William Chen, the company's chief financial officer, recently sat down with
to discuss the company's history and prospects.
Can you provide some background details of the company?
China Clean Energy is located in Fuqing City in Fujian province of China, and is engaged in the developing, manufacturing and distribution of biodiesel and specialty chemical products from renewable resources. We found a process through research and development to create biodiesel from waste grease including vegetable oil and palm oil.
Where do you see the company in five years? 10 years?
In the next few months, we will continue our focus on expanding shipments to our existing customers and also adding new customers. During the first quarter of 2010 we added three new specialty chemical and two biodiesel customers and we are negotiating with six new customers for our specialty chemical products.
As we go down the road, we will take conservative measures to upgrade to
in order to pursue opportunities in acquisition projects such as acquiring one of the upstream feedstock suppliers. This will help us better manage our feedstock supply and cost, and we may acquire two to three retail gas stations to sell our own biodiesel to increase profitability and sales volume. As the demand increases, we will expand additional capacity in our new Jiangyin facility.
What are CCGY's competitive advantages? What makes these sustainable over long periods of time?
One of our major advantages is that we have a sustainable business in our specialty chemical business segment. In addition, our new facility is able to produce more efficiently and our large customer base is able to absorb the additional supply for our products. In addition, we are now located near the sea port and railroad, which gives an advantage to easily export our products as well as transporting our feedstock.
Who are your main competitors?
One of the main competitors would be Gushan, they are the largest biodiesel producers in China. They have seven facilities in China and one is in our province. They are currently having trouble due to the consumption tax. This tax does not affect CCGY because our customers are not state-owned enterprises.
Why do your customers choose you over the competition?
Our specialty chemicals products have received positive feedback from our customers and they have exceeded the regular standard. We are also able to improve our product for specific customers. For example, if a specialty chemicals customer asks for a specific standard, we are able to develop it. If they need a different temperature, we have our own R&D team that can change the product for the customers.
How is the new factory doing? When do you expect full capacity?
We have had positive feedback from customers on the factory products, as they have noticed improved quality in the products coming from the Jiangyin plant. We expect to reach full capacity by the end of this year.
We expect 23-25% for specialty chemicals and approximately 8% for biodiesel. We expect both of those to improve from quarter to quarter.
Can you fully explain your segment lines?
Our products are environment friendly and come from renewable resources. We produce biodiesel, monoacid, dimer acid, polyamide resins, dimer acid-based polyamide hot melt adhesive, trimer acid, and high quality printing ink. These are the feedstock for our customers. Our customer's end product would be something like antirust oil that is used for ships, bridges and other buildings, soap, detergent, and coating for electronic appliances, glue, lubricants, and printing ink.
What is the estimated average price per ton of biodiesel? Specialty chemicals?
For biodiesel, the average selling price is approximately 650 dollars per ton and 1350 dollars for specialty chemicals.
What is the growth like in the industry?
Demand for diesel is growing at 9% in China. The motor vehicle fleet is growing at 16-17%. The demand is so great that China imports over 50% of its diesel.
Who are your customers? Can I meet or speak with them?
Yes, When you come to visit our plant, we can introduce to you some of our local customers. And also we have some of the large customer international customers like air products and chemicals, Cray Valley, and HBG export. They are NYSE listed companies. They were our largest customer in 2008 and they continue to be our largest customers today.
Who is the Chinese businessman/businesswoman you admire most?
Robin Li, the CEO and founder of
. I admire the business model Mr. Li has accomplished: an innovative company to bring valuable service to Chinese internet users to better search for the information they desire and connect the Chinese people to the world.
If you had to invest in a US listed publicly traded Chinese company other than your own, what would it be?
Zack Buckley is general partner for Buckley Capital Partners Hedge Fund and manages his blog at Uncoveringalpha.com. He developed his investing methodology by synthesizing the ideas from the best investors of all time: Warren Buffett, Peter Lynch, Seth Klarman and Benjamin Graham. Using a value approach, he researched thousands of companies in order to pursue the most undervalued companies, which led primarily to companies in China. Buckley will be spending three months this year in China visiting companies that are exciting investment opportunities. Follow him on his blog, Uncoveringalpha.com, as he travels across China touring factories and interviewing management.