Top 20 Chinese agrochemical companies in 2019: Resource integration begins new era of growth amidst challenges

In 2019, China’s pesticide industry continued to face considerable pressure from the external policy environment, represented by regular environmental inspections. The production operations of chemical companies in major chemical parks were suspended overnight because of nationwide safety campaigns triggered by a chemical plant explosion in Xiangshui County. Combined with other risks and challenges, such as the US-China trade war, exchange rate fluctuations and the economic downturn, the industry has suffered unprecedented setbacks.

However, Chinese agrochemical companies have been advancing despite such unfavorable circumstances, and the entire industry achieved a stable economic operational level in 2019. At the end of 2019, the overall operating income of largescale agrochemical companies reached some RMB240 billion and a total net profit of around RMB22 billion, staying broadly level from the previous year, but with the average growth rate slowing down with the sales income of six companies on the Top 20 list decreasing year on year.

The mergers and acquisitions of global agrochemical giants made the industry restless, and many Chinese agrochemical companies on the Top 20 list are proactively reshaping their own production and operations through capital leveraging.

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Hubei Sanonda Co., Ltd. acquired ADAMA in 2017. The company changed its stock name from Sanonda-A to ADAMA in 2019, and, since then, the agrochemical business of ChemChina was merged and listed with ADAMA as its carrier. ADAMA is now a well-deserved flagship agrochemical company in the Chinese agrochemical market. This year, it continued to lead the Top 20 list of Chinese companies with overwhelming sales of RMB24.906 billion, far exceeding Jiangsu Yangnong Chemical Co., Ltd., the second largest company. Second and third places on the list had different winners this year. Jiangsu Yangnong Chemical Co., Ltd. went up three places this year and ranked second with sales of RMB8.639 billion, while Shandong Weifang Rainbow Chemical Co., Ltd. ranked third with sales of RMB6.074 billion.

On the list, 14 companies achieved sales growth, with Limin Chemical Co., Ltd. recording the fastest year-on-year growth of 72.61%, followed by Jiangsu Yangnong Chemical Co., Ltd. with 66.07%, and CAC Nantong Chemical Co., Ltd. with 33.51%. Six companies suffered declines in sales revenue year on year, and Nanjing Red Sun Co., Ltd. experienced the sharpest drop with 18.54%.

Resource integration creates synergistic effects

As shown on the list, ADAMA’s sales exceeded the total of the four companies immediately following it. ADAMA is the largest generic pesticide company in the world, and recorded a growth rate three times higher than its peers over the past several decades. ADAMA was fully acquired by ChemChina through two transactions in 2011 and 2016, respectively.

Hubei Sanonda Co., Ltd. is the only listed carrier of the agro-inputs business of ChemChina. Since 2017, when Sanonda acquired ADAMA, ChemChina’s agrochemical business was consolidated and wholly listed, meaning that the world’s largest generic pesticide company was listed in China’s securities market, which is a key milestone for the agrochemical industry. In January 2019, the stock name of Sanonda A/ B was changed to ADAMA A/B.

After listing, ADAMA continued to integrate various advantageous resources in the upstream and downstream of the whole industrial chain, adding to its growth. At the start of 2019, ADAMA acquired Jiangsu Anpon Electrochemical Co., Ltd., a manufacturer specializing in backwards integration, and incorporated it into its international operations business. This move provided ADAMA with more differentiated products, a stronger formulation synthesis and production capacity, and more opportunities to export its products to the world through the latter’s extensive distribution network. In November 2019, ADAMA announced that it acquired 50% of the equity of Shanghai Dibai Plant Protection Co., Ltd., a whollyowned subsidiary of Jiangsu Huifeng Bio Agriculture Co., Ltd., which is devoted to the development, production and sale of plant protection formulations in China. Huifeng has many differentiated patented products and an extensive product registration portfolio in China, which complements ADAMA perfectly. The acquisition of Shanghai Dibai Plant Protection Co., Ltd. helped ADAMA reduce its operating costs and expand into overseas markets.

ADAMA is now able to compete in every individual business in the whole value chain, from product R&D, to registration, to production and to marketing. ADAMA is the registration certificate holder of more than 120 technical materials and over 5,600 formulations, at quantities far higher than other domestic companies. In the future, based on its localization advantages and its continuous integration of more resources, ADAMA will continue to add value to the Top 20 list of Chinese agrochemical companies.

