The Ministry of Finance recently released a list of commodities subject to changes in export tax rebate policies (see Table 1). The update includes a wide range of pharmaceutical and chemical raw materials, primarily under tariff code 29, covering nearly 70 products. Most of these items will see their export tax rebate rate reduced to 5%, down from previous levels. This adjustment has raised concerns among manufacturers, as the list lacks specific product names, making it difficult for companies to determine whether their products are affected.
As a result, many raw material drug companies are currently cross-checking with customs authorities to confirm the impact on their exports. Due to this lack of clarity, it is challenging to provide precise profit adjustments for individual products or firms. However, based on ongoing communication with relevant parties, ChinaPharm (1093HK) is expected to face a reduction in the tax rebate for penicillin and vitamin C raw materials, from 13% to 5%. Similarly, other companies like Sea Zhengye Pharmaceutical (600267) and Huahai Pharmaceutical (600521) have already received more detailed results from their inquiries.
From a static perspective, the decrease in export tax rebates directly increases the cost of sales, which may lower the profitability of bulk drug producers with significant export exposure. This could lead to a noticeable negative impact on earnings. However, from a dynamic viewpoint, higher production costs could act as a barrier to entry, making it harder for smaller players to compete. This may prolong the upward trend in API prices this year, potentially benefiting larger, more established firms by reducing market volatility and supporting price stability.
In the long run, the industry must address environmental and pollution issues. The structural adjustment through reduced tax rebates is likely to support a healthier and more sustainable development path for the sector.
Regarding ChinaPharm (1093HK), the company has not yet confirmed with authorities whether the policy change will affect its products. Assuming all else remains equal, a drop in the tax rebate from 13% to 5% could reduce its 2007 net profit by HK$37 million, bringing it down to HK$257 million (HK$0.17 per share), and further cut 2008 profits by HK$73 million to HK$249 million (HK$0.16 per share). However, increased industry barriers may delay price hikes, but also allow for higher average selling prices for key products like penicillin and vitamin C.
Given that the company's profitability is highly sensitive to pricing, even a small increase in selling prices could significantly improve margins. Therefore, while the tax rebate change may impact short-term earnings, it is unlikely to derail the company’s growth outlook for 2007-2008.
Key assumptions include: 40% of penicillin is exported, 60% of vitamin C is exported; the 5% tax rebate applies from July 1, 2007, affecting second-half 2007 and full-year 2008; effective tax rate is 18%.
Butyl acetate is mainly used as a solvent and a chemical reagent. This product is irritating to the eye and the mucous membrane of the upper respiratory tract. There is an anesthetic effect. It can cause dry skin and can be absorbed through a complete skin. In addition, it also has some harm to the environment.
Application
1. N-Butyl acetate is used as solvent in coating, lacquer, printing ink, adhesive, leatherroid, nitrocellulose, etc.
2. it is the solvent of some cosetics, acting as medium boiling solvent of nail polishes to dissolve the epithelium forming agents, like, nitrocellulose, acrylate and alkyd resins. It also can be used to prepare the remover of nail agents. It is often mixed with Ethyl Acetate while in use.
3. it is also applied to prepare perfume, it appears in the recipes of apricot, banana, pear and pineapple essences.
4. in petroleum refining ands pharmaceutical industry, it is used as extractant, especially the extractant of some antibiotics.
5. N-Butyl acetate is an azeotrope former with good ability to carry water, it is ofter used to condense some weak solution to reduce energy consumption.
6. N-Butyl acetate also can be used as analytical reagent verify thalium, stannum and tungsten, and determine molybdenum and rthenium.
Butyl Acetate,Organic Solvent,Butyl Acetate 99.7,Coating Agent Ba Butyl
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