The Hong Kong-listed maker of fine chemicals for use in aroma formulas and pharmaceutical products expects to fully commercialize leading edge jet-spray technology into its factories this year, a move which management says will not only boost capacity of key products by 50%, but also cut energy consumption costs by half.
EcoGreen kept its top line nearly unchanged last year at 728.5 mln yuan with a net profit of 107.7 mln, while net margins stayed relatively stable at around 14.8%.
The company, whose production facilities are located in the southeastern Chinese province of Fujian, announced its 2009 results in Hong Kong yesterday.
Jet-spray Power Play
EcoGreen’s Executive Director Mr. David Han told NextInsight that 2009 was a challenging year due to slower global orders on the lingering economic downturn, but that this year the company was taking steps to bring stronger growth and expected a turnaround.
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“The results were within expectations,” he said.
Part of the company’s confidence for this year stems from a growing reliance on benchmark technology much sought after in the fine chemicals, aromas and fragrances industry.
“The group will put more efforts in introducing the world’s latest jet-spray technologies into its major plants and actualizing a large-scale commercialisation this year when the market improves.
“Such a technological innovation can boost the existing production capacity of key products by 50% gradually and save more than 50% of the energy consumed in use of existing technologies,” the company said.
The most obvious to the upside is that existing plants can be upgraded and retrofitted using current facilities, with no need to start over from scratch.
This is critical in helping keep margins healthy, which dipped slightly to 14.8% last year from 15.4% in 2008.
“The advancement can be made on the existing infrastructure to achieve a large productivity enhancement while minimizing related capital expenditure. Through such revolutionary advancement in technology, the production cost of the group can be further reduced and the competitiveness of the products can be reinforced.”
The Nasdaq-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 our products will achieve a further dominant share in global market when the operation of innovated plant reaches its normal efficiency and economies of scale.”
Successful Formula
EcoGreen, which listed in Hong Kong in 2004, continually sniffs out the global fragrance, flavor and pharmaceutical intermediates market for the best opportunities and adjusts its product mix accordingly where necessary.
“We will continue to strengthen and develop its partnership with major international flavor and fragrance customers in the coming year. Under the partnership framework, we will launch new, edgy product mix, by which our operating performance will be improved,” the company said.
EcoGreen Executive Director Mr. David Han added that for another key product, Dihydromyrcenol, the company is especially strongly positioned.
“This is one of the global top five fine chemicals used in downstream flavor and fragrance mixing and matching used by downstream FMCG (fast-moving consumer goods) makers,” he said, adding that all five were in its product mix, and it enjoyed a commanding 20% market share for Dihydromyrcenol.
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To paint a clearer picture of possible downstream applications and destinations for this somewhat hard-to-pronounce compound, Mr. Han said the “wooden-scented” chemical is used in men’s cologne, shampoo and a whole closet-full of everyday household consumables.
“And our upstream chemicals and raw materials are primarily sourced from renewable sources. We are a green chemical processor, hence our name: EcoGreen.”
EcoGreen was committed to protecting margins – and thus shareholder value – by both protecting selling prices through quality enhancements as well as keeping production costs under control.
“Pressure from rising raw material costs is inevitable for the whole industry. To cope with this, EcoGreen will continue its operative measures including managing effectively the supply chain of raw material procurement while strengthening logistics control.”
“This will navigate the historical opportunities afforded by China’s new policies in forestry by formulating a cooperation strategy to work with upstream forestry players so as to make necessary changes to EcoGreen’s tradition of raw material supply,” the company added.
EcoGreen’s production facilities are based in the southeastern Chinese province of Fujian, just north of Hong Kong and directly across the water from Taiwan, and the firm was constantly looking for ways to make its manufacturing practices world standard quality and efficiency.
“The first stage of Changtai Plant construction will be complete and trial production will be carried out by late 2010. The plant is expected to play a pivotal role timely in our new cooperation with global industry, and it will help reinforce the crucial foundation for the Group’s business exploration into areas of other special chemicals,” EcoGreen said.
“In addition, a GMP accredited workshop, which complies with the standards of medicines and food production, will be set up in the Haichang Plant, and contribute revenue gradually from late 2010.”
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.
“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.”
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