Global Bio-Chem Technology Group Company...

Operation Environment Improved
Global Bio-chem Recorded Gross Profit of HK$316 Million

Global Bio-chem Technology Group Company Limited ("Global Bio-chem" or "the Company", stock code: 00809) together with its subsidiaries (the "Group") reported a 15.8% increase in its consolidated revenue for the year ended 31 December 2016 (the "Year") to HK$ 3,882.8 million. The Group recorded a gross profit of HK$ 315.8 million for the Year as compared to the gross loss of HK$258.6 million for the previous year. Such improvement was mainly attributable to the favourable agricultural policy reforms, lysine market recovery and the optimisation of operation.

However, the significant amounts of impairments, namely the impairment of prepayments and other receivables of HK$877.2 million and impairment of property, plant and equipment of HK$257.4 million, have put the Group's performance under pressure. As a result, the Company recorded a net loss of HK$1,912.3 million (2015: HK$2,270.5 million) for the Year.

The Directors do not recommend the payment of a final dividend for the year ended 31 December 2016 (2015: Nil).

During the Year, the Group's upstream business recorded a revenue of approximately HK$1,359.2 million (2015: HK$1,609.1 million). As the direct subsidies to local corn farmers gradually took effect during the harvest season of the Year, coupled with the corn procurement subsidies from the provincial governments to corn refiners in Northern China, the Group's corn purchasing cost for the second half of the Year has been substantially lowered. As a result, the Group's upstream business recorded a gross profit of approximately HK$23.5 million for the second half of the Year (Second half of 2015: gross loss of HK$113.1 million). However, such effect was not sufficient to offset the gross loss for the first half of the Year. Consequently, the Group recorded a gross loss of approximately HK$48.0 million (2015: HK$170.2 million) for the full Year.

The Group's amino acid business reported a 118.5% increase in revenue to approximately HK$1,926.7 million (2015: HK$881.6 million) during the Year, representing 49.6% (2015: 26.3%) of the Group's revenue. The sales volume of amino acids segment increased by 155.6% to 345,000 MT (2015: 135,000 MT). Benefiting from the cost savings resulting from the facility upgrade, lower raw material cost and market recovery, the Group's amino acids segment recorded a gross profit of approximately HK$279.5 million (2015:gross loss: HK$210.1 million) with a gross profit margin of 14.5% (2015: gross loss margin: 23.8%) during the Year. As the market of lysine products gradually consolidates, short-term volatility in lysine product prices is expected. While continuous efforts will be dedicated to lower production cost, the Group's research and development team is proactively looking for opportunities to develop other amino acids products complementary to the current product mix.

During the Year, the Group produced and sold a small amount of antifreeze products and at the same time, continued to sell its polyol chemicals inventory. As a result, the polyol chemicals segment recorded a gross profit of approximately HK$3.9 million (2015: HK$16.6 million).

The operating environment of corn sweeteners has been stable during the Year. The upsurge of sugar price at home and abroad driven by the decline in global sugar production, together with the lower corn purchasing cost in China have highlighted the cost advantage of corn sweeteners in China. Although sales volume of corn sweeteners dropped by 7.0% to approximately 213,000 MT (2015: 229,000 MT) and its revenue decreased by 26.1% to approximately HK$592.0 million (2015:HK$801.2 million) during the Year as a result of the suspension of downstream production in the Group's Changchun and Jinzhou sites, the corn sweeteners segment still recorded a gross profit of approximately HK$80.4 million (2015: HK$104.9 million) and a gross profit margin of 13.6% (2015: 13.1%).

In December 2016, Jilin Province Taiyangshen Construction Engineering Co., Ltd ("Former Purchaser") proposed to terminate the property disposal agreements dated 14 April 2016 (the "Property Disposal Agreements") and relevant asset disposal agreements (the "Asset Disposal Agreements"). Having considered the legal advice on the potential cost and time of initiating legal proceedings against the Former Purchaser, the Directors are of the view that the termination the Property Disposal Agreements and the Asset Disposal Agreements is of the best interest of the Company. The subsequent termination agreements were entered into between the Group, the GSH Group and the Former Purchaser on 2 March 2017 to terminate the Property Disposal Agreements and Asset Disposal Agreements. During the negotiation process with the Former Purchaser with respect to the termination agreements, the Company, together with GSH, have been in discussion with another potential purchaser who has expressed its preliminary intention to purchase the land and buildings owned by the various subsidiaries of the Company and GSH. The potential purchaser is a municipal government owned enterprise. Pursuant to a memorandum of understanding entered into between the Group and the potential purchaser, it is expected that the total consideration will be not less than RMB2.2 billion, subject to the price to be determined by way of auction. Further announcement will be made by the Company upon any update development of the property disposal.

