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Fufeng Group, one of the leading manufacturers of corn-based biochemical products on the mainland, announced impressive annual results for  last year.
'The group has recorded a compound annual growth rate of 47.5 per cent in terms of revenue since 2003,' says Li Xuechun,  chairman and executive director of Fufeng Group.  'The industry experiences changes every three years, so we were able to envisage and adjust our business models to cope with the changes.'
Profit attributable to shareholders surged 215 per cent from 294.7 million yuan (HK$335 million)  in 2008 to 928.3 million yuan for the year ended December 31, 2009.  Gross profit increased by 117.2 per cent from 644.3 million yuan to  1.4 billion yuan. 
The group recorded a 29.2 per cent increase in turnover  from 3.59 billion yuan  to 4.63 billion yuan. 
Earnings per share were 55.92  fen - a 215 per cent surge from 17.75 fen. 
Fufeng's board of directors recommended a payment of 25 HK cents per share as the year's final dividend,  which includes an interim dividend of 10 HK cents  paid during the year. That is a 150 per cent increase  from the final dividend of 10 HK cents in 2008.
The surge in gross profit and profit attributable to shareholders was mainly caused by a decrease in costs of production  and raw materials for the group's two major products, monosodium glutamate (MSG) products and xanthan  gum, due to the financial downturn  early  last year.
'The increase in the selling price of MSG and glutamic acid products, as the global economy picked up, has contributed to a surge in sales volume and market share of the group in this area,' says Gong Qingli, chief financial officer and executive director of the firm. 
The average selling prices of MSG and glutamic acid products recorded abnormal increases of 25.4 per cent and 15.8 per cent respectively from the third quarter to the fourth quarter  last year.
'The growth is abnormal because the unit cost of major raw materials in the MSG segment, such as corn kernels, coal, liquid ammonia and sulphuric acid, experienced a sharp drop due to the financial crisis,' Li explains.
The group expects that the internal consumption of glutamic acid will increase  this year, as the company gradually moves down the value chain to focus on products with a higher margin.
Fufeng's xanthan gum segment experienced a decrease in sales of  about 9.7 per cent, while the percentage of overseas sales of the product decreased from 85 per cent to 84 per cent during the period under review.
'The demand for xanthan gum gradually picked up during the fourth quarter of 2009 and we estimate it will be maintained in 2010,' Gong says. 
The group's annual production capacity of xanthan gum  has increased to 44,000 tonnes,  which represents about 50 per cent of the global market.
Fufeng will continue to strengthen its MSG and xanthan gum segments and  maintain  the group's research and development capabilities.
'We will slowly shift our emphasis from xanthan gum, which is an industrial product, to our consumer product, MSG,' Li says. 'The group therefore benefits from the economic stimulus package introduced by the [central] government which helps boost domestic demand.'
The group aims to maintain its competitive edge in terms of technology advancement, branding and cost advantage in order to  remain one of the leaders in  the industry.
'We believe the overall MSG and glutamic acid market will be balanced in terms of supply and demand in 2010,' Gong says. 'The price of MSG is expected to increase because of rising raw material costs. The group aims to capture at least 40 per cent of domestic market share and more than 30 per cent of market share globally.'
 The group has plans to develop new high-margin products, such as threonine  and branched-chain amino acid,  which will start production  later this year.
 It also plans to invest  560 million yuan to enhance its  plant in Inner Mongolia by  enabling synthetic ammonia production capacity  of 80,000 tonnes to reduce production costs.
Moreover, Fufeng plans to build a new plant costing 1 billion yuan  near the boundary between Inner Mongolia and Heilongjiang. Of that cost, 600 million yuan will be invested  this year.
Construction of the plant will begin in May and  production will start in the second half of  next year.
The group's  debt gearing dropped from 18 per cent in 2008 to 14 per cent  last year.  Its net debt gearing decreased from 11 per cent to 6 per cent,  while its additional bank credit facility amounts to  about 1.1 billion yuan.
Fufeng was included in the MSCI Global Small Cap Indices  in May  last year and was selected as one  of the HSCI's constituent stocks in March.



Fufeng's profit trebles to 928m yuan