Adisseo News
Back >>Q1 2023: Continued volume growth and Extra cost-cutting program launched to protect margins squeezed by market conditions
Release time:2023-04-27
- Safety is and remains Adisseo’s first priority: 12-month rolling TRIR as of 31 March 2023 at 0.54
- 2022 Sustainability Report issued
- Adisseo on track towards sustainability ambition: GHG emissions being reduced in line with the Company’s Science Based Target 2025 objective despite growth activities
Q1 2023: Revenues of CNY3.15bn (-9% vs Q1 2022), net profit attributable to shareholders landing at break-even position given sharp price erosion and raw material costs still at a high level even though reduced.
Business highlights
- Accelerated penetration of liquid methionine especially in China
- Continued double digit revenue growth in specialties across all species
Action plan to protect margins
- Optimization of product volume allocation fully leveraging new BANC360 facility
- Continuous temporary shut-down of 1 powder methionine production line and reduction of liquid methionine production in European plants
- Extra cost-cutting program on top of ongoing competitiveness program, targeting to save additional CNY200mil on fixed costs
- Strict control of resources focused on business development to pursue growth
One-China Strategy on track
- BANC360 running at a high safety standards and reliability
- Business revenue growth driven by liquid methionine strong penetration in China market
- Adisseo R&I / RICA positioned by SinoChem as “SinoChem Animal Nutrition Central Institute”
Key Projects
- Calysseo: ongoing trial production, expecting to launch FeedKind@ to Chinese market in the second half of 2023
Positive Free Cash Flow (CNY148mil) before M&A reflecting tight working capital and cash management
Management update:
- Retirement of Jean-Marc Dublanc from CEO position on 30 June 2023 but retained as a Director
- Nomination of Zhigang Hao, the Chairman to take over the role of CEO from 1 July 2023
FY2023 outlook
- Safety and sustainability remain Adisseo’s top priorities
- Low visibility on market demand but pricing is starting to stabilize and cost is going down. Throughout 2023, volume growth is expected to accelerate
- In this uncertain context, Adisseo is fully engaged to implement all necessary actions to protect margins and to pursue investment for future
Jean-Marc Dublanc, Vice Chairman and CEO of Adisseo, said: “In Q1 2023, despite the weak market demand, we still managed to achieve a strong volume growth (+25%) in liquid methionine, driven notably by China, supported by the successful acceleration in the installation of new liquid methionine spraying equipment while the specialty business recorded continued double-digit revenue growth (+13%) across all species.
However, our Q1 2023 gross margin was sharply squeezed to 21%, negatively affected by price erosion and still relatively high raw material costs.
In order to further protect our margins, we have engaged into swift and agile action plans including price optimization, product volume allocation, proactive cash management and extra cost-cutting programs targeting to save additional CNY200mil on fixed costs.
Nor-feed acquisition was closed in Feb, allowing Adisseo to penetrate attractive segment of natural plant extracts.
One-China Strategy is being pursued successfully. Nanjing plant has become the most important liquid methionine producer with best-in-class technology and highest competitiveness. Calysseo Chongqing plant, the world’s first commercial FeedKind® facility, entered trial production phase.
In 2023, despite limited visibility on market demand, we expect the business performance to progressively bounce back, benefiting from volume growth, stabilization of prices, reduced costs and on-going margin protection measures.”
Bluestar Adisseo Company (“Adisseo” or “the Company”) Board of Directors disclosed its Q1 2023 results.
I. Business Review: Revenues & Net Profit Attributable to Shareholders
|
Unit: CNY (100mil) |
Q1 2023 |
Q1 2022 |
YoY variance |
|
Operating revenue |
31.5 |
34.6 |
-9% |
|
21.1 |
25.3 |
-17% |
|
8.3 |
7.3 |
+13% |
|
2.2 |
2.0 |
+8% |
|
Gross profit (in % of operating revenue) |
6.7 21% |
11.1 32% |
-40% -11ppt |
|
2.8 |
7.3 |
-61% |
|
3.4 |
3.5 |
-3% |
|
0.4 |
0.3 |
+55% |
|
Net profit attributable to the shareholders of the Company |
0 |
4.3 |
-100% |
Safety is and will remain Adisseo’s priority. The safety performance for 12-month rolling TRIR as of 31 March 2023 landed at 0.54.
Adisseo is on track towards its sustainability ambition with GHG emission being reduced in line with the Company’s Science Based Target 2025 objective despite growth activities.
Adisseo issued its 2022 Sustainability Report, illustrating the Company’s strong commitment to the sustainable development.
In Q1 2023, in the context of significant macro-environment challenges, revenues decreased by -9% yoy to CNY3.15 billion, and gross profit margin reduced by -11ppt to 21%, mainly due to the sharp price decrease in performance products. First signs of price stabilization appeared but are yet to be confirmed.
Regarding the methionine business, Adisseo achieved strong volume growth (+25%) in liquid methionine driven notably by China. There is a positive dynamic in the Chinese market, showing promising future for continuous penetration of liquid methionine, supported by the successful acceleration in the installation of new liquid methionine spraying equipment.
Pricing has been under ongoing downwards pressure globally, but some signs of stabilization are starting in the Chinese market.
The positive effect arising from the decreased raw material and energy costs is expected to be materialized later this year due to the destocking effect.
Nanjing plant has been running at a high reliability with excellent safety result, enabling optimization of volume allocation in the context of fluctuating raw material and energy costs.
