EcoGreen Executive Director David Han (far left), Chairman Yang Yirong (fourth from left) with major shareholders at Xiamen, Fujian plant. Photo: Company
ECOGREEN FINE Chemicals Group (HK: 2341), in which famed Value Partners holds a 4.9% stake, is looking forward to a sweeter 2010 after a slowdown last year due to the global economic malaise.
Mr. David Han, Executive Director of the manufacturer and trader of fine chemicals from natural resources for use in aroma chemicals and pharmaceuticals, met with Greater China fund managers last week to better familiarize potential investors with the company’s business growth plan this year.
Challenges in last year’s operating environment, notably a slowdown in global orders, led to a top line decrease of nearly 2% to around 729 mln yuan, with net profit falling nearly 6% to some 108 mln yuan.
However the company achieved 4% growth for its core business operations and maintained its 15% dividend payout on a nearly 26% gross margin.
| |
| EcoGreen |
|
Market cap
|
HK$883.9 m |
| Stock price |
HK$1.90 |
| 52-week range |
HK$1.28-2.41 |
| 2009 dividend |
HK$0.04 |
| Dividend yield |
2.1% |
| PE |
7.2X |
|
Starting from 2010, the Hong Kong-listed firm expects to fully commercialize leading edge jet-spray technology into its factories this year, a move which management says will not only boost production capacity of key products by 50%, but also cut energy consumption costs by half.
In addition, Fujian province-based EcoGreen (www.ecogreen.com) expects continued robust economic growth in China this year as well as stronger demand form Fast-Moving Consumer Goods (FMCG) in developing markets will help carry the day for the company.
2010: Decidedly Upbeat
| |
| EcoGreen |
Shrs held |
% held |
| Yang Yirong (chairman) |
195.4 mln |
42.0 |
| Keywise Capital |
71.3 mln |
15.3 |
| FMR LLC |
37.2 mln |
8.0 |
| Platinum Invest |
28.2 mln |
6.1 |
| Value Partners |
22.9 mln |
4.9 |
|
| |
|
As the outlook on the global economy may improve in 2010, the constant growth of China’s economy and growing demand for fast-moving consumer goods in emerging markets will provide the group with a new valuable opportunity for development, EcoGreen said.
Despite the macroeconomic environment being fraught with some uncertainties, the company is confident of -- and optimistic towards – its upstream business development, its long-term prospect of aroma chemicals and food additives businesses and the expansion of other related business (such as special chemicals).
EcoGreen Fine Chemicals Chairman Mr. Yang Yirong. Photo: Company
"This is thanks to stronger domestic consumption of its products of aroma chemicals and food additives as the key components in daily necessities.”
Mr. Han told the fund managers that EcoGreen had several strategies in place to maximize profitability this year and meet any challenges head on.
“Firstly, we will continue to execute technological improvements and upgrades, including of course new and more efficient jet-spray technologies.”
EcoGreen will also bolster relationships with global industry leaders and leverage on these ties.
“We also continue to benefit from our enhanced focus on upstream operations. As such, we are enhancing upstream integration for long term stable raw material supplies given that raw material costs comprise 80% of our total production costs,” he said.
The company was also keen to fully optimize sales to developing countries, especially given the growth of the middle class there and strong demand for fast-moving consumer goods (FMCG).
"We expect 6-10% annual revenue growth from these markets for the foreseeable future.” EcoGreen was also continually looking into ways to fine tune its portfolio to effectuate maximum exposure to the highest margin products.
Ecogreen Executive Director David Han.
Photo: Andrew Vanburen
“And as role model of green chemical industries, we will continue to improve or performance in this area.”
Finally, as concerns EcoGreen’s expansion model, Mr. Han said all options were open, as long as they made good economic and synergistic sense for the company.
“Apart from an organic growth path, we will actively explore M&A opportunities,” he said.
The Hong Kong-listed firm added that the upgraded factory infrastructure will help it become an even bigger player in the global fine chemicals and fragrance/aroma sector.
“The advancement work is expected to commence soon and trial production will be carried out by late 2010. It is believed that the group’s products will achieve a further dominant share in global market when the operation of innovated plant reaches its normal efficiency and economies of scale.”
Included in the strategy to expand whenever and wherever necessary is a commitment to potentially boost capacity through non-organic means when advisable, and for cost-benefit reasons.
| |
| EcoGreen |
2009 |
y-o-y change |
| Turnover (yuan) |
728.5 mln |
(-2%) |
| Net profit |
107.7 mln |
(-6%) |
| EPS |
23.1 cents |
(-5%) |
|
| |
|
“While developing our existing business, we will seek and grasp opportunities proactively in integrating upstream business with a view to expanding business through horizontal merger and acquisition that may give synergies. We will by all means strive to enhance its industrial value, strengthen its business foundation and push further growth.”
See also: ECOGREEN: Jet-spray tech to boost key capacities by 50%
