Final Determination on Xanthan Gum Dumping Duties Enhances Competitive Advantage
Hong Kong, July 18, 2013 AEST (ABN Newswire) - The world's largest monosodium glutamate ("MSG") and xanthan gum producer, Fufeng Group Limited ("Fufeng" or the "Company", together with its subsidiaries, the "Group") (
HKG:0546), recently received a notice from the U.S. Department of Commerce on the final determination on xanthan gum anti-dumping duties. The Company is the only Chinese enterprise paying the lowest duty of 12.9%. The duty imposed on Fufeng's key competitor is 128.32% and the other four Chinese companies face duties of 70.71%. The general level of duties for Chinese companies is 154.07%. The announcement of the final determination marks an end to the xanthan gum anti-dumping investigation and responding process, which lasted more than a year. That Fufeng is paying the lowest xanthan gum dumping duty puts the Company in a highly advantageous position for competition in the U.S. market.
On June 5, 2012, on behalf of the U.S. xanthan gum industry, CP Kelco US petitioned the U.S. Department of Commerce and International Trade Commission (ITC) for an anti-dumping investigation of the xanthan gum products imported from China and Austria.
Thanks to its economies of scale in its production, vertically integrated business model and diversified product portfolio, the cost for Fufeng's xanthan gum products is much lower than its competitors. As a result, the extent of dumping on its products was ruled as much smaller than those of other exporters. In addition, throughout the entire investigation, Fufeng actively cooperated with the U.S. Department of Commerce. Fufeng's good disclosure practice and corporate governance were also key factors leading to the favourable investigation result for the Group.
Mr. Li Xuechun, the Chairman of Fufeng, said, "As one of the two Chinese enterprises who were mandatory respondents, Fufeng immediately set up a dedicated anti-dumping respondent steering group after receiving the notification from the Ministry of Commerce of China. The Company also engaged a professional legal team. With the full participation of relevant departments and staff, we established a professional response system with strong organization and effective central command, taking the Company through the whole process: from responding to the three main questionnaires and the supplementary questionnaire, managing on-site verification, mounting defense to taking part in hearings. This handsome and hard-won victory not only lays a solid foundation for Fufeng to gain xanthan gum market share in the U.S., but also injects impetus into the Company's expansion and extension of xanthan gum business to other markets and enhances Fufeng's reputation in the global market."
Mr. Li added, "As demand outstrips supply, the selling price of xanthan gum products will remain higher than the duties levied by the U.S. Commerce Department for a long period of time, and therefore the duties will have no impact on the profit margin of Fufeng's xanthan gum business. As the demand for xanthan gum further grows, particularly as a result of its application to extracting shale gas, the management expects the exports of xanthan gum to the U.S. will grow rapidly."
With a diversified clientele, Fufeng's xanthan gum products are exported to over 40 countries around the globe. In terms of market distribution, Asia accounts for about 40% (of which the Middle East constitutes about 25% and Southeast Asia about 15%), Europe about 25%, North America about 15% and other markets (including Russia, South America, etc.) about 20%. Fufeng's xanthan gum products are widely applied in the fields of food, pharmaceuticals, fine chemicals, agriculture, oil drilling and extracting, etc.
According to 2012 data, the revenue generated from Fufeng's xanthan gum business was around RMB1.07 billion (constituting 9.6% of total turnover), the operating profit was RMB430 million, and the operating profit margin was about 40%. In terms of production and sales volume, Fufeng is the largest producer of xanthan gum in the world with annual sales reaching 52,000 tonnes in 2012. According to Fufeng's estimation, the total global sales volume was about 120,000 tonnes in 2012.
About Fufeng Group Limited
Fufeng Group (
HKG:0546) is the world's largest producer of MSG, xanthan gum and a major supplier for a series of bio-fermentation products. The main products of the Group are food additives, animal nutrition, colloid and high-end amino acids. In fiscal 2016, Fufeng generated sales of approximately RMB11.2 billion and profit attributable to shareholders of about RMB1.09 billion. For more information, please visit our website www.fufeng-group.com
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