Adjustment measures, including the temporary shut-down of a European powder plant and the reduction of liquid production in Europe, are being continued to optimize costs.
Adisseo is implementing operational excellence programs and strict cost-cutting plans in addition to ongoing competitiveness enhancement program. More benefits are expected in the coming quarters.
Adisseo is also pursuing investment in sustainability and capacity expansion to reinforce leadership in methionine such as steam turbine heating project expected to run in Sept 2023.
On Vitamins, in the context of pricing pressure, Vitamin A business was significantly impacted while Vitamin E price resisted.
In Q1 2023, despite challenging market environment, thanks to well recognized product value, specialty business revenues realized double-digit growth (+13%) driven by:
- Double-digit growth in ruminant business despite headwinds and the difficulties in China market due to economic crisis in dairy industry
- Continued growth in Feed digestibility and Health by Nutrition driven by the fast penetration of new products: Rovabio Phyplus and continued double-digit growth of Selisseo with expected growth acceleration in H2 2023
- Continuous double-digit growth in aqua
The gross margin (41%) was negatively impacted by the cost pressure primarily. A margin improvement is expected in the coming quarters given during this first quarter, Adisseo experienced destocking of high-cost products.
Specialties Capacity Expansion and Optimization Project has been progressing as planned both in China and Europe to support business growth, optimize industrial set-up and improve customer service.
The acquisition of Nor-Feed, a French group that designs, produces and markets plant-based specialty ingredients and plant extracts for animal nutrition, was closed in February 2023. This will allow Adisseo to enter the attractive fast-growing segment of natural plant extracts.
In Q1 2023, One-China Strategy progressed successfully with tangible benefits delivered:
- Double-digit revenue growth in China driven by extraordinary penetration of liquid methionine in China market
- Nanjing Plant (BANC360) operates stably with competitive cost and excellent safety performance; Basic Engineering Design of new China Specialty blending facility in progress with land purchase to be finalized shortly
- “Smart Plant” Digitalization Project running at full speed with expected promising return on yield improvement, energy consumption as well as higher-level safety and sustainability
- Adisseo Research & Innovation Organization has been positioned by SinoChem as “SinoChem Animal Nutrition Central Institute” with Research & Innovation center in China being the important contributor
- Calysseo Chongqing plant, the world’s first commercial FeedKind® facility, entered trial production in Q1 2023 with excellent safety performance. Product launch to Chinese market is expected in the second half of 2023
The Competitiveness Enhancement Program expected a recurring saving of around CNY138mil in FY2023.
Extra cost-cutting plans have been implemented with a target to deliver CNY200mil additional savings on fixed costs. Further initiatives to protect margins include product volume allocation and price optimization, yield improvement, reliability enhancement, optimization of distribution costs, and FTE control.
Q1 2023 net profit attributable to shareholders sharply decreased to break-even position because of significant decrease in gross profit and increased depreciation and amortization.
Ongoing action plan was implemented to protect margins, while at the same time, Adisseo continues its investment in research and innovation and sales and marketing to pursue business expansion.
II. Cash-flow and Net Debt
Cash position as of 31st March 2023 stood at CNY776 million, a reduction of CNY20 million compared to 31st December 2022. Adisseo recorded positive free cash flow before M&A, amounting to CNY148mil, reflecting tight working capital and cash management.
Positive cash flow generated from operating activities has been mainly spent on investments including M&A.
III. Management updates
The current CEO Jean-Marc Dublanc will retire at the end of June this year from the CEO position, but he will retain as a Director for Adisseo to contribute his insightful advice on a strategic level.
The Chairman Zhigang Hao will take over the role of CEO. With the well-prepared succession plan in place, Adisseo will go through a smooth transition and ensures management continuity.
IV. FY2023 outlook
Safety and sustainability remain Adisseo’s top priorities.
The visibility on market demand remains low but pricing is starting to stabilize and cost is going down. Throughout 2023, the volume growth is expected to continue thanks to:
- Strong growth in methionine and specialties
- Innovation and external growth opportunities
In this uncertain environment, Adisseo is fully engaged to implement all necessary actions to protection margins and to pursue investment for future. This includes:
- Ongoing proactive margin and cost optimization arising from competitiveness enhancement program and extra cost-cutting plans
- Full leverage of raw material and energy costs decrease
- Pursuing its strategic projects to support sustainable and profitable business growth in the long term
-End-
About Adisseo
Adisseo is one of the world's leading experts in feed additives. The group relies on its 8 research centers and its production sites based in Europe, USA, Thailand and China to design, produce, and market nutritional solutions for sustainable animal feed. With more than 2,650 employees, it serves around 4,200 customers in over 110 different countries through its global distribution network.
Adisseo is one of the main subsidiaries of China National BlueStar, leader in the Chinese chemical industry with more than 20,000 employees and a turnover of CNY 73.5 billion in 2022.
Adisseo is listed on the Shanghai Stock Exchange.
Adisseo Corporate websites: www.adisseo.com; www.bluestar-adisseo.com
ADISSEO press contact
In China: Yun CAI, yun.cai@adisseo.com
- Copyright © Bluestar Adisseo Co., Ltd. All rights reserved.
Beijing PSB No.11010502050775
Beijing ICP No.16002028-1 - 邮箱：http://www.star-nm.com/lxxcl/index.htm