Balancing cost optimization and new investments amid production project delays and changes

Editor’s Note: With the recent release of mid-year reports by Chinese listed companies, AgroPages has promptly conducted an in-depth analysis. We have selected 36 companies and identified three common characteristics based on their business dynamics from December last year to August. The revenue figures presented in this article are for informational purposes only and should not be used as a basis for ranking. All data is cited with sources and statistical methods to ensure accuracy and transparency.

China is the world's largest producer and exporter of pesticides, making the investment and development trends of pesticide and related intermediate production companies a key focus for global market watchers. Since 2023, the rapid growth of the worldwide pesticide market has slowed down, leading to ongoing declines in product prices. This has had a significant impact on the operational performance of producers and has affected their future investment decisions. As of August 31, all Chinese listed companies involved in pesticides and intermediates have released their mid-year financial reports for 2024, providing an opportunity to gain insights into industry dynamics and corporate development trends.

According to data from AgroPages, as of June 3, 2024, 36 Chinese listed companies' total revenue in pesticides and related intermediates reached approximately RMB70.684 billion. This represents a decline of RMB3.518 billion compared to RMB74.202 billion during the same period in 2023, reflecting a decrease of 4.74%.

Of these 36 companies, half (18) reported revenue growth, with an average increase of 23.2%. Notably, Hebang Biotech, BSM Chemical, and Xingfa Group exhibited the most significant growth rates, achieving year-on-year increases of 170.70%, 83.36%, and 23.04%, respectively. These companies successfully navigated the challenging market environment by implementing effective strategies.

The remarkable revenue growth of Hebang Biotech in the first half of 2024 can be attributed to two main factors: an increase in product prices and a rise in sales volume. Specifically, during the first half of 2024, the total sales volume of the company’s pesticides, intermediates, and by-products reached 124,251.78 tons, nearly matching the total sales volume of 136,622.87 tons for the entire year of 2023. The average sales price in the first half of 2024 rose from RMB12,258.70 per ton in 2023 to RMB13,494.00 per ton.

The primary factor driving BSM Chemical’s revenue growth is its acquisition of Ningbo Generic Chemical Co., Ltd. at the end of 2023, which has become one of its wholly-owned subsidiaries. Based on Ningbo Generic’s performance commitments and historical results, BSM Chemical is expected to see substantial growth in its year-end performance for 2024. Financial data from Ningbo Generic shows that its net profit attributable to the parent company was RMB49.4619 million in 2021, RMB52.5739 million in 2022, and RMB35.7314 million in 2023.

Pic.1 The net profit attributable to the parent company of BSM Chemical and Ningbo Generic

In contrast, Xingfa Group’s revenue growth differs from Hebang Biotech’s, primarily benefiting from increased sales volume in its pesticide business segment. Between 2023 and 2024, pesticide sales volume surged from 81,500 tons to 124,700 tons. Although the sales price dropped from RMB26,806.51 per ton to RMB21,411.84 per ton, the total revenue from the pesticide business still achieved a year-on-year growth of 19.62%. The fertilizer business segment also contributed to revenue growth despite facing similar challenges of increased sales volume and declining prices.

Rainbow Agro reported revenue growth of 12.65% in the first half of 2024; however, its profit margins have not kept pace with this growth and remain significantly below levels seen during the same period in 2023. This situation is primarily due to a substantial increase in operating costs, which demands serious attention from the company.

In contrast, the other 18 companies experienced an average revenue decline of 16.89% compared to the same period in 2023. ABA Chemical, Lanfeng Biochemical, and Guangxin Corporation Limited experienced the most significant declines, with year-on-year decreases of 51.65%, 41.54%, and 34.14%, respectively.

ABA Chemical experienced a significant decline in revenue during the first half of 2024. In 2023, the company’s total revenue was RMB852.4362 million, with the pesticide intermediate business contributing RMB574.8499 million, accounting for 67.44% of total revenue. However, by the same time, in 2024, the total revenue had decreased to RMB589.1627 million, with pesticide intermediate business revenue falling to RMB277.9684 million, reducing its share to 41.18%. Although sales in the pharmaceutical intermediate and specialty chemicals sectors saw an increase, this was insufficient to offset the decline in the pesticide business.

ABA Chemical’s main products include chlorantraniliprole, triflumezopyrim, fluazaindolizine, tetraniliprole, indoxacarb, oxathiapiprolin, and lufenuron. Changes in market demand for these products may contribute to a significant reduction in the company’s orders.