The Group's relocation of production facilities in Luyuan District to Xinglongshan is in progress - the Group will commence the construction of methanol production facilities in Apirl 2017. The Group will take the opportunity of the relocation to re-adjust its product mix and capacity to adapt to market changes, and at the same time, enhance operation efficiency through continuous research and development efforts to lower operating costs.

According to the announcement of the Company dated 2 March 2017, its controlling shareholder, via internal restructuring, had injected its 49% equity interest in Global Bio-chem into Jilin Agricultural Investment Group Co., Ltd. ("Nongtou"), a subsidiary of the State-owned Assets Supervision & Administration Commission of the People's Government of Jilin Province. Immediately after the restructuring, Nongtou has become the indirect controlling shareholder of Global Bio-chem. It is believed that Nongtou will exercise its influence in the agricultural sector in Jilin Province and continue to support the business development of the Group. The introduction of the new shareholder will create synergy effects with the Group's business.

Looking into the future, Mr. Kong, the Chief Executive Officer of Global Bio-chem, said: "Excluding the accounting adjustments made by the Group, significant improvements have been observed in the Group's revenue as well as its gross profit during the year under review. The State's reform on the corn supply-side system will gradually ease the pressure for corn processers and contribute to the healthy and stable development of the market. While the lysine market recovers and the Group's relocation plans gradually progress, the Group is moving back on track. With the support from Nongtou, the Group will continue to maintain its competitiveness and strive to uphold its market position, diversify its product range and enhance its capability in developing high value-added products and new applications through in-house research and development efforts and strategic business alliance with prominent international market leaders. The Group will also continue its prudent approach in optimising facilities utilisation to ensure healthy cash flows of the Group. With all these favourable factors contributing to the industry's development and the plans as formulated by the Group, the Group is expected to return to profit in 2018."

About Global Bio-chem
Global Bio-chem (stock code: 00809.HK) has been listed on the Main Board of the Stock Exchange of Hong Kong Limited since 2001. The Group is principally engaged in the manufacture and sale, research and development of corn-based biochemical products in the People's Republic of China ("PRC"). Headquartered in Hong Kong and with its production facilities based in various provinces in the PRC, Global Bio-chem is one of the leading corn-based biochemical product manufacturers worldwide. Global Bio-chem is also the parent company of Global Sweeteners Holdings Limited (stock code: 03889.HK), one of the largest corn sweeteners producers in the PRC, which is also listed on the Main Board of The Stock Exchange of Hong Kong Limited.

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Issued by: Global Bio-chem Technology Group Company Limited
Through: CorporateLink Limited

Media Enquiry: CorporateLink Limited

Shiu Ka Yue	Tel: 2801 6198 / 9029 1865	Email: sky@corporatelink.com.hk
Lorna Wong	Tel: 2801 7761 / 9086 8623	Email: lorna@corporatelink.com.hk
Kathryn Lu	Tel: 2801 6045 / 6708 2879	Email: kathryn@corporatelink.com.hk

 

(Attached with: Global Bio-chem's Audited Consolidated Statement of Comprehensive Income for the Year ended 31 December 2016)

Global Bio-chem Technology Group Company Limited

(Stock Code: 00809)

Audited Consolidated Statement of Comprehensive Income

For the Year ended 31 December 2016

For the Year ended 31 December
2016 2015
HK$' 000 HK$' 000
>

REVENUE	3,882,840		3,352,003
Cost of sales	(3,567,018)		(3,610,572)
Gross profit (loss)	315,822		(258,569)
Other income and gains	187,116		138,529
Selling and distribution expenses	(296,578)		(177,468)
Administrative expenses	(347,562)		(383,037)
Other expenses	(1,500,062)		(1,068,660)
Finance costs	(441,118)		(515,873)
LOSS BEFORE TAX	(2,082,382)		(2,265,078)
Income tax credit (expense)	170,096		(5,461)
LOSS FOR THE YEAR	(1,912,286)		(2,270,539)
OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of financial statements of foreign subsidiaries	96,586		37,982
Items that will not be reclassified subsequently to profit or loss:
Deficit on property revaluation	(20,633)		(7,117)
Income tax effect	8,190		1,283
	(12,443)		(5,834)
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX	84,143		32,148
TOTAL COMPREHENSIVE LOSS FOR THE YEAR	(1,828,143)		(2,238,391)
Loss for the year attributable to:
Owners of the Company	(1,850,640)		(1,995,970)
Non-controlling interests	(61,646)		(274,569)
	(1,912,286)		(2,270,539)
Total comprehensive loss attributable to:
Owners of the Company	(1,657,297)		(1,974,367)
Non-controlling interests	(170,846)		(264,024)
	(1,828,143)		(2,238,391)
LOSS PER SHARE
Basic	HK$ (0.29)		HK$ (0.51)
Diluted	HK$ (0.29)		HK$ (0.51)