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Andy Chen

Shares of China Starch Holdings closed at their offer price on their trading debut yesterday, ahead of the company's announcement that first-half net profit jumped 278 per cent  on corporate restructuring and tax exemption.
Net income for the mainland's third-largest cornstarch supplier reached 70 million yuan, or 26.68 fen per share, for the six months to June, up from 18.5 million yuan, or seven fen a share, a year  earlier.
Sales  rose 39.9 per cent to 603.17 million yuan.
The Shandong-based  company was able to consolidate 100 per cent of its profit to its shareholders in the first half after corporate restructuring, according to a spokesman, compared  with 45 per cent  attributable to minority interests in the first half of last year.
Chairman Tian Qixiang said yesterday the company had also benefited from a two-year tax break after it had become a wholly foreign-owned enterprise.  The company's effective tax rate in the first half of last year was 30.1 per cent.
Shares of China Starch, which raised HK$333 million  in a Hong Kong initial public offering,  traded between  HK$2.63 and  HK$2.21 before closing at the offer price of HK$2.22.
Fluctuations in the price of corn, China Starch's main raw material, would squeeze profit margins and  add volatility  to future earnings, analysts  warned.
Cornstarch, produced from corn kernels, is  a raw material for  a wide range of products, including ethanol, glucose, lysine, animal feeds, agricultural fertilisers, paper, textiles, industrial chemicals, foods and beverages, pharmaceuticals and plastics.
Mr Tian yesterday said corn prices, which  surged 20 per cent in the first half,  were 'decreasing slowly' in the second half.  He expressed confidence that the company's gross profit margin would 'rebound significantly' in the second half.
The gross margin for its core cornstarch business fell 2.9 percentage points in the first half to 12.5 per cent on rising corn prices.
'Generally, we renew contracts with customers every two months, which means we can only raise product prices two months after the increase in corn prices,' Mr Tian said.
The company is expanding its higher margin lysine business. Operating profit  for lysine, a corn-based pet-food additive, surged 171 per cent to 38.1 million yuan. The gross profit margin  for lysine products rose 8.3 percentage points to 30 per cent in the first half.
It plans to double its annual production capacity of cornstarch to about 800,000 tonnes by the end of the year and to 1.05 million tonnes by the end of next year.
Fund target
The firm raised HK$333 million by selling shares at HK$2.22 each
The amount of profit the cornstarch supplier made in the first half, in yuan 70m



China Starch net soars 278pc but  stock ends flat on market debut