due to limited capacity.

Besides, affected by H7N9 and pork price fluctuations in 2013, QHT has difficulties in feed business expansion and suffered losses

in animal feed business.



18/28


Table 12: Sales volume of QHT‘s main products, 2012 and 2013

Division Product2012 2013

Sales volume, tonne YoY change Sales volume, tonne YoY change

PrebioticsFOS 10,259 1.25% 11,207 9.24%

GOS 1,234 113.74% 1,300 5.30%

Others

Tortoise jelly 7,054 / 7,610 7.88%

Jelly 265 / 372 40.22%

Animal feed N/A / 1,190 N/A

Others 266 -2.92% 278 4.41%

Note: Tortoise jelly, jelly, and animal feed are QHT's new products launched in 2012.


Table 13: Performance of QHT's main business by product, 2013

Division Product Revenue, million USD YoY change Gross profit YoY change Gross profit margin YoY change

PrebioticsFOS 22.94 4.03% 10.58 20.57% 46.11% 6.33　percentage points

GOS 5.69 4.60% 2.05 -7.38% 35.98% -4.65　percentage points

Others

Tortoise jelly 10.25 18.94% 4.06 24.97% 39.61% 1.91　percentage points

Jelly 0.54 -27.35% 0.21 -27.29% 38.08% 0.03　percentage points

Animal feed 0.49 165.02% -0.07 -281.45% -14.58% -35.88　percentage points

Others 1.53 -4.41% 0.53 -25.72% 34.76% -9.97　percentage points

Total 　 41.44 7.26% 17.35 13.62% 41.87% 2.35　percentage points


R&D

In 2013, QHT's R&D expenditure reached USD2.28 million, up by 24.29% year on year, focusing on the technological innovation of

FOS, GOS; prebiotics application in end market; new products R&D. And QHT obtained three invention patents, which will enhance

the enterprise's core competitiveness.

Table 14: R&D expenditures of QHT, 2011-2013, million USD

2011 2012 2013

R&D expenditure 1.11 1.84 2.28

Proportion to total revenue 4.10% 4.73% 5.47%


In order to improve its performance, QHT will devote itself to coordinated development of raw prebiotics materials and prebiotics

end-products. QHT will implement a number of strategic plans.

Firstly, QHT is constructing new plant for its subsidiary-Jiangmen Sunity in Jiangmen City, Guangdong Province, scheduled for the

completion within 2014. The new plant will improve insufficient capacity of tortoise jelly to some extent.

Secondly, QHT will make efforts to exploit end-product in 2014 through its wholly subsidiary-Guangdong Quantum Hi-Tech

Microecological Health Industry Co., Ltd., as a prebiotics end-product oligo was launched in Jan. 2014. (For more details, please

refer to Sweeteners China News 1402 Supplement P12: QHT's prebiotics end-product oligo has strong sales)



19/28


Thirdly, in Sept. 2013, QHT made a resolution that it would set up a subsidiary through joint venture, in order to improve sales

performance and brand awareness. This subsidiary is specialized in sales of health-care products, which is under the construction.

Fourthly, as QHT suffered losses in animal feed business and FOS expansion is in slow progress in the feed industry in 2013, the

company terminated an investment plan in feed business in Nov. 2013. QHT will focus on the development of prebiotic products

and health-care products in the future.

Shandong Bailong cooperates with Healingbio

Summary: On 12 April, 2014, Shandong Bailong signed a cooperation agreement with Healingbio. Owing to the similarities in their

businesses, the two company may carry out future cooperation in areas including functional food, animal feed additives,

biopesticides, and animal health product.

On 12 April, 2014, Shandong Bailong Chuangyuan Bio-tech Co., Ltd. (Shandong Bailong) signed a cooperation agreement

with Healingbio Co., Ltd. (Healingbio). Healingbio is a South Korean biotech company and has advanced technology in extensive

biological fields, especially in fields of healthy food, animal feed additives, and microbial pesticides. Park Se-Jun, General

manager of Healingbio, said that after early communication, the further cooperation will be promoted mutually in broader areas.

Future cooperation between Shandong Bailong and Healingbio can be carried out in following areas.

