Century Sunshine Executive Director Mr. George Yang told fund managers in Shenzhen that magnesium alloy is the new green material. Photo: Aries Consulting
CENTURY SUNSHINE Group Holdings Ltd (HK: 509), a leading PRC-based maker of rare earth magnesium alloys and organic fertilizers, is benefitting from a growing appreciation of greener farming methods among the nation’s growers.
And Century Sunshine, founded in 2000 and listed in Hong Kong since 2004, is betting that an ongoing campaign by both politicians in Beijing and farmers to make agriculture more efficient and ecologically sustainable will translate into strong demand for the firm's environmentally-friendly fertilizer products.
Century Sunshine's green fertilizers help tea, fruit and peanut farmers come harvest time.
Photos: e-chinatea, pconline, ymt360Century Sunshine Executive Director Mr. George Yang said that supportive policy from the government, product restructuring and technological upgrades have all contributed to some of the firm's recent stellar results.
Speaking to investors on Friday in Shenzhen at the Aries Consulting-organized “3rd Scaling New Heights – Asia Investment Forum 2014,” Mr. Yang said the firm improved its first half gross profit margin by 3.1 percentage points to 30.2%.
“We expect to report fast top and bottom line growth for 2013.”
Century Sunshine has been developing, producing and distributing ecological fertilizers for well over a decade, with downstream products including both organic and compound fertilizers, marketing via its self-owned labels "Lu Di," "Le He He," "Zhan Lan," and "Feng Shou."
While the firm’s “green” fertilizers are usable in a variety of agricultural fields including rice paddies, Century Sunshine also markets some of its output as being specially tailored for higher-margin crops such as tea, fruits, vegetables, peanuts, bamboo, and eucalyptus trees.
Century Sunshine promotes its fertilizers as being environmentally friendly, energy saving, and produced using the latest emission reduction technology.
Century Sunshine's ecological fertilizers are major beneficiaries of China’s new ecological farming policy, and enjoy strong support among PRC farmers. Photo: CompanyIt was the first listed firm to specialize in environmentally friendly ecological fertilizers (compound fertilizers, Si-Mg compound fertilizers and organic fertilizers) in China – a country that has traditionally used hydrocarbon fertilizers, mainly ammonia-based, to make its fields more fruitful.
Mr. Yang said the company positions itself as one of the leading vertically-integrated enterprises covering magnesium and ecological fertilizers to achieve “green” technological innovations and operational efficiencies.
“We believe our biggest draw for investors is the fact that we are a fast-growing business with huge market potential and growth prospects.
“Our goal is to become a leading ‘green’ natural resources firm for the 21st century.”
Magnesium alloys -- growth driver
Since 2008, Century Sunshine has been investing in research and development of its primary growth driver -- magnesium alloys.
Mr. Yang said other factors were working in the firm’s favor, helping make management very bullish on future prospects.
“We are a high-tech rare earth magnesium alloys production firm with our own 21 related patents, which differentiates us from most of our rivals.
“We also own exclusive technologies in our Si-Mg compound fertilizer and organic fertilizer production and enjoy strong product differentiation, with a sales network covering 20 provinces across Mainland China.”
Mr. Yang added that Century Sunshine is the only Hong Kong-listed play in its sector that can fully benefit from the Chinese government’s new economy policies.
“Our strength in both the upstream and downstream markets is evident and we are always looking to improve technology to put out exclusive products.”
Indeed, it was this characteristic that has helped Century Sunshine’s bottom line outpace revenue of late, as “ordinary products” have a profit margin of around 18% while “exclusive products” boasted levels more than 30%.
Magnesium is lighter than aluminum, 100% recyclable and has abundant reserves. Photo: Century SunshineSpecialty Fertilizers
Century Sunshine was very encouraged by the strong growth potential of specialty products in Mainland China and elsewhere.
Mr. Yang said that total usage of nitrogen/phosphorus/potassium fertilizers has increased by 32% over the past decade in the PRC, and total use of compound fertilizers surged over 82% during the same timeframe.
The main products of most Hong Kong-listed fertizer firms are straight fertilizer such as urea.
They are therefore suffering from the ongoing trend away from straight fertilizers and a preferred and growing use of more compound and organic fertilizers -- an industry trend from which Century Sunshine is benefitting.
Meanwhile, as per agricultural experts’ estimation, the potential market size of silicon-magnesium (Si-Mg) fertilizers – a specialty product of Century Sunshine -- is around 40 million tonnes per year.
“We enjoy strong brand recognition for our organic and Si-Mg fertilizer products, all of which are well-received in the market and cover both the organic and mass-agricultural sectors."
He added that Century Sunshine's fertilizers have a three-pronged positive impact on crops by improving soil quality, balancing nutrient intake and enhancing photosynthesis.
The debut of the firm's popular Si-Mg fertilizer products in March 2012 contributed 23% of segment revenue with a gross margin of 35% for the first half of 2013.
Century Sunshine's Hong Kong share performance. Source: Yahoo Finance
And China’s farmers were expected to keep ordering bags of this variety of fertilizer given on-the-ground soil conditions in the countryside.
“More than 50% and 19%, respectively, of China’s 4.5 million acres of rice paddy land is lacking in silicon and magnesium.
“Anticipating the current arable land situation in China, we launched Si-Mg fertilizer to address soil deficiencies followed by a comprehensive marketing campaign,” Mr. Yang said.
“We have very advanced technological capabilities for our mining operations,” said Century Sunshine ED Mr. George Yang. Photo: Aries ConsultingThe firm’s Jiangsu Province mine has secured material supply for Si-Mg fertilizer in a cost effective way, helping the average gross profit margin improve 6.2 percentage points.
He added that the firm’s technology for mining magnesium and rare earth metals was top of the line also.
“We have very advanced technological capabilities for our mining operations which makes for a very high entry barrier to the sector.”
Century Sunshine has an annual magnesium capacity of some 16,000 tonnes in 2013, owning high grade, abundant reserves of magnesium raw materials which forms an integrated supply chain from upstream supply to downstream production.
To further strengthen its R&D into rare earth magnesium alloys in the new materials sector, China Rare Earth Magnesium -- a unit of Century Sunshine -- inked a strategic deal with the Changchun Institute of Applied Chemistry, Chinese Academy of Sciences (CAS), in June 2013.
By leveraging on the strategic cooperation with CAS, Century Sunshine is confident it can develop and capitalize on its advantages in resources and technologies in this segment.
“It sets a solid foundation and diversification for high-end magnesium alloys development with distinctive quality for the group in the future,” Mr. Yang added.
Century Sunshine recently 0.79 hkdHe said magnesium is known as the 21 Century’s “green engineering material,” and rare earth magnesium alloy is the pearl in the crown.
Considering rising global pollution levels, people need to use more environment friendly, lighter and sustainable materials, and magnesium is lighter than aluminum, 100% recyclable and has abundant reserves, which guarantees its great future.
As the leading company in the rare earth magnesium alloy sector, Century Sunshine will definitely be the top beneficiary in the industry.
“Both our ecological fertilizers and rare earth magnesium alloy business are well positioned for long term growth, and the Chinese government’s new economic policy will enhance our development.”
To meet future demand, Century Sunshine is implementing an ambitious expansion plan targeted for completion by end-2016 in which the firm’s capacity is likely to increase three- to four-fold overall, guaranteeing fast growth in the coming years.
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