Editor's note: by analyzing the overall performance of the semi annual reports of the listed companies in the pesticide chemical industry, we can see the impact of the financial crisis on China's agricultural basic industries to a certain extent, and help the pesticide chemical enterprises to study and determine the strategies to deal with the financial crisis.
Affected by the external economic environment, since the beginning of this year, some enterprises in China's pesticide and chemical industry have encountered some prominent problems, such as increased production and operation pressure, serious overstock of inventory, tight working capital, and declining profitability, which further increase the financial risk of enterprises.
Analysis of semi annual report
The author selects eight representative pesticide listed companies to analyze the 2009 semi annual reports, and it can be seen that there are the following significant characteristics in China's pesticide industry
First, the sales revenue and profits of some listed companies have declined significantly compared with the same period of last year, but a few companies still go up against the trend.
According to the analysis in Table 1, first of all, the sales revenue and total profit of the eight listed companies from January to June this year decreased by 22.71% and 44.86% respectively compared with the same period last year. Among them, sales revenue and total profit of three companies increased compared with the same period last year. It can be seen that with the gradual spread of the financial crisis, the global economic growth is weak, and the business pressure is further increased.
For example, the sales performance of Anhui Huaxing Chemical (11.40%, 0.20%, 1.79%) in the first half of 2009 decreased by 53.14% compared with the same period last year. Anhui Huaxing Chemical, Lear chemical (23.59, 0.27, 1.16%) and Jiangsu Yangnong chemical (35.48, - 0.15, 1.16%) were the four listed companies with large export proportion, -42%) and Nantong Jiangshan Pesticide Chemical Co., Ltd., only Lear chemical's export sales are growing. The reason is that the company is currently the largest and the second largest manufacturer of Chloropyridine herbicides in China, and the first one in China to break through the core production technology of this kind of products - cyanopyridine chlorination technology. The large-scale production technology of this product is more difficult, and at present, it is only in the United States in the world Guotao Yinong and the company can produce on a large scale, so the product competitiveness is very strong and the gross profit rate is very high. In the first half of 2009, Lear chemical's gross profit margin reached 46.68%, far higher than other pesticide manufacturers. On the contrary, those products that are easy to imitate are very competitive, and the product price and gross profit rate are very low. Some enterprises that are not highly dependent on foreign trade have been little affected. On the contrary, they have increased. For example, the sales of Shenzhen nuoxin (24.06, - 0.14, - 0.58%) increased by 25.82% year on year.
Secondly, the product structure is the same. Overcapacity caused by capacity expansion leads to the decline of enterprise sales and the decline of product gross margin.
Due to the increasing demand for glyphosate products in the international market from 2007 to 2008, the price of glyphosate products soared from the normal 30000 yuan to 82100 yuan. Major domestic pesticide manufacturers have invested heavily in new glyphosate production lines. For example, Anhui Huaxing Chemical Co., Ltd., Jiangsu Yangnong Chemical Co., Ltd. and Nantong Jiangshan Pesticide Chemical Co., Ltd. have similarities in product varieties, and the three parties are blindly expanding their production capacity, expecting to make up for the reduction of gross profit rate through the growth of sales volume.
Since 2008, due to the global financial crisis and the rapid expansion of domestic glyphosate production capacity, the sales price of glyphosate has been running at a low level. At present, the sales price is still around 22000 yuan / ton. In the first half of 2009, the sales of glyphosate in Anhui Huaxing Chemical Co., Ltd. was 218.21 million yuan, accounting for 50.39% of the total sales. The gross profit margin of the product was only - 5.17%, while the gross profit margin of the product was 34.95% in the same period last year. In the first half of 2009, the sales volume of glyphosate in Jiangshan of Nantong was 643.82 million yuan, accounting for 52.42% of the total sales volume. The gross profit rate of the product was only 5.72%, compared with 35.91% in the same period last year.