Functional food:

– Healingbio's Cheong In® food takes lactobacillus' repair function to intestinal ecosystem as a selling point. Shandong Bailong's

prebiotics products, such as fructo oligosaccharide (FOS), has the same function. In fact, prebiotics often have better performance

than probiotics like lactobacillus in the repair of intestinal ecosystem.

Animal feed additives:

– Similar to food business, Healingbio uses lactobacillus in animal feed to prevent animal diseases and improve feeding efficiency,

while prebiotics have been also applied in animal feed additives. For example, Quantum Hi-Tech (China) Biological Co., Ltd.

and Baolingbao Biology Co., Ltd. have operated businesses of FOS and isomalto oligosaccharide (IMO) respectively as feed

additives.

Biopesticide & animal health product:

– Accoring to introduction in the homepage of Healingbio, its microbial pesticide is still under clinical trial, and will be used for

management of lawn grass and cultivation of crops. Oligosaccharide can be also used in biopesticides. Some domestic

company have paid attention to this application. For example, Henan Heallen S & T Co., Ltd., a producer of animal pharmaceuticals

and animal health products, intends to produce animal health product using xylo oligosaccharide.

In addition to the development of new businesses, as for Shandong Bailong, the company can learn advanced technology from

Healingbio through cooperation. Furthermore, the cooperation will be also beneficial for the expansion of overseas market of

Shandong Bailong. Just on 29 Dec., 2013, the company obtained Non-GMO Identity Preserved Compliance Verification for FOS,

IMO, and maltitol, in order to explore overseas market. (For more details please refer to Shandong Bailong may explore overseas



20/28


market in 2014 in Sweeteners China News Vol.4 January Issue, p11 )

Import & Export AnalysisExport overview of some sweeteners and raw materials in China, February

2014

Table 15: Export overview of some sweeteners and raw materials (with independent HS code) in China, Feb. 2014

Product

Feb. 2014 Jan. 2014Month-on-month growth of

volume in Feb. 2014Month-on-month growth of

value in Feb. 2014Exportvolume,tonne

Exportvalue, USD

Exportvolume,tonne

Exportvalue, USD

Saccharin 696.65 4,829,792 1,626.99 10,985,638 -57.18% -56.04%

Cyclamate 1,341.80 2,519,711 2,610.65 4,957,986 -48.60% -49.18%

Mannitol 475.91 1,210,001 720.45 1,962,564 -33.94% -38.35%

Xylitol 1,256.57 3,817,446 1,799.62 5,506,182 -30.18% -30.67%

Sorbitol 5,921.77 3,498,395 8,020.17 4,848,584 -26.16% -27.85%

Glucose and glucose syrup (fructosecontent <20%, dry state) 27,243.76 15,315,691 44,500.68 24,482,416 -38.78% -37.44%

Glucose and glucose syrup(20%≤fructose content<50%, dry state) 301.95 459,732 396.95 519,532 -23.93% -11.51%

Other fructose and fructose syrup(fructose content >50%, dry state) 11,382.39 6,386,415 11,702.67 6,261,190 -2.74% 2.00%

Liquorice 85.66 471,559 449.63 3,751,009 -80.95% -87.43%

Corn starch 3,187.52 1,624,142 6,987.52 3,659,732 -54.38% -55.62%


Table 16: Top 3 export destinations of some sweeteners and raw materials (with independent HS codes) in China, Feb. 2014

Product

1 2 3Others,tonne

Total,tonneDestination Export volume,

tonne Destination Exportvolume, tonne Destination

Exportvolume,tonne

Saccharin Pakistan 138.00 Germany 118.05 The US 102.00 338.60 696.65

Cyclamate Turkey 338.20 SouthAfrica 312.50 Argentina 123.20 567.90 1,341.80

Mannitol India 137.00 Thailand 76.50 Turkey 57.50 204.91 475.91

Xylitol The US 595.38 Japan 98.00 Turkey 90.00 473.19 1,256.57

Sorbitol Japan 1,181.05 Thailand 818.44 Vietnam 801.75 3,120.53 5,921.77

Glucose and glucose syrup (fructose content<20%, dry state)

