AgroPages-Noposion: net profit down by 91.4% YoY to USD2.9 million in H1 2016-Agricultural news

By Think Real - Shenzhen Noposion Agrochemical Co., Ltd. (Noposion, the largest pesticide formulations manufacturer in China) released its H1 2016 financial report. Specifically, it made the revenue of USD227.7 million, up by 4.2% YoY and net profit USD2.9 million, down by 91.4% YoY.

Increased costs in establishing Tian Tian Quan online platform

In H1, Noposion continuously advanced the smooth development of Internet based Tian Tian Quan ecological platform: 1,200 direct-sale stores were newly built. In particular, it licensed brand to 400+ stores, signed nearly 300, participated (by share, each at a 35% stake) in nearly 200 and controlled 11 (by share, each at a 51% stake). Besides, it opened 2,200+ Tian Tian Quan agricultural service stores in 400+ counties, 28 provinces / regions / municipalities.

Regarding rise in revenue and fall in net profit, Noposion attributed it to the growth of 33.3% in cost of sales, which was caused by acquisition activities. In H1, the company made a total investment of USD16.2 million for external business, down by 48.4% YoY. However, it input largely in expanding distribution channels. Only within January-June, it invested in 24 distribution companies such as Puyang Yulong Agricultural Service Co., Ltd.

Declines in gross profit margins for all products

During this period, key products including insecticides, fungicides, herbicides, plant nutritionals and promoters all recorded falls in gross profit margins, particularly by 1.1 percentage points, 1.9 percentage points and 17.6 percentage points respectively in insecticides, fungicides and herbicides. Noposion also ascribed this to the acquisitions of distribution companies, “They were commonly marketing products of comparatively low gross profit margins, which pushed down the overall performance.”

However, Noposion believed that it performed fairly well in this period, “We set strategic goals early this year. In addition to consolidating its position in traditional pesticide formulations segment, we made efforts to explore and optimise business models, and create new sources for profit growth.”

Table 1: Revenue and gross margin of main business of Noposion, H1 2016

Item		Revenue, million USD	YoY change	Gross margin	YoY change, percentage points
By product	Insecticides	86.7	0.49%	38.6%	-1.1
	Fungicides	75.9	10.2%	43.5%	-1.9
	Herbicides	35.2	-20.0%	16.0%	-17.6
	Crop nutrients	22.8	32.5%	30.9%	-9.2
	Additives	1.4	48.8%	38.1%	-13.6
	Brand services	1.2	/	/	/
	Other (in agrochemical)	4.2	303.4%	16.9%	9.5
	Others	0.26	42.9%	71.4%	37.9
By region	Northeast China	14.3	-7.8%	34.6%	-4.4
	North China	17.9	1.8%	34.9%	-5.7
	East China	72.2	16.2%	37.2%	-3.0
	South China	27.5	-22.8%	36.1%	-4.0
	Central China	27.8	-3.3%	36.0%	-4.8
	Northwest China	28.1	11.8%	34.9%	-5.7
	Southwest China	37.5	16.8%	34.7%	-4.8
	Overseas	2.0	35.7%	38.7%	-8.4
	Others	0.26	42.9%	71.4%	37.9