Global Sweeteners and peers face profit margin squeeze from surging corn prices

Despite rising demand for sugar on the mainland, domestic sweetener makers, including listing candidate Global Sweeteners Holdings, face pressure on profit margins because of surging corn prices.

Changchun-based Global Sweeteners, a unit of Hong Kong-listed Global Bio-Chem Technology, aims to raise as much as HK$612 million in an initial public offering this month. Its retail tranche was launched yesterday and will run until Thursday.

Global Sweeteners, which makes corn-based sugar products such as crystallised glucose and maltose syrup, posted a 94.4 per cent jump in net profit to HK$156.7 million for the year ending December on a 38.6 per cent increase in sales to HK$1.14 billion.

Earnings for the three months to March rose 46.6 per cent to HK$34.6 million as sales gained 58.6 per cent to HK$336.3 million, according to the company's prospectus.

The company offered to sell its shares at between seven times and 9.1 times its earnings last year.

By comparison, Xiwang Sugar Holdings, a mainland producer of starch-based sweeteners and refined corn products, traded at 10.81 times 2006 earnings based on yesterday's closing of HK$3.85.

Kenny Tang Sing-hing, an associate director at Tung Tai Securities, said Global Sweeteners' share pricing was reasonable and similar to its Hong Kong-listed peers.