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China Biodiesel turns waste into fuel

• FROM: July 2006 |
• TAGS: china biodiesel international, biodiesel |
• COMMENTS: Add yours

• China Biodiesel turns waste into fuel
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Biodiesel manufacturer China Biodiesel International is a profitable biodiesel manufacturer which has hardly scratched the surface of the Chinese market.

It is currently the only biodiesel maker which uses waste or old oil rather than oil from newly grown crops. It raised £6.6m after expenses at 85p a share when it joined AIM. That valued the company at £38.6m. By the end of the first day’s trading the shares reached 99p.

The cash will wipe out borrowings and finance extra capacity at the existing site in Longyan and a new plant on the coast, both of which are in the Fujian province of China. The existing plant will increase capacity from 20,000 tonnes to 50,000 tonnes a year and the additional plant will double total capacity to 100,000 tonnes a year by the middle of next year.

China Biodiesel makes biodiesel from waste oil. This waste oil is collected by suppliers and includes old cooking oil, expired oil from grain depots and waste oil from animal fats. The company has 16 suppliers both local and national. It also imports waste palm oil from Malaysia. The Chinese government is keen that the waste oil is put to a good use. China Biodiesel has its own technology to convert waste oil to biodiesel. Its competitors use new vegetable oil to produce biodiesel. Once the waste oil is processed the resulting biodiesel is sold to chemical companies or to distributors which supply petrol stations in the area.

Biodiesel is sold at a 5% discount to standard diesel. Although the standard diesel price is kept below the world market rate by the authorities it is rising and this has a beneficial effect on China Biodiesel’s revenues.

Although the majority of revenues come from biodiesel around one-quarter ofrevenues come from materials that are left over which are sold to make phosphate-free detergents and toxin-free plastic packaging.

In the year to December 2005 China Biodiesel generated revenues of RMB 68m (£4.6m) and profit before tax of RMB 27m (£1.84m). Because the business is deemed to be a foreign owned enterprise it won’t pay any tax in 2006 and 2007 and will probably pay a reduced rate after that. House broker Evolution Securities estimates that profits will rise to £2.6m on revenues of £8.4m in 2006. That assumes an increase in the amount of biodiesel sold from 17,000 tonnes to 27,000 tonnes.

The long-term plan is to open plants in Guangzhou and Shanghai by 2009 thereby taking capacity to 200,000 tonnes a year. After that plants in Beijing and Wuhan are planned.

China Biodiesel intends to pay around one-quarter of its net profits in dividends.

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