Thu, 07/17/2008 - 16:30
Jilin Pharma swapping drugs for fertilizers
Shanghai. July 17. INTERFAX-CHINA - Shenzhen-listed Jilin Pharmaceutical Co. Ltd. will shift its main business focus from producing medicines to chemical products, according to a company statement July 16.
The company and its largest shareholder, Jilin Jinquan Baoshan Pharmaceutical Co. Ltd., have reached an agreement under which Jilin Pharma will first sell its assets and liabilities to Jinquan Baoshan Pharma, then issue shares to acquire assets in Qinghai Lenghu Bindi Potash Fertilizer Co. Ltd. and other, as yet unspecified, investment targets.
According to the announcement, Jilin Pharma will issue a maximum of 900 million A-shares to raise the capital required to obtain the 100-percent stake in the fertilizer manufacturer, which includes the rights to mine potash ores.
Jilin Pharma said the deal will help it extricate itself from a tight financial situation, as competition in the pharmaceutical industry has become sharper in recent years.
The company recorded a net loss of RMB 126.51 million ($18.58 million) in 2005, and a loss of RMB 35.82 million ($5.26 million) in 2006. In 2007, the company made a net profit of RMB 18.79 million ($2.76 million).
"It is not unusual for a listed company struggling to perform financially to changes its business focus," Li Jingsong, a pharmaceutical industry analyst from Industrial Securities, told Interfax.
Though pharmaceutical companies are under pressure from rising raw material costs, most view poor management as the real reason for Jilin Pharma's financial woes, according to Li.
After Jilin Pharma completes the purchase of the potash company, it will rename itself "Qinghai Bindi Potash Fertilizer Co. Ltd.". According to Jilin Pharma's announcement, the newly named company is expected to generate net profit of RMB 160 million ($26.43 million) this year and RMB 580 million ($85.17 million) next year.
Lenghu Bindi Potash Fertilizer Co Ltd. will put into operation this month a newly completed 300,000-ton per annum potash fertilizer factory, while readying itself to start operations at a 480,000-ton per annum potassium sulfate project in the second half of 2010.
China imported 8.83 million tons of potash fertilizers in 2005, accounting for 70 percent of all potash fertilizer used in China that year. Demand has been increasing since, at a rate of between 8 percent to 10 percent a year.
-KZ
