March 27, 2007

 

COFCO aims to list all units and account for half of China's ethanol production

 

 

China National Cereals, Oils & Foodstuffs Import & Export Corp (COFCO Group), the mainland's largest grain trader and processor, expects to list all its businesses within 5 years and account for more than half the ethanol market in China by then.

 

Chairman Frank Ning Gaoning said COFCO, whose China Agri-Industries Holdings raised HK$3.2 billion (US$410 million) in an initial public offering earlier this month, would keep injecting assets into its two Hong Kong-listed vehicles for the next 3 to 5 years until units of the group are all listed.

 

The shares were well-received, with shares of China Agri-Industries soaring 48.66 percent on their debut last week. More spin-offs from COFCO were also possible in the near future, Ning said.

 

COFCO International, the group's other Hong Kong-listed firm, is a leading food processor but has other businesses as well.

 

Ning said COFCO's businesses should be clearly categorised into separate branches to attract  investors, adding that the next step would be consolidation of the group's property business.

 

China Agri-Industries is in oilseed and rice trading, brewing and wheat processing, and now plans to focus on biofuel and biochemical businesses.

 

Part of the reason is that Beijing has so far issued only 5 licences to produce ethanol, meaning that there would likely be a limited number of producers in the market.

 

China Agri-Industries' Managing director Patrick Yu Xubo hopes that by 2010, 50 to 60 percent of China's targeted 5 million tonne ethanol production would come from the company.

 

The company's current capacity is at 180,000 tonnes but plans to expand this to 1.08 million tonnes by the end of next year.

 

Even as more companies look into the biofuel business, there would be more demand for ethanol in the country, he said.

 

China Agri-Industries wholly or partially owns 2 of the 4 licensed operating ethanol fuel plants in the mainland. The company's biofuel and biochemical division generated 30.2 per cent of profits and in the first 9 months of last year.

 

China Agri-Industries more than doubled its 9-month profit last year to RMB 506.7 million (US$65.4 million) from RMB 224.5 million (US$29 million) as sales rose to RMB 13.84 billion (US$1.8 billion) from RMB 12.08 billion (US$1.5 billion).