Gushan Environmental Energy Limited (NYSE:GU) is the largest commercial biodiesel producer in China. The company is expected to issue a public offering on the NYSE this week.
All quotations are from the company’s most recent S-1 filing with a link provided.
GUSHAN ENVIRONMENTAL ENERGY LIMITED (GU)
Business Overview (from http://ipo.nasdaq.com/edgar_conv_html%5C2007%5C12%5C03%5C0001193125-07-258046.html">prospectus)
We are the largest biodiesel producer in China as measured by annual production capacity in 2006, according to Frost & Sullivan, a market research and consulting firm. We believe we were one of the first commercial biodiesel producers in China when we commenced operations in 2001. We produce biodiesel and by-products of biodiesel production, including glycerine, plant asphalt, erucic acid and erucic amide. Biodiesel is a renewable, clean-burning and biodegradable fuel produced from a variety of feedstocks, such as vegetable oil, animal fat and recycled cooking oil. The by-products of our biodiesel production have numerous commercial applications in the food, pharmaceutical and manufacturing industries.
Offering: 15 million ADSs at US$11.50 - US$13.50 per ADS. Net proceeds of approximately US$171.6 million will be used to expand production capacity, research & development, and general corporate purposes Underwriters: Merrill Lynch, CIBC World Markets, Piper Jaffrey Financial Highlights:
Underwriters: Merrill Lynch, CIBC World Markets, Piper Jaffrey
Revenues increased by 14.4% from RMB643.9 million for the nine months ended September 30, 2006 to RMB736.4 million (US$98.3 million) for the nine months ended September 30, 2007 … Cost of revenues for the nine months ended September 30, 2007 totaled RMB415.6 million (US$55.4 million), an increase of RMB80.6 million (US$10.8 million) or 24.1%, compared to RMB335.0 million for the nine months ended September 30, 2006… Gross profit for the nine months ended September 30, 2007 totaled RMB320.8 million (US$42.8 million), an increase of RMB11.9 million (US$1.6 million), or 3.9%, compared to RMB308.9 million in the nine months ended September 30, 2006… R&D expenses totaled RMB1.8 million (US$0.2 million) in the nine months ended September 30, 2007, an increase of 157.1% from RMB0.7 million in the nine months ended September 30, 2006… Selling, G&A expenses for the nine months ended September 30, 2007 totaled RMB35.5 million (US$4.7 million), an increase of 47.9% from RMB24.0 million for the nine month period ended September 30, 2006… Net income for the nine months ended September 30, 2007 was RMB 250.1 million (US$33.4 million), a decrease of RMB34.3 million (US$4.6 million), or 12.1%, compared to RMB284.4 million for the nine months ended September 30, 2006.
The biodiesel industry is still at an early stage in China and we have thus far experienced limited competition from domestic biodiesel producers. Our competitors include China Biodiesel International Holdings, East River Energy Resources, SINOPEC (NYSE:SHI), CNOOC (NYSE:CEO), and PetroChina (NYSE:PTR) and domestic manufacturers that are currently in the development stage of biodiesel production.
China represents a potentially lucrative market for international competitors, many of whom may seek to enter the PRC market. We believe that there are no foreign competitors with a material presence in the biodiesel industry in China. However, it has been reported that certain Malaysian producers have recently expressed interest in establishing biodiesel production facilities in China and that they will likely use imported Malaysian palm oil as a feedstock. The biodiesel industry in China may be more competitive due to competition from overseas manufacturers in the future.
As the largest biodiesel producer in China, as measured by biodiesel production capacity, with an early-mover advantage and strong business relationships, we believe that we are able to differentiate ourselves from our competitors. Nevertheless, existing and future domestic competitors, who may have a greater presence in other regions through government support or enjoy greater popularity among local customers, may be able to secure a significant market share in regions where we currently do not have operations. Further, our international competitors may have comparatively greater financial and research and development resources. Any increase in the number or size of competitors may affect our competitive position in the biodiesel market and our overall performance and profitability.
- Company website
- Online roadshow
- 24/7 Wall Street: ‘IPO Filing: Gushan Environmental, Biodiesel & In China (GU)’
- Biofuelshub.com: 'Biodiesel giant goes public to expand production capacity and research and development effort'
- China Venture News: ‘Gushan Environmental Plans NYSE IPO’