Finally, product innovation is an effective guarantee for the growth of sales revenue and total profit. Under the influence of the financial crisis, the demand for pesticides in the international market has decreased. Due to the late spring cold at the beginning of the year in the rice planting areas of southern China, the pest situation is generally light, which directly affects the sales of pesticides. In the first half of 2009, the company's sales revenue increased by 25.82% over the same period of last year, and its gross profit increased by nearly 6 percentage points over the same period of last year. The reasons are as follows: first, the company organizes production in the form of multiple varieties, small batches and multiple batches according to market demand; second, the company formulates sales policies according to market changes to guide the sales of high margin products and eliminate low margin products. On the contrary, companies with a single product structure and no attention to re product development all saw a decrease in gross profit in the first half of the year compared with the same period last year.
Second, the projects under construction continue to increase, some enterprises lack investment in science and technology development, and the decision-making level of enterprises lacks enthusiasm for developing independent intellectual property products.
At present, the pesticide market is no longer the competition of output, but the competition of mastering the core products with independent intellectual property rights. The disclosure of construction in progress and technology development costs of some listed pesticide enterprises listed in Table 2 to a certain extent reflects the current situation of overcapacity, unreasonable product structure, insufficient technology investment and low enthusiasm for independent intellectual property product development of pesticide enterprises in China. Lear chemical attaches great importance to technological innovation. In addition to the projects of capacity expansion in duxiuding, bicarbonate, annual output of 3000 tons of chlorpyrifos and annual output of 500 tons of chlorofluoropyroxyacetate, Lear chemical also invests 5.643 million yuan in the transformation of enterprise technology center. At present, the company has obtained three invention patents.
Third, some listed companies have great changes in the stability and reproducibility of net cash flow from operating activities.
Generally, the net cash flow of business activities is negative, which reflects the poor self adaptability of the cash flow of business activities. The operating cash flow can not support the needs of investment or debt repayment, but also can maintain normal operation by recovering investment or borrowing new debt to obtain cash.
It can be seen from table 2 that three of the seven listed companies' net cash flow from operating activities increased compared with the same period of last year, while the other four companies decreased significantly compared with the same period of last year, and two companies even showed negative values. The reason for this phenomenon is that on the one hand, the payment for goods is not returned in time and the inventory is overstocked; on the other hand, it may be due to the increase of enterprise management and operating expenses. Accounts receivable accounted for only 18.77% of sales from January to June in 2008, while accounts receivable accounted for 56.99% of sales from January to June in 2009. The untimely collection of accounts receivable directly led to the cash flow difficulties of enterprises. Enterprises must maintain normal production and operation and expand production capacity through liabilities. Nantong Jiangshan chemical's poor net cash flow in business activities is mainly reflected in the poor inventory control of the enterprise. Although the company's accounts receivable account for 9.3% of sales revenue and the capital recovery is good, the cash flow statement shows that the proportion of cash paid for purchasing goods and accepting services in the capital recovery of sales increased from 74.61% in the same period of last year to 98.13% from January to June 2009.
Coping and improvement
Through the analysis of China Daily News, we can reflect many problems existing in enterprises. In order to effectively reduce the adverse effects of the external economic environment, and to prepare for the long-term development and promotion of enterprises in the future, it is suggested that enterprises start from the following aspects.
1、 Strengthen technological innovation and open up domestic and foreign markets
As we all know, petroleum resources are limited, and the raw materials of pesticide and chemical industry based on petroleum will be exhausted with the exhaustion of petroleum resources, which requires enterprises to continuously carry out technological innovation and develop products with higher technological content to meet the market demand. Lear chemical just saw this point. When the price of glyphosate products rose from 30000 yuan / ton to 80000 yuan / ton, it did not blindly follow other enterprises to start glyphosate production line, but invested funds in the research and development of Chloropyridine herbicides that other enterprises did not have. In the first half of 2009, the sales of pesticide manufacturers generally declined, while the sales and total profits of the company increased by 20.84% and 58.15% respectively in the same period. At present, the state has issued a number of preferential tax policies to encourage enterprises to increase investment in technology development. The decision-making level of enterprises should increase investment in technology when they invest in projects, so as to develop products with high technology content and win a place in the market competition.
