on August 7, kaisai biology (SH688065, stock price 61.33 yuan, market value 35.8 billion yuan) released its 2023 semi-annual report.

In the first half of 2023, Kaiser Bio achieved operating income of about 1.03 billion yuan, a year-on-year decrease of 20.05; realized a net profit of about 0.242 billion yuan, a year-on-year decrease of 28.12.

Kaisai Biology said that the net profit after deducting non-profit in the first half of the year was about 0.2 billion yuan, down 39.46 percent from the same period last year, mainly due to the company's long-chain dibasic acid series sales volume decreased compared with the same period due to weak downstream demand and an increase in one-time costs.

in addition, kaisai biology announced that the time for one of the investment projects, "the project with an annual output of 500000 tons of bio-based pentamethylenediamine and 900000 tons of bio-based polyamide", to reach the intended serviceable state is expected to be delayed until the end of 2024.

Weak demand for long-chain dibasic acids

Long-chain dibasic acid series products have been the main force contributing to Kaisai's biological revenue. According to Kaisai bio-prospectus, biological long-chain dibasic acid usually refers to the carbon chain containing ten or more carbon atoms of aliphatic dicarboxylic acids, is an important fine chemical intermediates, mainly used in high-performance long-chain polyamide, spices, hot melt adhesives, lubricants, cold-resistant plasticizers, powder coatings.

photo source: screenshot of Kaiser biological announcement

The "Daily Business News" reporter noted that the decline in revenue and the increase in management expenses were the two main reasons for the decline in profits in the first half of this year.

judging from the changes in income structure, in the first half of this year, kaisai bio's long-chain dibasic acid series and bio-based polyamide series realized income of about 0.94 billion yuan and 0.07 billion yuan respectively, down about 0.14 billion yuan and 0.07 billion yuan respectively from the same period last year. In response to the decline in revenue, Kaiser Bio said that sales of the long-chain dibasic acid series were affected by weak downstream demand.

The decline in revenue was accompanied by a lower decline in costs at Kaiser Bio, which led to a decline in the company's gross margin. Wind data shows that Kaiser Bio's gross profit margin in the first half of this year was 29.73 per cent, compared with 35.07 per cent in the same period last year.

At the same time, the management cost of Kaisai Biology in the first half of this year was about 0.09 billion yuan, and about 0.066 billion yuan in the same period last year, which also affected the net profit to a certain extent. "Management expenses increased 38.50 percent year-on-year from the same period last year, mainly due to one-time fees and increased share-based payments." Kesay biological said.

from the detailed composition of management expenses, the biggest factor leading to the increase of Kaisai biological management expenses is employee compensation and benefits, which increased by about 19 million yuan compared with the same period last year.

in addition, at the end of June this year, kaisai biology issued a plan to issue a shares to specific targets. it plans to raise no more than 6.6 billion yuan to supplement working capital and repay loans. The issuing object is Shanghai Yuqin (to be established). Kaisai Bio said that if the issue is completed, China Merchants Group indirectly holds more than 5% of the company's shares through Shanghai Yaoqin (to be established).

"After the completion of the issuance of shares to specific targets, China Merchants Group will become an indirect shareholder of the listed company and intends to sign a business cooperation agreement with the company to carry out strategic cooperation in a series of bio-based polyamide materials." Kesay biological said.

Partial Fundraising Project Extension

According to Kaiser Bio's 2023 semi-annual report, its current annual production capacity of biological long-chain dibasic acid is 115000 tons.

in addition to long-chain dibasic acid, kaisai biology also said: "the large-scale production line of bio-based polyamide and its monomer bio-based pentanediamine has been put into production and has begun to contribute to sales revenue. there may still be some problems to be solved in the process of improving the capacity utilization rate of the above products, such as equipment debugging, technical process adjustment and optimization, and there is a risk that the production progress is not as expected."

In 2020, Kaiser Bio's IPO raised a net amount of about 5.3 billion yuan. In 2022, Kaisai Biology said that it would adjust the amount of funds raised for the project "40000 tons/year biological sebacic acid construction project" from about 1.7 billion yuan to about 0.5 billion yuan, and change the amount of funds raised to about 1.2 billion yuan to invest in the new project "500000 tons of bio-based pentamethylenediamine and 900000 tons of bio-based polyamide project with an annual output".

according to the latest announcement of kaisai biology on August 7 this year, the company said: "according to the current actual construction situation and investment progress of the project, the company plans to adjust the time for the" project with an annual output of 500000 tons of bio-based pentanediamine and 900000 tons of bio-based polyamide "to reach the intended usable state after careful study, provided that the investment purpose and scale of the raised funds do not change."

photo source: screenshot of Kaiser biological announcement

Kaiser Bio adjusted the date when the project reached its intended serviceable status from the end of this year to the end of next year. As for the reasons for the adjustment, the company said: "affected by the changes in the infrastructure planning of the park where the project is located, the construction progress of the fund-raising project has been extended compared with the original plan."

in the semi-annual report, kaisai biology said that the project with an annual output of 500000 tons of bio-based pentanediamine and 900000 tons of bio-based polyamide, the project with an annual output of 30000 tons of long-chain dibasic acid and 20000 tons of long-chain polyamide are under construction. due to the factors such as personnel organization, supplier equipment processing and transportation, civil engineering installation speed, macro environment, trade and industry policy changes, etc, it may have a certain impact on the construction and operation of the project, and there is a risk that the construction progress will not meet expectations.