Company says its products can help control food prices

Bluestar Adisseo Nutrition Group, the French animal-nutrition feed additives producer backed by China National Chemical Corp, said Wednesday that it sees huge potential for business growth on the mainland.

The company believes that its products can help raise the productivity of the country's animal husbandry amid tight meat supply that has helped fuel inflation.

"Methionine could reduce the cost of poultry breeding by more than 20 percent, which will not just benefit the farmers but also help control prices amid an environment of price hikes," said Bluestar Adisseo Chief Executive Officer Jean-Marc Dublanc at a video press conference for the company's Hong Kong initial public offering (IPO) later this month.

Bluestar Adisseo is offering 2.3 billion shares, or 25 percent of the company, at HK$3.50 to HK$5.25, its term sheet shows. At its upper end, this would amount to HK$12.08 million ($1.56 billion).

The company will use 40 percent of the IPO proceeds to expand and upgrade its European plants, and another 40 percent to develop its feed business.

Bluestar Adisseo's featured product, methionine, is an essential amino acid and a basic building block in the formation of proteins. It cannot be synthesized in the body but only assimilated indirectly through edible meat.

Methionine is now mainly used in feed to promote the growth of poultry and livestock, shorten feeding cycles, and increase the quantity of lean meat.

However, due to high technical barriers, there are only five licensers of methionine production technology in the world, and the market is concentrated among four main players which control more than 90 percent of global market share. Bluestar Adisseo ranks second.

Bluestar Adisseo also produces a diverse range of animal nutritional products including vitamins and enzyme. Its principal revenue is nevertheless more reliant on the sales of methionine, which accounted for 61.6 percent, 61.9 percent and 63.8 percent of its total revenue respectively between 2007 and 2009.

According to a new report from Global Industry Analysts released this year, the mainland is the second-largest manufacturer of animal feed, as well as being among the largest consumers of methionine in the world.

However, there is no methionine producer on the mainland currently, which has "an estimated annual demand of 120,000 tons," according to Xi Yuxin from China National Bluestar Group, which bought Adisseo Group for $480 million in 2006. China National Bluestar group is a unit of China National Chemical Corp.

"In fact, methionine's popularity has been stymied by the high cost of importing it," said Dan Chen, managing director of China Banking at Deutsche Bank, who added that the current dearth of Chinese producers will leave more room for Bluestar Adisseo to profit after it localizes production and lowers its costs.

The company announced in August 2009 that it plans to build a methionine plant in Nanjing, the first plant of its type on the mainland. It is expected to be operational by the second half of 2012 with an annual production capacity of 70,000 tons.

Robert Lu, chairman of Bluestar Adisseo, expects the group's net profit to rise at a rapid pace after the IPO in Hong Kong, due to the enormous prospects on the mainland market.

"Nutritional feed additives are definitely a very interesting concept for Hong Kong investors," said Linus Yip, a strategist at First Shanghai Securities.

"The good performance of other France-based companies like L'occitane after their listing may embed confidence on the local investors," Yip added.

China Daily

(HK Edition 11/18/2010 page3)