ThePhilippines 6,170.40 Vietnam 2,876.19 Indonesia 2,844.78 15,352.39 27,243.76

Glucose and glucose syrup (20%≤fructosecontent<50%, dry state) Turkey 259.84 Oman 22.40 Saudi

Arabia 11.20 8.51 301.95

Other fructose and fructose syrup (fructosecontent >50%, dry state)

ThePhilippines 4,775.62 Vietnam 4,091.58 Indonesia 1,175.00 1,340.19 11,382.39

Liquorice Japan 34.13 SouthKorea 32.43 Malaysia 12.00 7.10 85.66

Corn starch Indonesia 1,536.83 Taiwan 288.50 Thailand 275.50 1,086.69 3,187.52




21/28


Consumption Trend & CompetitivenessComparsion on 2013 annual report of three main sugar companies

Summary: A rise in sucrose imports and a fall in sucrose sales price greatly affected performances of some sucrose enterprises in

2013. Promotion of fine varieties application and mechanization in sugarcane planting were included in the 2014 business plan of

many sucrose producers. Besides, development of high-added value products were also their focuses, according to their annual

reports.

China's sucrose industry witnessed a enormous growth in sucrose imports and a significant drop in sucrsoe sales price in 2013.

However, different companies showed different performances in their annual reports.

On 14 March, 2014, Nanning Sugar Manufacturing Co., Ltd. (Nanning Sugar) released its annual report of 2013. The company saw

a YoY increase of 32.83% in revenue to USD715.3 million, mainly duing to an increase in sales volume of sucrose. Net profit

attributable to shareholders amounted to USD8.0 million, greatly improved from the loss of USD50.5 million in 2012. This

improvement was attributed to the closure of some money-losing paper business and gains on disposal of fixed assets.

Table 17: Nanning Sugar' performance, 2012 and 2013


Revenue 538.5 715.3 32.83%


Operating profit (- means loss) -62.1 -41.7 32.87%

Net profit attributable to shareholders (- means loss) -50.5 8.0 /

Source: Nanning Sugar Manufacturing Co., Ltd.

Nanning Sugar has two main divisions: sucrose and paper.

– Revenue from sucrose business saw an enormous growth in 2013. This was due to the huge growth in sales volume of machine-

processed sugar. However, the sales price declined in 2013, leading to a fall in gross profit margin of sucrose business.

– Conversely, sales volume of machine-processed paper decreased in 2013, causing a drop in revenue from paper business.

Nanning Sugar made great efforts to the production and sales of highly profitable paper products, which improved its gross profit

margin.

Table 18: Sales volume and output of Nanning Sugar's main business, 2012 and 2013

Division Item 2012, tonne 2013, tonne YoY change

Sucrose industry

Sales volume 416,711.12 713,626.85 71.25%

Output 507,452.00 647,931.10 27.68%

Inventory 92,941.16 27,245.41 -70.69%

Paper industry

Sales volume 145,285.53 84,467.93 -41.86%

Output 157,282.19 71,479.92 -54.55%

Inventory 17,389.15 4,401.14 -74.69%




22/28


Table 19: Performance of Nanning Sugar's main business, 2013

Division Revenue, million USD YoY change Gross profit matgin YoY change

By industrySucrose 542.5 48.82% 12.59% -0.97 percentage points

Paper 87.7 -33.17% 11.75% 6.98 percentage points

By productMachine-processed sugar 542.5 48.82% 12.59% -0.97 percentage points

Machine-processed paper 47.5 -53.16% 3.62% 2.73 percentage points


There were several measures taken by Nanning Sugar in 2013.

– On 28 Dec., 2012 and 19 March, 2013, Nanning Sugar obtained the production license and registration certificate for the

production of medicinal sucrose as pharmaceutical excipient respectively, and began to produce after then. The company was the

first sucrose producer of obtaining this qualification in Guangxi zhuang autonomous region, the major sucrose production area in

China. Since the market price of medicinal sucrose is always higher than sucrose, this new business can help to improve Nanning

Sugar's profit magin of sucrose business. According to the annual report of Hunan Er-Kang Pharmaceutical Co., Ltd. (Er-Kang), its

gross profit margin of medicinal sucrose in 2013 was 13.27%. As Er-Kang used sucrose from outsourcing as raw material in

production, Nanning Sugar has advantage in cost over Er-Kang, and thus a bigger profit margin.

