Summary: As of 31 Aug., 16 listed firms that engage in vitamin business have released their semi-annual reports of H1 2023.

As of 31 Aug., 16 listed firms that engage in vitamin business have released their semi-annual reports of H1 2023. Affected by the sluggishness of vitamin market, the financial performance of these 16 firms in this reporting period was mostly unsatisfactory. Of these 16 firms, 11 firms reported year-on-year decreases in their operating revenues and net profits attributable to shareholders. Notably, Zhejiang Shengda Bio-pharm Co., Ltd. (Shengda Bio-pharm) and Hubei Guangji Pharmaceutical Co., Ltd. (Guangji Pharma) presented year-on-year decreases of more than 100% in their respective net profits attributable to shareholders for H1 2023.

Zhejiang Shengda Bio-pharm Co., Ltd. (Shengda Bio-pharm)

According to the semi-annual report that it released on 26 Aug., Shengda Bio-pharm sustained financial losses in H1 2023, which was contrary to the profit-earning situation in H1 2022. The company's net profit attributable to shareholders for H1 2023 was -USD882,180 (-RMB6.33 million), down by 115.86% compared to USD5.56 million (RMB39.93 million) for H1 2022.

Since Shengda Bio-pharm's main products are vitamins (biotin and folic acid) and biological preservatives, the sluggishness of vitamin market was amongst the contributors to its dismal financial performance.

Shengda Bio-pharm stated: In the first half of 2023, the company was confronted with a harsh environment featuring complicated international situation and slack vitamin market. The newly-built production capacities for vitamins have been progressively activated since 2021, but the vitamin demand from both home and abroad was below expectations. Against the backdrop of oversupply, the vitamin prices persistently stayed at a low level in H1 2023. Additionally, China's export volume of vitamins in Jan.–May 2023 dropped by 8% YoY, and overseas customers continued to consume the stocks in hand (therefore suppressed demand).

Quarter-wise analysis of Shengda Bio-pharm's vitamin selling price and revenue

• The selling prices of vitamins first dropped sharply in Q1 and then rebounded in Q2.
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• In Q1 2023, the average selling price of vitamins dipped by 49.41% YoY and slid by 29.93% QoQ.
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• In Q2 2023, the average selling price of vitamins dipped by 14.15% YoY and ascended by 20.44% QoQ.

The operating revenues from domestic vitamin sales and overseas vitamin sales in Q1 both substantially declined YoY. In Q2, the operating revenues from domestic vitamin sales still declined YoY, but at a smaller rate; while the operating revenues from overseas vitamin sales delivered a year-on-year growth.

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• Q1 2023: The operating revenue from domestic vitamin sales was USD2.92 million (RMB20.94 million), down 29.94% YoY; the operating revenue from overseas vitamin sales was USD5.19 million (RMB37.28 million), down 39.02% YoY.
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• Q2 2023: The operating revenue from domestic vitamin sales was USD3.05 million (RMB21.90 million), down 19.82% YoY; the operating revenue from overseas vitamin sales was USD6.24 million (RMB44.81 million), up 18.73% YoY.

In the face of hostile market environment, the company deepened the implementation of the "differentiated competition" strategy and exerted considerable efforts into the field of pharmaceutical-grade vitamins, having sought development in the high-end pharmaceutical market.

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• The company's vitamin products in the pharmaceutical field, namely CEP-certified biotin and folic acid API (active pharmaceutical ingredient), delivered strong sales in H1 2023. (CEP refers to Certificate of Suitability of Monographs of the European Pharmacopoeia.)
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• Sales volume of and sales revenue from CEP-certified biotin grew by 89.31% and 86.39% YoY respectively.
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• Domestic sales volume of and domestic sales revenue from folic acid API grew by 36.14% and 40.30% YoY respectively.

Hubei Guangji Pharmaceutical Co., Ltd. (Guangji Pharma)

According to the semi-annual report that it released on 31 Aug., Guangji Pharma also sustained financial losses in H1 2023, while in the same period of last year it earned profits. The company's net profit attributable to shareholders for H1 2023 was -USD3.59 million (-RMB25.80 million), down by 204.49% compared to USD3.44 million (RMB24.70 million) for H1 2022.

Guangji Pharma attributed the sharp decline in net profit to the following factors:

• The sales revenue and net profit from high-content vitamin B2—the company's main product—dropped, in consequence of the decreases in the product's sales volume and profitability. This was because the effects of global economy and the complicated situation of the domestic market led to the following results: the number of VB2 producers rose; end-user demand continued to be weak; clients' procurement demand declined; market transactions were tepid; and VB2 price was at a low level.
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• A year-on-year uplift was witnessed in the costs, contributed by the efforts to expand marketing channels, the expenses of paying compensation for restricted stock incentive plan, and an increase in interest-bearing liabilities.

Guangji Pharma's operating revenue for H1 2023, by region:

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• Revenue from domestic regions was USD35.15 million (RMB252.36 million), down 4.14% YoY;
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• Revenue from overseas regions was USD12.75 million (RMB91.55 million), down 18.80% YoY.

 

Revenue from "raw material series products" (pharma-grade riboflavin, food-grade riboflavin, 98% feed-grade riboflavin, 80% feed-grade riboflavin and riboflavin sodium phosphate) accounted for the largest proportion (60%+) in the company's total revenue. In H1 2023, the revenue from "raw material series products" totalled USD32.05 million (RMB230.10 million), down 6.17% YoY.

Although the financial performance was negatively influenced by market oscillations, Guangji Pharma adhered to the operating mindset of "stabilising the mature business segments, pushing forward with plans for new businesses, and focusing on sci-tech innovation", and took a series of measures in H1 2023 so as to consolidate its position in the market:

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• Guangji Pharma was making every endeavour to expand the market shares of high-content vitamin B2, CP-grade vitamin B2 and vitamin B6. (CP refers to Chinese Pharmacopoeia.) As per a regulation issued by European Commission, starting from 11 April, 2023, the company is allowed to sell a genetically-modified vitamin B2 feed additive in the European Union (EU) market. In Aug. 2023, the company restarted the sale of this product in the EU market. Meanwhile, the company is applying for an exclusive approval on the registration of a non-genetically modified vitamin B2 feed additive in the EU.
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• A new wholly-owned subsidiary named Hubei Guangji Health Technology Co., Ltd. was founded, in a bid to expedite the establishment of industrial setup in the big health industry. The new subsidiary is set as the carrier of development in the fields of Chinese traditional medicine and health care products. Up to now, two health care products, namely Compound B Vitamins and Coenzyme Q10 Soft Capsules, have been marketed.
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• Two new R&D organisations affiliated to Guangji Pharma, including a technology company and a research institute, were established in Wuhan City, Hubei Province. Guangji Pharma's spending in R&D of pharmaceutical preparations and bio-fermentation products was ramped up. Several projects for new product R&D were accelerated.
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• The company's deep strategic cooperation with Sinopharm Group Hubei Co., Ltd., the general trade agency of Guangji Pharma's CP-grade VB2 and CP-grade VB6, persisted. Two firms thoroughly exploited market resources with joint hands.