Jiangsu Yangnong Chemical Co., Ltd. (Yangnong for short) ranked second on the list and recorded a year-on-year growth of 66.07%, which was made possible by the integration of its resources with the Sinochem Group, another leading chemical company in China. In June 2019, Yangnong purchased a 100% stake in Sinochem Crop Protection and a 100% stake in Shenyang Sinochem Agrochemicals R&D Co., Ltd. from Sinochem International. The Sinochem Group is the actual controller of Sinochem International and Yangnong. After the reorganization, the core assets of Sinochem International’s internal pesticide business was integrated under the control of Yangnong.

Yangnong is the only firm with a whole industrial chain of pyrethroids in China. It is capable of producing some 8,100 tons of pyrethroids annually and has a market share of 70% in terms of hygienic pesticides based on pyrethroids. The Xiangshui explosion has affected the supply of pyrethroids made at the Chenjiagang Chemical Industry Park, but benefited Yangnong’s sale of these products in 2019. In addition, the integration of all pesticide assets of Sinochem International provided Yangnong with more helpers, including Shenyang Sinochem Agrochemicals R&D Co., Ltd., which specializes in the research and development of innovative compounds, as well as Shenyang Sciencreat Chemicals Co., Ltd., which mainly produces and sells technical materials, such as sulcotrione, imazethapyr and pymetrozine, and Sinochem Crop Protection, whose advantages are registration ability and channels. The core assets of Sinochem International’s internal pesticide business formed an integrated and complete industrial chain of research, production and sales. The effective integration of R&D resources and sales networks, as well as complementary advantages in terms of of products and customers, together with a cluster of investment projects by Jiangsu Youjia Plant Protection Co., Ltd., a subsidiary of Yangnong, will also help improve Yangnong’s performance. It is clear that the various resources under Yangnong will ensure a greater synergistic effect in the future.

Powerful combination generates new growth

The powerful alliances of domestic agrochemical companies have changed the Top 20 list this year. Limin Chemical Co., Ltd. (Limin Chemical for short) entered the list for the first time and came in at the 18th place, with sales of RMB2.584 billion. The rapid increase in the company’s income was attributable to the acquisition of Veyong’s asset mix (Hebei Veyong Bio-Chemical Co. Ltd., Hebei Veyong Animal Pharmaceutical Co., Ltd. and Inner Mongolia New Veyong Biochemical Co., Ltd.) by. In July 2019, Limin Chemical successfully acquired 60% of equity in Veyong’s asset mix. The sales revenue of Limin Chemical in 2018 was RMB1.497 billion, while Hebei Veyong Bio-Chemical Co. Ltd recorded RMB1.607 billion. The incorporation of the latter’s revenue in its financial statements raised Limin Chemical’s sales revenue by 72.61% year-on-year, heavily outperforming its peers. The merger of Limin and Veyong is also a case of the successful combination of Chinese agricultural companies in recent years, through which the concerned parties combined their respective abilities to resist risks and achieve growth through the integration of complementary resources.

Limin Chemical is the largest manufacturer of EBDC-based protective fungicides and various pesticides, such as cymoxanil, fosetyl-aluminum, pyrimethanil and metam-sodium, in China, seizing an important industrial position in the segment of fungicides. Veyong is a longstanding pesticide company in China, and its core products include the herbicide, glufosinateammonium, and the insecticides, abamectin and emamectin benzoate. The acquisition of Veyong’s asset mix has largely filled the gaps in Limin Chemical’s herbicide and insecticide segments, enabling it to complete in three segments of pesticides (i.e. fungicides, insecticides and herbicides) and further underpinning its position as a major player in the industry. 

In 2019, Limin Chemical continued to extend its advantages in the international mancozeb market and made a breakthrough in the registration of mancozeb in Brazil. As of July 2019, Limin Chemical obtained four registration certificates for mancozeb TC and six registration certificates for single mancozeb formulation, including those held by its holding subsidiary, Hebei Shuangji Chemical Co., Ltd., through supporting its customers in the Brazilian market. By the end of the year, Limin Chemical’s mancozeb successfully passed the EU’s technical equivalence detemination. The further promotion of traditional products in the international market and the synergistic development brought along by mergers and acquisitions will continue to enhance the performance of Limin Group Co., Ltd.