– In 2013, Naning Sugar had shut down some paper business, in order to reduce losses. As disclosed in its annual report, four

paper mills suffered loss in 2013. It worth mentioning that the company sold a paper subsidiary in Dec. 2013, and thereafter exited

the business of bagasse pulp. The sales contributed a net profit of USD16.1 million.

Nanning Sugar will implement following measures in order to improve its performance.

– Nanning Sugar is facing a risk of sugarcane supply, as the expropriation of land used for engineering construction by government

will occupy planting land for sugarcane. Besides, a drop in sugarcane purchasing price will also discourage farmers from

sugarcane planting. Considering that, the company will keep on the promotion of mechanization and land consolidation, in order to

construct high-yield planting bases and ensure sugarcane supply. During the extraction season of 2012/2013 (from Oct. 2012 to

Sept. 2013), the company had accomplished land consolidation of about 350 hectares. However, such consolidation area is too

small to meet the need of sugarcane supply. This measure will take a long time to be effective.

– Nanning Sugar will enter the real estate industry using opportunities of engineering construction by government, to diversify its

profitable businesses. For example, a paper mill of the company shut down in 2013 was included in the reconstruction plan of

Nanning City. It will also take a period to generate profit from the investment in real estates, however, the company will gain

compensations from government for fixed assets.

On 9 April, 2014, COFCO Tunhe Co., Ltd. (COFCO Tunhe) released its annual report of 2013, disclosing a YoY increase of

11.22% in revenue to USD1831.6 million in 2013. Furthermore, during the report period, the company achieved a net profit

attributable to shareholders of USD13.1 million, greatly improved from the loss of USD64.8 million in 2012. The improvements in

performance were attributed to rising sales volume of sucrose, net profit achieved by sucrose trade, and reduced losses from

tomato business.



23/28


Table 20: COFCO Tunhe' performance, 2012 and 2013


Revenue 1,646.9 1,831.6 11.22%

Total cost of sales 1,729.8 1,859.2 7.48%

Operating profits (- means loss) -62.2 -9.5 /

Net profit attributable to shareholders (- means loss) -64.8 13.1 /

Source: COFCO Tunhe Co., Ltd.

COFCO Tunhe's sucrose business includes three parts: domestic self-produced sucrose, overseas self-produced sucrose, and

sucrose trade.

– Domestic self-produced sucrose includes sucrose produced by beet and that by sugarcane. In 2013, sales volume of them rose

by about 110,600 tonnes and 116,300 tonnes respectively, leading to a rise of USD0.07 million and USD0.10 million in revenue.

– Overseas self-produced sucrose is operated by Tully Sugar Limited (Tully Sugar) located in Australia. On 11 April, 2013, COFCO

Tunhe acquired Tully Sugar. During the report period of 2013, sales volume of this business increased by 74,700 tonnes. This

business contributed a net profit of USD20.4 million for COFCO Tunhe in 2014.

–On 28 June, 2013, COFCO Tunhe acquired the sucrose import & export business from COFCO Limited (COFCO). Accoring to

COFCO Tunhe, the sucrose imports by the company accounted for more than 50% of total sucrose imports in China. In 2013, sales

volume of COFCO Tunhe's imported sucrose increased by 289,500 tonnes. This business contributed a net profit of about

USD20.4 million for COFCO Tunhe in 2014.

The loss of COFCO Tunhe's tomato business decreased by USD94.3 million to USD18.5 million in 2013. The decrease in loss

was attributed to a rise in tomato ketchup's sales price and a fall in inventory. Besides, revenue from tomato business in

2013 decreased by 7.2% year on year, because of a drop of 18,700 tonnes in the sales volume of tomato ketchup over 2012.

As overseas self-produced sucrose and sucrose trade contributed the main profit in 2013, COFCO Tunhe's business plan in 2014

also focused on the development of these two parts.

– Seeking opportunities for overseas acquisition in Australia, Brazil, Thailand, and so on.

– Continuing to focus on sucrose trade according to changes in domestic and international sucrose markets.

