Glyphosate industry is expected to unveil the integration

Jiangsu Yangnong Chemical Co., Ltd. recently issued an announcement that the company's state-owned shares have been transferred without compensation for official approval by the China Securities Regulatory Commission. After transferring 100,000 shares held by Jinmao Group for free, Sinochem Group held a 40.59% stake in Yangnong Group, the controlling shareholder of Yangnong Chemical, and became the new actual controller of the company. Industry analysts believe that this move will accelerate Sinochem's distribution in the agrochemical industry. With the deepening of environmental inspections, the integration of the domestic glyphosate industry is expected to open.

Yangnong: Asset Allocation Settled

The “Acquisition Report” announced by Yangnong Chemicals shows that, with the approval of the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, and the Yangzhou State-owned Assets Supervision and Administration Commission, Sinochem Group has transferred to Yangmao, a wholly-owned subsidiary of the Yangzhou State-owned Assets Supervision and Administration Commission, for free transfer. It holds 0.06% equity of Yangon Group. After the transfer, Jin Mao Group held a 40.53% stake in Yangnong Group. Sinochem International, a subsidiary of Sinochem Group, indirectly holds 40.53% of the equity of Yangon Group, holds 40.59% of the total equity, controls 36.17% of Jiangsu Yangonong Chemical Co., Ltd., and becomes the actual controller of Yangon Group. Yangnong Chemical stated that the cooperation between the two parties has created favorable conditions for Sinochem to further promote the industrialization of the fine chemicals and pesticides business. After Sinochem Group Holdings Yangon Group, the industrial status in the field of fine chemicals and pesticides will be further improved. At the same time, Yangon Group will bring new profit growth points to Sinochem Group, which will increase the profitability of the company.

It is worth noting that according to the announcement released by Yangon Chemical before this, within 12 months after the equity transfer was completed, Sinochem Group will adjust the planning and the optimal allocation of company resources according to the actual operating conditions, business structure, and other factors. It is not excluded that Sinochem Group and its affiliates will increase the stake in Yangon Group by more than 51% through acquisitions or capital increases.

Sinochem: speeding up the process of agrochemical development

After the completion of the acquisition, Sinochem Group has owned the equity of two companies involved in the main listed company of glyphosate, including Yangnong Chemical and Jiangshan, the holding company of Sinochem Group, holding 40.59% and 29.19% respectively. . In 2013, Yangnong Chemical completed a combined sales income of RMB 305 million, a total profit of RMB 456 million, and a net profit attributable to shareholders of listed companies of RMB 378 million, an increase of 35.42%, 96.65%, and 94.57% year-on-year respectively. In the first quarter of 2014, Yangnong Chemical achieved an operating income of 853 million yuan, a year-on-year decrease of 3.19%; a net profit of 115 million yuan, a year-on-year increase of 16.76%; and earnings per share of 0.67 yuan. China Agricultural Chemical Industry Association recently released 2013 China's pesticide industry sales ranking, Jiangsu Yangnong Chemical Co., Ltd. ranked third with sales of 3.05 billion yuan. According to the statistics, in addition to Yangnong Chemical and Jiangshan Chemical, the A-share listed companies in which Sinochem currently directly or indirectly holds more than 5% of its shares also include Sinochem International, Intel Group, and Salt Lake. Analysts pointed out that the pesticide and chemical business has always been one of Sinochem's main businesses. Both Yangon and Jiangshan were included in the Sinochem Group, indicating that Sinochem is expected to become a carrier for the integration of the glyphosate industry. Become the largest glyphosate company in China. Some analysts believe that after the local state-owned assets are allocated equity to the central SOEs, the central SOEs will generally increase their investment. The positioning of Yangon Chemical in the Sinochem Group deserves attention. In response, Qi Wu, director of the Information Department of the China Pesticide Industry Association, said in an interview with the China Chemical News reporter that joining Yangon Chemical will accelerate Sinochem's distribution in the agrochemical industry. Industry integration is in line with the industrial development policy, and it is beneficial to Enterprises strengthen the development of environmental protection and other aspects. As Yangnong is the main insecticide and bactericide drug manufacturer in China, the technical strengths such as pyrethroids and imidacloprid are very strong in China, and the scale of production is relatively large, so this acquisition will not only increase Sinochem’s The market share of glyphosate also means Sinochem's determination to enter the pesticide market.

Glyphosate: Prospects for industry consolidation

At present, domestic production companies with large production capacity of glyphosate mainly include Leshan Fuhua, Xinan, Jiangshan, Yangnong Chemical, and Sanonda A. A securities researcher said that due to the growing environmental protection of glyphosate, the integration of the industry is a general trend. Yangnong was formally controlled by Sinochem Group and Jiangshan Co., Ltd. became a “branch of a central state-owned enterprise”, which was in line with the development trend and formally unveiled the glyphosate integration. With the increasingly stringent environmental protection policies, the integration of the glyphosate industry will also accelerate.

It is reported that the list of glyphosate companies through environmental verification is expected to be announced in the near future. According to Qi Wu, the first environmental glyphosate verification work is currently underway and the specific list has not yet been announced. "With the increasing environmental protection threshold, some glyphosate enterprises in the future with poor capital strength, low technological level, and insufficient investment in environmental protection may withdraw." Qi Wu told reporters. In September 2010, the Ministry of Industry and Information Technology, the Ministry of Environmental Protection, the Ministry of Agriculture, and the General Administration of Quality Supervision, Inspection and Quarantine jointly issued the “Pesticide Industry Policy” requirement. By 2015, the number of pesticide companies in China will be reduced by 30%, and the top 20 pesticide companies in China will have sales. It will reach more than 50% of the country's total sales and reach 70% in 2020. In this regard, the industry believes that the integration of glyphosate industry is conducive to the future development of leading domestic agrichemical companies.

According to a research report released by China Gold Securities, the announcement of the environmental check list is the core of the change in the supply side of the glyphosate industry, and the general trend of strict environmental protection in the glyphosate industry will not change. Once the green check list has been issued, there will be a solid basis for whether the company is eligible for environmental protection. Enterprises that have not entered the first batch may be forced to suspend production for rectification or reduce the operating rate, and downstream customers and channels will further contract to the manufacturers who passed verification. The glyphosate industry will also be the first list of environmental protection inspections** for the “white list” and “black list” camps. The companies on the “white list” will have great advantages and enjoy the industry’s booming glyphosate industry. .

According to statistics from the China Pesticide Industry Association, the industry completed 12 mergers and reorganizations in 2013, which is the same as in 2012, including 4 original drug companies and 8 pharmaceutical companies. These mergers and acquisitions are mainly for geographical expansion, upstream and downstream integration, and there are also some companies that have transformed themselves through mergers and acquisitions of original drugs or pharmaceutical companies. Li Zhonghua, secretary general of the China Pesticide Industry Association, stated that environmental protection will become the top priority in the development of the pesticide industry in China. In the future, pesticide companies will increase environmental protection thresholds, eliminate backward production capacity, accelerate industry consolidation, and become bigger and stronger through listing, mergers, and restructuring. .