Gelonghui announced on April 10, China Chemical Fertilizer (00297.HK). The board of directors announced that Yitong Digital Technology has invested in target assets at a cost of RMB 41.52 million through the public listing process organized by the Beijing Stock Exchange. On April 10, 2024, Sinochem Fertilizer (as the seller) and Yitong Mathematics (as the buyer) signed an asset transaction contract for the sale.
Assets related to Sinochem Fertilizer's nitrogen fertilizer business unit include intangible assets such as 1 patent and 14 trademarks, human resources, and supply and marketing relationships. The main nitrogen fertilizer varieties operated by Sinochem Fertilizer's nitrogen fertilizer business unit are ordinary urea, ammonium chloride, ammonium sulfate, and differentiated nitrogen fertilizer.
The main business model of the nitrogen fertilizer business unit is to procure nitrogen fertilizer products from external suppliers and sell them to customers. Sales channels include direct sales to industrial customers such as compound fertilizer plants, plywood factories, melamine, automotive urea, electric power denitrification plants, etc., and sales to agricultural customers through dealer distribution or direct sales to large growers.
The overall business of Sinochem Fertilizer is guided by fertilizer distribution services, and the business is focused on procurement and trade. Among them, due to lack of internal production capacity support, the nitrogen fertilizer business unit needs to take up large amounts of capital for external procurement. In particular, nitrogen fertilizer trade generally uses prepayment methods to purchase goods from suppliers, so the nitrogen fertilizer business unit bears a large risk of price fluctuations. Against the backdrop of increased concentration in the domestic nitrogen fertilizer industry, profit margins in procurement and trade have been severely compressed, and the profit contribution of Sinochem Fertilizer's nitrogen fertilizer business unit to the Group continues to be low. In this context, in order to accelerate the Group's transformation and upgrading, improve operating efficiency, and release the high capital occupied by the nitrogen fertilizer trading business, Sinochem plans to sell target assets. Yitong Digital is an associated company of the Company. The target assets are transferred to Yitong Digital, which is in line with the Group's strategic positioning and business adjustment needs.
In addition, Yitong Digital Technology has undertaken and operated the Fei Yitong platform. The Fei Yitong platform is an agricultural electronic platform that provides market information for agricultural industry practitioners, integrates supply information and logistics resources, and cooperates with financial institutions to provide supply chain collaboration services for upstream and downstream companies. The development goal of the Feyitong platform is to become an industrial distribution service provider deeply involved in the field of chemical fertilizer, integrating matching and self-operated transactions, information, logistics, finance, and dynamic warehousing management.
Obtaining target assets will help Yitong Digital Technology develop its own business on the Feyitong platform, promote the trading of nitrogen fertilizer on the Feiyitong platform, and expand the market influence of the Feitong platform. Sinochem Fertilizer is the largest shareholder of Yitong Digital Technology, and Yitong Digital's business development can also enhance the Group's return on investment.