DaBomb to pursue stable profits starting next year through a three-pronged approach

After shutting down its loss-making plant in Zhangzhou, Fujian, agricultural biotechnology manufacturer DaBomb (6578) is expected to start making a profit as early as the fourth quarter. The company is also working on three ways to improve its operations, including increasing the proportion of functional additives with the best gross margin, increasing the proportion of professional contract manufacturing organizations (CDMOs) for US customers, and improving the economies of scale of its Taiwan plant. It hopes to achieve stable profitability starting next year.

According to DaBomb 's estimates, the Zhangzhou plant in Fujian used to lose about 600,000 to 700,000 RMB per month. However, due to the high cost of raw materials and the adjustment of the Chinese economy, the losses in the first half of this year have increased. The management team then decided to cut losses. The largest asset impairment has been recognized in the third quarter. Even though there are still final expenses such as personnel and taxes in the fourth quarter, the impact on the amount will not be significant. The company expects to move towards profitability in the overall quarter.

DaBomb also pointed out that in the past, the gross profit margin of its main product, fermented protein, was low because the raw materials were controlled by others. The company hopes to improve the technological content of its products in order to achieve a stable gross profit margin. This includes increasing the protein ratio in fermented protein through process improvement, or increasing the proportion of functional additives in the medium term. Currently, the revenue share of functional additives has increased from 7% last year to 12%, and it is expected to move towards 20% next year.

DaBomb has also invested 90 million to expand its fermentation tank to 20KL. The first phase of the production line will be completed by the middle of next year, and the capacity will increase by dozens of times compared to the current capacity. Another tank will be added in the second half of next year. In the long term, it hopes to expand its customized design and manufacturing orders for strategic customers in the United States and increase its overseas layout in Southeast Asia and other regions.

The above content is excerpted from MoneyDJ News, November 24, 2023, at 10:28:45, reported by reporter Hsiao Yen-hsiang.