This is an English adaptation of a FoodBud historical article originally published on December 31, 2021.
On December 27, Angel Yeast announced it would terminate the proposed separate listing of its subsidiary Hubei Hongyu New Packaging Materials Co., Ltd. (“Hongyu Packaging”) and withdraw the related listing application documents. The stated reason was a major increase in upstream raw material costs and a material change in Hongyu Packaging’s operating environment.
Angel Yeast said that as of June 30, 2021, Hongyu Packaging generated main-business revenue of about RMB296 million, up 20.51% year on year, while net profit excluding non-recurring items was RMB17.6409 million, down 46.41%. Considering the impact of higher upstream raw material costs, changes in the capital-market environment, and future business positioning, Angel Yeast said it needed to rearrange its capital-operation plan. It also said it would restart the spin-off listing process when conditions were mature.
Hongyu Packaging develops, manufactures, and sells new plastic packaging materials. Its core products include color-printed composite packaging materials, breathable films, and injection-molded products. These are mainly used in outer packaging for food, yeast, and seasoning products, as well as in production of medical protective clothing.
In 2020, Hongyu Packaging reported revenue of about RMB523 million, up 16.73% year on year, and net profit attributable to shareholders of the quoted company of about RMB71.1042 million, up 54.30%.
Angel Yeast acquired a 65% stake in Hongyu Packaging through a private placement in June 2010, becoming its controlling shareholder. Hongyu Packaging was listed on China’s NEEQ on May 12, 2016.
Angel Yeast was founded in 1986 and is headquartered in Yichang, Hubei. It listed on the Shanghai Stock Exchange in 2000. The company describes itself as Asia’s largest and the world’s third-largest yeast company, with businesses covering baker’s yeast, yeast extract, brewing yeast, biological feed additives, nutrition and health products, and food ingredients.
In 2020, Angel Yeast generated revenue of about RMB8.933 billion, up 16.73%; net profit attributable to listed-company shareholders of about RMB1.372 billion, up 52.14%; and net profit attributable to listed-company shareholders excluding non-recurring items of about RMB1.22 billion, up 45.81%.
Hongyu Packaging’s customers include Angel Yeast, Want Want Group, Panpan Foods, Qinqin Group, Kouweiwang Group, Weilong Foods, Shisanxiang Group, Yili, Mengniu, and Fuling Zhacai.
The company classifies customers into four sectors: food, seasonings, food additives, and medical/sanitary materials. Revenue mainly comes from food.
In food packaging, Hongyu serves three main use cases:
In seasonings, Hongyu’s main products are seasoning bags and packaging films, currently used for spices, pickled vegetables, and similar products, with Shisanxiang Group as a representative customer.
In food additives, its main products are injection-molded products. Representative customers include Chengdu Shengen Biotechnology Co., Ltd. and Shandong Tianbo Food Ingredients Co., Ltd. Shengen is a Sichuan seasoning company serving both B2B and consumer markets.
Color-printed composite packaging materials have consistently been Hongyu Packaging’s largest revenue contributor. Breathable films and other products became a rising business line in 2020.
Hongyu’s upstream suppliers are mainly raw-material suppliers centered on plastics and packaging-equipment suppliers. Its downstream industries include food, apparel, electronics manufacturing, daily chemicals, and medical/sanitary-material manufacturers.
Angel Yeast holds 65% of Hongyu Packaging and is its largest customer, contributing more than 35% of total sales revenue. Hongyu’s top five customers have long accounted for more than 70% of sales revenue, a notably high concentration. Comparable companies in the same field typically have top-five customer sales concentration of about 20% to 40%.
Sales to Angel Yeast have been relatively stable, as have sales to Panpan Foods and Want Want Group. Sales to Kouweiwang Group declined year by year mainly because Kouweiwang adjusted its procurement strategy. By contrast, Fuling Zhacai and Mengniu deepened cooperation with Hongyu Packaging as they expanded the types and quantities of products purchased, leading to rising sales to those two customers.
According to the prospectus, Hongyu Packaging planned to raise RMB400 million to expand capacity and strengthen R&D capabilities.
Its R&D spending was not especially large, but R&D investment accounted for more than 3% of revenue. Revenue from core-technology products accounted for more than 65%.
Its R&D priorities included anti-counterfeiting packaging, thinner packaging, improved heat resistance, and other performance upgrades. These areas reflected more diverse consumption scenarios, pressure to reduce cost and improve efficiency, and growing attention to environmental protection.
Like many packaging companies, Hongyu Packaging had a relatively high accounts-receivable balance.
The top five customers by accounts receivable totaled RMB48.6521 million, RMB58.5065 million, and RMB47.449 million in the reporting periods, accounting for 74.16%, 83.26%, and 69.05% of total accounts receivable, respectively.
Other receivables were mainly deposits.
Accounts payable balances were RMB63.5458 million, RMB77.4226 million, and RMB100 million. The year-end 2019 balance rose 21.84% from year-end 2018, and the year-end 2020 balance rose 33.45% from year-end 2019. The increase was mainly due to higher payables for material purchases, affected by changes in purchase volume and raw material prices. At the end of 2019, long-term asset purchase payables also increased because of equipment purchases and construction-project payments.
Prepayments were relatively low. Overall, payables exceeded receivables, showing that Hongyu had some leverage in back-end procurement payment terms.
During the reporting period, Hongyu Packaging’s accounts-receivable turnover ratios were 5.70, 6.60, and 7.53, rising year by year mainly because main-business revenue increased. Inventory turnover ratios were 6.41, 5.23, and 4.92.
For operators, the case highlights a familiar logic: large food groups can support captive or aligned packaging suppliers, but packaging remains a supplier business that still needs technical barriers, cost discipline, and working-capital control.
Note: Listing, fundraising, restart-plan, and forward-looking figures in this article are historical and reflect information available as of December 31, 2021.