Vitamin C cuts Northeast Pharmaceutical's net profit down 90%

Business Club March 17th In the face of overcapacity in the vitamin C industry, Northeast Pharmaceuticals has not been able to avoid performance decline. The company's annual report released yesterday showed that in 2010 alone net profit of 53.444 million yuan, a sharp drop of 88.78% year-on-year, close to Jiucheng.

Net profit has increased six times. Northeast Pharmaceuticals, North China Pharmaceuticals, Shijiazhuang Pharmaceutical Group, Jiangshan Pharmaceuticals, and Luwei Pharmaceuticals are the so-called "five major families" in the Chinese vitamin industry. Vitamin C produced by these five companies accounts for more than 90% of the global market share.

Among them, Northeast Pharmaceutical and North China Pharmaceutical are domestic A-share listed companies. Until 2008, the growth performance of Northeast Pharmaceuticals mainly came from the increase in vitamin C prices.

In that year, the company's performance was also very brilliant net profit of 358 million yuan, an increase of 6.53 times. Only vitamin C sales revenue is between RMB 1.3 billion and RMB 1.4 billion. Gross profit margin is above 60%, which contributes RMB 800 million in gross profit.

Overcapacity net profit fell but due to a large number of companies launching vitamin C production lines and excess capacity, vitamin C prices continued to decline.

Since 2010, vitamin C prices have dropped significantly. The data show that in the first quarter of 2009, the average price of vitamin C was 88 yuan/kg, and in the first quarter of 2010, it was about 75 yuan/kg, a drop of 15%. At the same time, Northeast Pharmaceuticals reported a quarterly report disappointing the industry, and net profit began to decline. In the first quarter of 2010, net profit was only 113 million yuan, a decrease of 26.75% year-on-year.

According to the annual report released yesterday, the low price of vitamin C has brought the company into a downtrend. According to the 2010 annual report, the company achieved an operating income of 4.828 billion yuan, a year-on-year decrease of 5.23%, and a net profit of 53.444 million yuan, a sharp drop of 88.78% year-on-year. At present, the market price of vitamin C is about 45 yuan/kg. At the same time, Northeast Pharmaceutical announced that it had no dividend plans in 2010.

Industry Analysis Improves Entry Barriers and Promotes Industry Consolidation Northeast Pharmaceuticals will face a vitamin C survival battle next. Zheng Yining, a pharmaceutical analyst at Debon Securities, believes that the vitamin C industry has been restricted by the relevant government agencies as a sector with overcapacity, and it is bound to face consolidation.

“The “Vitamin C Industry Access Requirements” is expected to be introduced in the near future. Once released, the integration of the Victoria C industry will be triggered, and the top five domestic industry leading companies are expected to benefit from this policy and take advantage of the quagmire of overcapacity.” Mentioned in the report.

Industrial Securities holds the same view. It believes that the current price of vitamin C is at historically low levels. In the future, as the share of exports is limited and industry access thresholds are raised, the current unordered competition landscape will undergo major changes.