2、 Expand marketing area and reduce marketing risk
Shenzhen nopson was listed in 2008, mainly engaged in pesticide processing and compound production. There is no production capacity of technical drugs, but the company has achieved good business performance in the first half of this year, with sales revenue and total profit increasing by 24.52% and 45.55% respectively compared with the same period last year. The company disclosed in the 2008 prospectus: the company will use 61.3 million yuan of the raised funds for the construction of grassroots marketing network. In addition, the total number of employees of the company is 1087, of which sales personnel account for 61%, which shows that the company attaches great importance to the construction of marketing network. The company also cooperates with grassroots dealers to establish a "four in one" marketing mechanism of product sales, technology promotion, after-sales service and information feedback. The relatively flat marketing network basically covers the county-level administrative regions in China, which greatly promotes the sales growth. In addition, the company also attaches great importance to the spread of marketing risks, understand the "do not put eggs in the same basket" principle. In 2009, the company's top five distributors only sold 35 million yuan, accounting for 3.93% of the total sales, effectively avoiding the business risks brought by relying on sales changes of key customers.
3、 Strengthen the management of accounts receivable
The financial crisis makes the external environment of Chinese enterprises more complex and changeable, and the business risk and financial risk increase sharply, especially the export enterprises. Enterprises should attach great importance to the management of accounts receivable and adopt "Five Cs" for customers (quality character, capacity, capital, collateral, conditional conditions) system to conduct credit evaluation, and then adopt different sales strategies and settlement methods; strengthen contract and order management, improve the proportion of advance collection; strengthen payment recovery management, establish the responsibility system of collection and debt clearance, improve the turnover speed of accounts receivable; strengthen the risk warning and forecast of accounts receivable We should pay close attention to the political and economic situation of importing countries, carefully study and judge the production and operation status of enterprises in importing countries, and timely adjust export strategies and methods.
4、 Actively relieve the pressure of product inventory
Economic slowdown and weak external demand are the important factors of increasing inventory pressure. In this regard, comprehensive measures should be taken to continuously improve the production and marketing rate of enterprises, so as to effectively alleviate the inventory pressure of enterprises. We should adhere to the principle of determining production by sales, accurately grasp the development trend of the product market, strengthen the prediction of the market situation, scientifically and reasonably organize production, and timely adjust the product structure. Efforts to expand regional sales share, and constantly improve product market share.
5、 Pay attention to strengthen cash flow management
Stable and sufficient cash flow is an important guarantee for enterprises to cope with the crisis, operate steadily and develop healthily. In order to make the enterprise run well, the enterprise managers should establish the financial management concept dominated by capital management, strengthen the cash management consciousness, attach great importance to the enterprise cash flow budget management, strengthen the process management of capital flow, shorten the inventory turnover period and accounts receivable turnover period, increase the cash inflow, control the cash outflow, and ensure the safety of funds. In practical work, due to the inaccurate prediction of market product demand information, the increase of raw material purchase inventory and the blocked product sales channels, the normal capital turnover of enterprises is very difficult. In addition, the credit policy is too loose, the customer payment is not timely, also directly affect the enterprise blood circulation. For example, Anhui Huaxing Chemical Co., Ltd. and Nantong Jiangshan Co., Ltd. have negative net cash flow from operating activities because accounts receivable and inventory occupy a large amount of funds.
Therefore, enterprises should strive to shorten the cycle of capital circulation, improve the cash flow management system, establish an effective management information system, further improve and strengthen the dynamic monitoring of cash flow, and ensure that the enterprise capital chain is not broken.
