The Shenzhen Stock Exchange issued a concern letter to Fujian Green Pine Co., Ltd. due to the impact of the pandemic on its subsidiary, NBC and the adjustment of industry regulatory policies, and other factors. Green Pine expects a maximum pre-loss of $146 million in 2021. The Shenzhen Stock Exchange sent a concern letter to Fujian Green Pine Co., Ltd.
On February 9, Fujian Green Pine Co., Ltd. released an announcement on its response to the Shenzhen Stock Exchange’s concern letter.
Recently, Fujian Green Pine Co., Ltd. issued a forecast of its 2021 results with an estimated loss of $130 million to $146 million for the year while the company also made a profit of over $71 million in the previous year.
On January 26, the Shenzhen Stock Exchange sent a concern letter to Fujian Green Pine Co., Ltd. The concern letter asked Fujian Green Pine Co., Ltd. to explain whether the company’s external business environment faces the risk of continuous deterioration and whether the decline in operating income of its main business is sustainable, taking into account the development trend of the industry in which its main business is located and the changing trend of market demand.
Fujian Green Pine Co., Ltd. responded that, firstly, the overall growth rate of cosmetics industry failed to achieve the growth of operating income and the new investment eroded the profit. Secondly, due to the influence of commodity price fluctuation, upstream supply chain tension and other factors, the price of major raw materials for cosmetics is on a continuous rising trend resulting in the rising production cost of cosmetics business during the reporting period, which poses greater pressure on the product gross margin. Thirdly, the price of major raw materials and auxiliary materials and fuel for turpentine deep processing business increased. At the same time, as competitors resume production expansion, market competition intensified resulting in the rising price of upstream raw materials failed to be transmitted to the downstream and the product gross margin decreased compared with last year.
In fact, a significant reason for the loss of Fujian Green Pine Co., Ltd. is the loss of its acquired subsidiary, NBC. In its 2021 earnings forecast, Fujian Green Pine Co., Ltd. said that NBC showed signs of goodwill impairment due to the impact of the epidemic, industry regulatory policy adjustment, industry growth rate decline and changes in the competitive landscape.
In its response, Fujian Green Pine Co., Ltd. also said that along with project expansion and increased labor expenses, coupled with the impact of the pandemic as well as macro policies and commodity price fluctuations, NBC’s operating net profit is expected to decline significantly year-on-year.
NBC is a professional cosmetic ODM manufacturer integrating R&D, design and manufacturing, mainly engaged in mask, skin care products and wet wipes business. Data show that NBC achieved operating revenue of approximately $423 million in 2020, operating profit of $52,753,500, gross profit margin of 22.36% and net profit attributable to NBC’s owner’s equity of $45,756,500.