Pic.2 The revenue share of ABA Chemical

The decrease in Lanfeng Biochemical’s pesticide business revenue can be attributed to two strategic decisions: first, the sale of its subsidiary, Ningxia Lanfeng Fine Chemicals Co., Ltd. While this move was intended to optimize asset structure, it had a direct negative impact on pesticide business revenue in the short term. Second, the company’s substantial investment in the photovoltaic industry underscores Lanfeng Biochemical’s commitment to transitioning from a solely agrochemical company to a diversified enterprise. In 2023, the pesticide business accounted for 100% of the company’s revenue. Still, by 2024, this proportion had significantly dropped to 36.25%, while the revenue share from the photovoltaic business increased, becoming the primary source of income for the company.

Pic.3 Revenue share of Lanfeng Biochemical’s products

Guangxin Corporation Limited experienced a revenue decline in the first half of 2024, primarily due to falling product prices. While there was a decrease in sales volume, it was not the main contributing factor. Specifically, during the first half of 2024, the sales volume of pesticides and intermediates totaled 331,000 tons, down approximately 9% from 363,900 tons in the same period in 2023. This decline was mainly observed in the second quarter, where intermediate sales dropped from 168,600 tons to 137,100 tons, representing an 18.68% decrease.

Pic.4 The price of Guangxin’s technical and intermediate products

Regarding pricing, both technical materials (TCs) and intermediates saw significant reductions. By mid-2024, the average price of TC products was RMB28,567.3 per ton, reflecting a year-on-year decrease of 35.15%, while the average price of intermediates stood at RMB3,134.45, indicating a year-on-year decrease of 23.16%. This downward trend in prices had a substantial impact on the company’s revenue.

For more detailed information regarding the specific revenues of each company, please refer to the table below.

Commonalities in three major aspects: project adjustment, investment activities, and executive change

Based on analysis of the dynamics of 36 listed pesticide companies in the first half of the year (with some developments extending to December 2023, as well as July and August 2024), three distinct common characteristics can be identified in their behavioral patterns, regardless of whether they experienced revenue growth or decline:

• Project changes: Companies adjust their project development and implementation strategies. This may involve initiating new projects, suspending or terminating existing ones, or shifting project direction.

  
  

• Investment changes: Companies are actively engaging in capital operations, including increasing, decreasing, or reallocating external investments and reorganizing internal resources.

  
  

• Executive changes: Several companies have made adjustments in their senior management, which may include changes in board members, and the appointment or departure of key executives.

These common characteristics provide valuable insights into corporate strategic adjustments and market responses.

Project changes

Changes in projects among the listed pesticide companies typically manifest in two primary areas: positive project advancements and delays in project execution. Of the 36 companies surveyed, eight faced project delays or modifications, while one completed the trial production phase of its project. Given the substantial investment scale of these companies—ranging from tens of millions to billions of RMB yuan—any change in a project requires significant decision-making and involves associated costs and risks. However, companies that complete their projects often gain considerable competitive advantages and enhance their market position.

Specific cases of project delays:

• Fengshan Group has postponed the completion date for its construction project for 24,500t/a p-chlorotoluene and other fine chemical products to December 2025. The primary reasons for the delay include setbacks in equipment delivery and installation and disruptions caused by weather conditions. The project is in the equipment installation phase and has not yet reached operational status.

  
  

• Xingfa Group has pushed back the completion dates for its ″200,000t/a iron phosphate project″ and ″30,000t/a liquid silicone rubber project along with the 107-silicone rubber unit of 50,000t/a photovoltaic adhesive project″ to September 2026. This delay is mainly due to macroeconomic factors and industry changes that have slowed the overall construction progress.

  
  

• Sino-Agri Union has revised the expected completion date for its 3,300t/a insecticide TC project to December 31, 2025. The company is carefully analyzing one of the sub-projects. It plans to optimize the process route and technical solutions to reduce production costs, enhance safety, and minimize waste emissions, thereby improving the products’ competitiveness in the market.

Other companies such as Nutrichem, ABA Chemical, Norsyn, Wynca, and Rainbow Agro have also experienced similar project changes.

Examples of positive project developments: 

• Hailir’s construction projects for 2,000t/a tolfenpyrad TC, 2,000t/a 2-chloroacrylonitrile and 2,000/ta chlorophenylglycine intermediates are approaching trial production stages. Tolfenpyrad, a novel pyrazole heterocyclic insecticide and acaricide, is exclusively registered for production by Hailir in China. 2-chloropropionitrile is an important intermediate in pesticide production, while chlorophenylglycine is a widely used chemical synthesis compound, especially as a critical raw material for the insecticide chlorfenapyr.

The successful or imminent completion of these projects signifies a substantial enhancement in technological innovation and market competitiveness for the project owners.

