BEIJING (Reuters) - China Agri-Industries Holdings Ltd (0606.HK), a subsidiary of top Chinese grains trader COFCO, swung to profit in the first six months of the year, helped by a big jump in profitability in its ethanol and oilseeds segments.
The company - which processes grains including soybeans, corn, rice and wheat - said on Wednesday revenues rose 9 percent to HK$44.4 billion ($5.67 billion) while its net profit rose to HK$1.2 billion from a HK$292 million loss a year ago.
The turnaround came as operating profit at its Biochemical and Biofuel segment surged nearly five-fold to HK$754 million, driven by higher output of ethanol and better margins following a shift in government policy.
China dropped its support price for corn in 2016, slashing the cost of the grain which is a key raw material for ethanol. It also offered subsidies to encourage companies to buy more of the country’s large corn stockpiles.
At the same time, Beijing imposed anti-dumping tariffs on imports of distillers’ grains (DDGS), a byproduct of ethanol production, and hiked the tariffs on imports of the fuel, helping domestic ethanol producers.
“With the recovered crude oil prices and reduction in DDGS imports, the biofuel business was able to scale up and improve profitability,” China-Agri said in a filing.
The company also pointed to higher demand for sweeteners, and a stronger performance at its oilseeds processing segment, helped by improved sourcing and production despite sluggish demand for soybean oils and meals.
Abundant global grains supplies should help ease cost pressures in the second half, China-Agri said, but warned it would face fluctuating oilseed prices and the expiry of government subsidies for corn processors.
China-Agri's shares were up 1.1 percent in afternoon trade, in line with a firmer overall market .HSI.
Reporting by Dominique Patton; Editing by Richard Pullin