– Promoting the application of fine varieties and mechanization in the cultivation of sugarcane, in order to improve competitiveness

in raw material cost.

– Inventory control of tomato ketchup in order to reduce cost.

Guangxi Guitang (Group) Co., Ltd. (Guitang) saw a net loss attributable to shareholders of USD17.3 million in 2013, according to its

annual report released on 8 March, 2014. By contrast, Guitang obtained a net profit of USD2.3 million in 2012. The company

attributed the decline in performance to a fall in sales price of sucrose and a rise in cost of machine-processed paper.



24/28


Table 21: Guitang' performance, 2012 and 2013


Revenue 178.1 180.1 1.15%


Operating profit (-means loss) -0.5 -16.7 /

Net profit attributable to shareholders (- means loss) 2.3 -17.3 /

Source: Guangxi Guitang (Group) Co., Ltd.

– Sucrose ouput increased in 2013 while sales volume decreased, because of the oversupply in domestic sucrose market.

Furthermore, the average market price of sucrose in Guangxi zhuang autonomous region decreased by USD88.3/t in 2013, greatly

squeezed the profit margin of Guitang's sucrose business.

– Revenue from paper business saw an increase in 2013, mainly due to the rise in output and sales volume of paper pulp. However,

intense competition existed in machine-processed paper market, the weak sales and high inventory caused a fall in Guitang's

output of machine-processed paper. Specially, the output of writing paper decreased by 18.03% YoY to 39,100 tonnes in 2013,

while the output living paper decreased by 8.96% to 33,800 tonnes. Such fall in output indicated a rise in unit cost and a fall in profit

margin of Guitang's paper business.

Table 22: Sales volume and output of Guitang's main business, 2012 and 2013

Division Item 2012, tonne 2013, tonne YoY change

Sucrose industry

Sales volume 89,970.35 96,172.10 -6.45%

Output 101,911.20 93,942 8.48%

Inventory 23,578.30 11,637.45 102.61%

Paper industry

Sales volume 123,196.58 91,109.70 35.22%

Output 110,191.19 94,280.18 16.88%

Inventory 26,128.92 39,134.31 -33.23%


Table 23: Performance of Guitang's main business, 2013

Division Revenue, million USD YoY change Gross profit matgin YoY change

By industry

Sucrose 69.3 -16.07% 4.92% -7.27 percentage points

Paper 102.8 17.35% 10.77% -2.28 percentage points

Others 4.3 -0.56% -0.69% 3.38 percentage points

By product

Sucrose 69.3 -16.07% 4.92% -7.27 percentage points

Writing paper 33.0 6.32% -1.57% -4.43 percentage points

Living paper 52.7 3.46% 21.03% 1.27 percentage points

Paper pulp 17.0 207.66% 2.91% -5.63 percentage points

Others 4.3 -0.56% -0.69% 3.38 percentage points


Below are business plan of Guitang in 2014.

– The company will promote the application of fine varieties in order to improve the yield of sugarcane and ensure raw material

supply.



25/28


– The company intends to reduce cost through improving management.

– The company will investigate and exploit the market of high-added value products, such as refined sugar and special paper. In

fact, Guitang has just launched its "Guihua" hardcover sugar in March 2014.

Affected by imported sucrose, oversupply of sucrose, thereby weak sucrose sales price remain in 2014, which will lead to low profit

margin of domestic sucrose industry. Furthermore, farmers may be lack of enthusiasm for sugarcane planting, causing raw material

shortages in future. Many sucrose producers, like Nanning Sugar and Guitang, had to promote the application of fine varieties and

mechanization, in order to ensure raw material supply and improve competitiveness in cost. Besides, both Nanning Sugar and

Guitang began to develop high-added value products, in order to improve their performances. By contrast, COFCO Tunhe will be

less affected due to its overseas sucrose business and sucrose trade.