Investment changes

Investment changes are a critical indicator of a company's strategic transformation, significantly influencing its strategic positioning, financial health, and operational efficiency. Such changes may compel companies to reassess and adjust their long-term strategies in response to market fluctuations or to seize emerging opportunities. This can involve increasing investments in key business areas, cutting back on investments in other sectors, or even exiting markets that no longer align with the company's objectives.

From a risk management perspective, investment changes allow companies to diversify their investments, spreading risks and minimizing dependence on a single market or product. Additionally, companies can mitigate overall risk by divesting from higher-risk businesses or assets. Furthermore, investment changes provide a vital avenue for companies seeking growth potential. By investing in new markets, products, or services, companies can explore new revenue sources, ultimately driving revenue and profit growth.

Investment changes can significantly influence a company’s market position and brand image. Prudent investment decisions can confer advantages in a competitive marketplace, while poor investment choices may lead to a loss of market share.

Among the 36 listed pesticide companies, 17 have recently undergone investment changes, primarily in two areas:

• Cost optimization: Some companies optimize resource allocation and reduce operating costs by dissolving or restructuring subsidiaries to improve operational efficiency. For instance, Yongtai Technology has dissolved its wholly-owned subsidiary Shandong Yonghong Lithium Industry Technology Co., Ltd., while Fengshan Group has dissolved its wholly-owned subsidiary Sichuan Fengshan. Companies like Qianjiang Biochemical, Huifeng Joint-stock, and Lanfeng Biochemical have taken similar measures.

  
  

• Investment in new markets and products: Other companies are pursuing growth by investing in new markets and products. For example, Wynca has developed genetically modified corn and soybean products that have obtained the agricultural biosafety certificate. Cynda plans to invest in constructing new production lines for pesticide TCs and safety agents. Hebang Biotech intends to subscribe to shares of the Australian-listed company Avenira Limited, while Nantong Jiangshan plans to establish a joint venture with Wengfu Group to create a new chemical company. Companies such as Zhongxin Fluoride Material, Noposion, and BSM Chemical are also actively expanding into new investment areas.

These investment changes reflect companies' strategies for optimizing and growing in a constantly evolving market environment, aiming to enhance competitiveness and market position.

Executive changes

Executive changes within listed companies often indicate strategic direction adjustments, corporate culture transformations, decision-making process optimizations, and investor confidence fluctuations. Such changes can lead to talent movement, reshaping of customer relationships, reassessment of compliance risks, and volatility in financial and market performance. Moreover, they can profoundly influence a company's innovation capabilities and research and development directions. Therefore, leadership changes must be managed carefully to ensure a smooth transition and maintain the company’s market competitiveness.

According to statistics from AgroPages, during the first half of 2024, 18 of the 36 listed pesticide companies experienced executive changes. These changes can be categorized into three scenarios:

• End of board term and re-election: In this scenario, the board of directors is re-elected, but the member list remains largely unchanged, ensuring stability in the core decision-making team. For instance, Noposion completed the election of its seventh board of directors in July, selecting five directors, including non-independent directors Lu Boqiang, Gao Huansen, and Wang Shihao, along with independent directors Xu Jia and Jiang Fan. Compared to the sixth board, only two independent directors changed. Companies such as Meibang Pharmaceutical, Guangxin Corporation Limited, and Fengshan Group also experienced similar changes.

  
  

• Departure of senior management: This scenario involves departing senior management personnel who do not pertain to critical business sectors. For example, Qiao Zhi, a supervisor at Lvheng Technology, resigned, and Bian Hongmei, the head of auditing and supervisor at Huifeng Joint-stock, also stepped down. Similar situations occurred at Meibang Pharmaceutical, Greatchem Chemicals, and other companies.

  
  

• Significant changes in key management: This type of change may substantially impact a company’s future development and is the most prevalent among all categories, taking various forms. For example, Steve Hawkins of ADAMA resigned as the company’s president and CEO (legal representative); Liu Hongsheng, chairman of Yangnong Chemical, resigned from all positions due to a job transfer; Liu Xiangshui of Cynda stepped down as vice president and from subsidiary roles for personal reasons and will not hold any positions post-resignation; Liu Xiaoliang was appointed as the executive general manager of Nutrichem, overseeing daily operations; Zhao Fuming, the former general manager of Red Sun, resigned due to age, with Hu Rongmao succeeding him. Similar changes occurred at Sino-Agri Leading, Hunan Haili, and Guoguang Agrochemical. These transitions may present new development opportunities for the companies.

Final note

This article employs a concise and clear expression style to enhance the reading experience. Each section provides rich content sufficient for in-depth discussion, detailing the developmental trajectories of these listed companies. If you are interested in a specific topic or would like to receive a more detailed follow-up analysis, please feel free to share your feedback. We look forward to hearing your thoughts and are happy to offer deeper insights.