Clear strategic deployment facilitates a steady progress based on the basic growth points 

CAC Nantong Chemical Co., Ltd. (CAC for short), Shandong Weifang Rainbow Chemical Co., Ltd (Rainbow for short). and Lianyungang Liben Crop Science and Technology Co., Ltd. also achieved eyecatching growth and raised their positions on the list. The growths of these companies derive from the continuous expansion of the market share of their competitive products in the international market, as well as the outcomes of previous research on their business models.

CAC advanced five places to 15th on the list from 20th last year, and its sales increased by 33.51% to RMB2.841 billion. The company focused on the development and distribution of azoxystrobin-based products, as well as the protection of intellectual property rights, which helped maintain its performance. CAC submitted patent applications for its azoxystrobin production technology in over 20 countries and regions around the world, and obtained corresponding patent authorizations in China, the EU, the US, Australia, New Zealand and other countries and regions. In November 2019, a patent for its production technology was officially approved and confirmed by the European Patent Office. In July 2019, the company also invested RMB3 billion in Nanchong to build a 100KTA fine chemicals production facility. Upon the start of the commercial operation of the project, the production capacity of CAC will considerably increase, and it is expected to generate an annual sales revenue of RMB7.5 billion.

Guided by clear strategic decisionmaking, Rainbow has made steady progress on the list, rising from fourth place last year to third place this year, with its sales increasing by 13.66% to RMB6.074 billion. In 2019, Rainbow accelerated the completion of its market access platform while continuously expanding its B2C business model in overseas markets. In October, 2019, the company announced that it will invest about EUR50 million in the next five years to screen for important active ingredients. It will also invest in Annex II Defending & Annex III for marketable formulations in the EU market. In the South American market, Rainbow Brazil recorded considerable sales in 2019, which is expected to exceed US$300 million this year. The WG production line of Green Crops acquired by Rainbow officially started production in April 2019, which will guarantee for company’s business development in the region and establish a solid foundation for its sustained growth until 2030.

The year-on-year decline in sales of six companies indicates many pressures from various sources

Six companies on the list experienced declining sales last year, including Nutrichem Company Limited, Nanjing Red Sun Co., Ltd., Sichuan Leshan Fuhua Tongda AgroChemical Technology Co., Ltd., Zhejiang Zhongshan Chemical Industry Group Co., Ltd., Jiangsu Lianhe Chemical Technology Co., Ltd., and Noposion Agrochemicals Co., Ltd. In contrast, all companies on the list last year experienced positive growth, which indicates the pressure caused by the overall business environment of China’s agrochemical industry on companies in 2019. Nanjing Red Sun Co., Ltd. recorded the biggest drop of 18.54% year on year among the six companies. Generally speaking, the main reasons for the decline include the fact that chemical parks around the country were ordered to suspend operations for rectification, which had a huge impact on the performance of some companies; the tight raw materials supply and rising prices versus falling product prices and profit margins; and the complicated international situation and the US-China trade war, which adversely affected foreign trade.

A new round of expansion is initiating 

Summing up the existing situations of Chinese agrochemical companies, most of them are making gradual adjustments to adapt to changes to policies. Pesticide companies in China are required to relocate from urban areas to industrial parks from 2020, and those that settled in parks will secure a promising future. After a rush of production capacity reductions, a new round of expansion is being initiated, represented by the relocation of many companies from coastal and traditional chemical-producing provinces to inland areas.

From the perspective of the industry, the establishment of Syngenta Group in early 2020 added to the merger of ChemChina and Sinochem, officially entering a “booster” period that will be firstly implemented in the agricultural sector. The two trillionyuan giants will, following the guidance of the central government related to supplyside structural reform, ensure specialized reorganization and integration in areas with prominent issues related to repeated investment and lack of competition, which will also create a model of and additional impetus for the integration of the agrochemical industry.

From the perspective of companies, more importance must be attached to ensuring the close management of the whole process, from production to end-use consumption, as well as to improving resource utilization efficiency, and prioritizing safety at work and environmental protection during development. Clean production and high efficiency will be the main directions and standards for the high-quality development of all Chinese pesticide companies.

This article was initially published in AgroPages '2020 Market Insight' magazine. Download it to read more articles.