Apr. 27, 2021
The price of Glyphosate has continued to soar and the business performance of several listed companies increased to a certain extent.
Xingfa Group is expecting a first quarter net profit of Yuan350 million, a year-on-year increase of 1,344%. In addition, the business performance of Wynca increased dramatically in the first quarter, with an expected net profit between Yuan270 million and Yuan300 million, a year-on-year increase of between 2,920% and 3,256%.
“With the upgrading of the global food security strategy, the price of glyphosate is expected to remain at its high level. So far, the price has reached Yuan31,500 per ton, but this was only Yuan27,000 yuan in the second half of last year,” said a business executive from the Xingfa Group, noting that the high price of glyphosate may last until the third quarter. Currently, the company's production against received purchase orders has been scheduled up to June, with all production lines currently running at full capacity.
A manager from the Securities Department of Wynca said that glyphosate is an indicator of the business performance of the agrochemical industry. The pandemic has boosted purchase orders, while the price of chemical raw materials has generally risen. As an indispensable agricultural product, a rise in glyphosate price is inevitable.
Glyphosate is a driver of business performance
On the evening of 11th April, Xingfa Group released its 2020 performance report. Last year, the company attained an operating revenue of Yuan18.317 billion, a year-on-year increase of 1.54%, as well as a net profit of Yuan624 million, which is a year-on-year increase of 106.29%, and net profit of Yuan632 million after deduction of non-recurring profit and loss, a year-on-year increase of 113.84%.
China is a major glyphosate producing country, with a total capacity of roughly Yuan700,000 tons in 2020. Among its listed companies, Xingfa Group’s annual capacity is 180,000 tons, accounting for about 25% of total while Wynca has an annual capacity of 80,000 tons.
Information shows that since the third quarter of last year, the price of glyphosate has been driven by the rise in cost of glycine. Currently, the price of glycine, the main raw material, is stable at Yuan16,800 per ton. In the east China market, the price of glyphosate is Yuan32,000 per ton.
A manager in charge of Wynca said that since the second half of 2020, glyphosate, as a business indicator of agrochemical product, has a well-balanced demand and supply situation, and the product price tended to rise. The company's price and sales volume in the first quarter both increased over the same period last year.
According to its performance report from last year, Wynca achieved an operating revenue of Yuan12.516 billion, an increase of 4.25% year-on-year, and attained a net profit of Yuan585 million attributable to shareholders of the listed company, which is an increase of 26.91% year-on-year.
No planned capacity expansion
Analysts believe that the overseas glyphosate stocks should be generally at a lower level, and there is global demand for the replenishment of glyphosate. The price of glyphosate this year is expected to increase over the previous year while profitability beyond expectation is foreseen.
However, considering current business statistics, all companies have appeared cautious, stating that there is no planned capacity expansion.
A staff member of the Xingfa Group’s Securities Department said that the price of glyphosate is expected to remain high until the third quarter, which will not come down over a short period of time. Nevertheless, downstream buyers are cautious about placing orders and are taking a wait-and-see attitude, as the rate of increase is believed to become smaller.
“At present, the company's 180,000-ton production capacity is running at full steam, and there is no planned capacity expansion in the short term,” said the staff member.
However, the company has achieved a capacity increase through other means. Yidu Xingfa, a subsidiary of the Xingfa Group, has created a breakthrough in the wet phosphoric acid purification process, which will increase the stability of the 100,000-ton wet phosphoric acid purification process, having apparently helped improved business performance last year.
The manager in charge of Wynca also said that there is no planned expansion of the company’s glyphosate capacity, but measures will be taken to promote the conversion rate of high value-added terminal products via optimization of the organosilicon product structure. The overall scale of organosilicon monomer production increased from 340,000 tons to 490,000 tons, while the sales volume and revenue of major terminal products, such as rubber compound, sealant and silicone oil, rose 50% or above in the first quarter.
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