Price UpdateEx-factory prices of sweeteners in China in April 2014



26/28


Table 24: Ex-factory prices of Chinese sweeteners, April 2014

No. Product Price in April2014, USD/t

Price in March2014, USD/t

Sweetness comparedwith sucrose

Price of unit sweetness inApril 2014, USD/t

Month-on month growth ofprice in April 2014

1 Sucrose 773 774 1.00 773 -0.09%

2 Steviol glycosides (RA95) 99,231 99,717 450.00 221 -0.49%

3 Sucralose 68,765 70,246 600.00 115 -2.11%

4 Acesulfame-K 7,079 7,113 200.00 35 -0.49%

5 Aspartame 13,862 14,048 200.00 69 -1.33%

6 Glycyrrhizin (tripotassiumglycyrrhinate) 16,260 16,340 150.00 108 -0.49%

7 Saccharin 7,561 7,081 300.00 25 6.78%

8 Cyclamate (NF13) 2,480 2,557 30.00 83 -3.03%

9 Neotame (98%) 59,621 59,913 8,000.00 7 -0.49%

10 Erythritol 4,065 4,085 0.65 6,254 -0.49%

11 Mannitol (food grade) 3,496 3,513 0.70 4,994 -0.49%

12FOS (fructooligosaccharide, powder95%)

7,642 7,843 0.30 25,474 -2.56%

13 XOS (xylo oligosaccharide,powder 95%) 36,179 33,088 0.40 90,447 9.34%

14 Maltose syrup (75%, liquid) 417 421 0.90 464 -0.77%

15 Sorbitol (70%, liquid) 508 532 0.70 726 -4.53%

16 HFCS (fructose: 42%,liquid) 433 435 1.00 433 -0.49%

17 HFCS (fructose: 55%, liquid) 482 488 1.10 438 -1.32%

18 Maltitol (75%, liquid ) 653 654 0.90 726 -0.19%

19 Glucose monohydrate 526 536 0.74 711 -1.82%

20 Crystalline maltitol 2,629 2,614 0.35 7,511 0.55%

21 Crystalline sorbitol 1,175 1,148 0.50 2,350 2.35%

22 Crystalline xylitol 3,750 3,834 1.20 3,125 -2.18%

Note: The price is an average of different manufacturers' quotations inc. VAT.

Source: CCM



27/28


Journalist: Dongliang CaoEditor: Ally BiChief Editor: Xuejian ShiPublisher: Guangzhou CCM Information Science &Technology Co.,Ltd

CCM's legal disclaimers 1. CCM guarantees that the information in the report is accurate and reliable to the best ofits knowledge andexperience. CCM defines the report as a consulting product providinginformation and does not guarantee its information is completely in accordance with thefact. CCM shall not have any obligations to assume any possibledamage orconsequences caused by subscribers’ any corporate decisions based upon subscribers’own understandingand utilization of the report. 2. The complete copyright of the report is and will be held by CCM. Subscribers shall notacquire, or be deemed toacquire the copyright of the report. 3. The report provided by CCM shall be only used as source of subscriber’s internalbusiness decisions and shall notbe used for any other purposes without CCM’s priorwritten consent, unless stated and approved in license contractsigned by both parties.Subscribers shall not distribute, resell and disclose the whole report or any part of thereport to third parties and shall not publish any article or report by largely or directlycopying or citing the information or databased on CCM’s report without the prior writtenconsent of CCM. 4.“Single User License” means that there shall be only ONE person to receive, accessand utilize the reportSubscriber can present the content of the report that marked thesource from CCM to their internal colleagues for theirinternal communication andutilization, but cannot share the whole report to other individuals. Any citation,distribution,reselling and disclosure of the report as well as its partial content to any thirdparty are prohibited, including but notlimited to their parent companies or subsidiaries. 5. “Corporate License” means that subscriber shall not cite, distribute, resell the report ordisclose information of thereport to any third party without CCM's prior written consent,except subscribers' affiliates controlled with ownership of more than 50% of shares. Guangzhou CCM Information Science & Technology Co., Ltd.Any publication, distribution or copying of the content in this report is prohibited.17th Floor, Huihua Commercial & Trade Building, No.80 XianlieZhong Road Guangzhou,510070, P.R.China Tel:+86-20-37616606Fax:+86-20-37616768E-mail:[email protected]:www.cnchemicals.com

Date post:	15-Aug-2020
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

Sweeteners China News - cnchemicals.com · Welcome to the April issue of Sweeteners China News...

Documents