Firm eyes non-grain plant in response to new state policy
China Agri-Industries Holdings said yesterday that it would shift to investing in non-grain biofuels in accordance with the mainland's new policy forbidding biofuels generated from grain crops.
The announcement came as the Hong Kong-listed unit of state-backed China National Cereal, Oils & Foodstuffs Import and Export Corp posted first-half net profit of HK$615.17 million, up 95.2 per cent from a year earlier. Turnover reached rose 54 per cent to HK$11.6 billion on strong sales in its oilseed business.
China Agri's first non-grain biofuel project will use cassava, sweet potatoes and other vegetables. The project, which will start production by the end of this year in Guangxi province, will produce 100,000 to 200,000 tonnes of fuel a year.
Aside from its pilot project in Guangxi, the company was also planning non-grain biofuel facilities in Sichuan, Chongqing, Hebei and Hubei in the next three years, managing director Yu Xubo said.
The National Development and Reform Commission said last month that the government would not allow an increase in the production capacity of plants that made biofuels from grain crops because it was pushing up grain prices.
The company said corn costs rose 15 per cent in the first half, although it did not list specific prices.
'By 2010 China plans to generate two million tonnes of non-grain biofuel, in which we hope half of the production will come from China Agri,' Mr Yu said, adding the cost of making biofuel from non-grain materials was about 14.2 per cent lower than from grain materials.
China Agri has five core businesses: oilseed processing, biofuel and biochemicals, brewing materials, rice trading and processing, and wheat processing.
For the first half, oilseed processing accounted for 68 per cent of overall sales. Operating profit for that segment grew 283 per cent to HK$375 million from a year earlier.
Biofuel amounted to only 7 per cent of the overall business. Operating profit from biofuel dropped 50 per cent to HK$60 million.
The company will spend as much as HK$550.5 million expanding its oilseed business, far higher than the originally planned HK$134.8 million, according to a statement filed with the Hong Kong stock exchange on Tuesday.
'We indeed hope to have a balanced proportion of all the businesses. Profit drivers in the future will be the biofuel and biochemical business, oilseed processing and the brewing material business,' Mr Yu said.
With rising consumption of beer in the villages, the company also plans to enlarge its brewing material production capacity to 1.08 million tonnes by 2011 from 400,000 tonnes at present.
China Agri's sister company, China Foods, which produces and sells Great Wall wines and Coca-Cola products, yesterday reported a 29.2 per cent drop in first-half net profit to HK$377.27 million.
China Agri's first non-grain biofuel facility will open by year-end
First-half net profit rose 95.2 per cent from a year earlier to, in HK$615m