Scan the QR code in the image to register

Org Technology, once heavily reliant on Red Bull, is emerging from the shadow of Red Bull.

In the 1990s, Guan Yuxiang, a 55-year-old retired female worker, founded Org Technology and successfully secured an order from Red Bull. As Red Bull rapidly expanded in the domestic market, Org Technology also achieved rapid growth and was listed on the A-share market in 2012.

The long-feared scenario finally materialized: being tied to Red Bull meant sharing its losses. In recent years, the Red Bull dispute has dragged Org Technology into lawsuits, putting pressure on its operating performance. In 2017 and 2018, the company's net profit attributable to shareholders of the listed company (referred to as net profit) declined sharply year on year.

Fortunately, Org Technology took proactive measures, including investments and outbound mergers and acquisitions, to reduce its reliance on Red Bull. Now, in the beverage industry, besides Red Bull, the company also counts Red Bull's competitors such as Dongpeng Special Beverage, Jianlibao, and JDB as clients. Additionally, the company has actively expanded its two-piece can business, extending its client base to industries such as beer and dairy.

In the past two years, Org Technology's operating performance has rebounded rapidly. In 2020, despite the impact of the pandemic, the company's net profit still achieved a slight increase, reaching 703 million yuan. In the first quarter of this year, the company expects net profit to increase by more than four times.

-01- Two-Piece Can Business Drives Q1 Net Profit Up 4 Times

As the pandemic gradually comes under control, Org Technology's profitability is also being released.

On the evening of March 23, Org Technology released its Q1 performance forecast. The company expects net profit for the first three months of this year to be between 220 million yuan and 286 million yuan, compared with 44 million yuan in the same period last year, representing a year-on-year increase of 400% to 550%.

How was such a substantial increase in net profit achieved? Was it contributed by non-recurring gains and losses?

Org Technology explained that in the first quarter of this year, the domestic pandemic was effectively controlled, production and living order returned to normal, major clients' businesses achieved significant growth, the two-piece can business developed well, and the company's operating revenue increased, leading to higher profits.

According to the company's explanation, the significant growth in Q1 operating performance was due to the improvement in its main business.

Org Technology was listed on the Shenzhen Stock Exchange in 2012. Before and after listing, the company's operating performance was once very impressive. In the three years before listing, from 2009 to 2011, the company's operating revenue increased from 1.299 billion yuan to 2.841 billion yuan, and net profit increased from 121 million yuan to 317 million yuan, both more than doubling.

In 2012, the first year of listing, the company achieved operating revenue of 3.506 billion yuan and net profit of 405 million yuan, up 23.43% and 27.65% year on year, respectively. From 2013 to 2015, the company's operating revenue was 4.567 billion yuan, 5.455 billion yuan, and 6.662 billion yuan, up 30.25%, 16.84%, and 22.14% year on year, respectively. During the same period, net profit was 614 million yuan, 809 million yuan, and 1.017 billion yuan, up 51.53%, 31.53%, and 25.71% year on year, respectively.

In 2016, Org Technology's operating performance continued its rapid growth, achieving operating revenue of 7.599 billion yuan and net profit of 1.154 billion yuan, up 14.05% and 13.43% year on year, respectively.

In 2017, Org Technology's operating performance experienced its first adjustment. That year, the company achieved operating revenue of 7.342 billion yuan, net profit of 704 million yuan, and net profit excluding non-recurring gains and losses (referred to as deducted non-recurring net profit) of 597 million yuan, down 3.37%, 38.98%, and 44.57% year on year, respectively, with the deducted non-recurring net profit declining the most.

In 2018, the company's operating revenue rebounded to 8.175 billion yuan, up 11.35% year on year, while net profit and deducted non-recurring net profit were 225 million yuan and 124 million yuan, down 67.98% and 79.27% year on year, respectively. Both net profit and deducted non-recurring net profit declined sharply again.

In 2019, Org Technology's performance stopped declining and rebounded. That year, the company achieved operating revenue of 9.369 billion yuan, net profit of 683 million yuan, and deducted non-recurring net profit of 592 million yuan, up 14.60%, 203.15%, and 379.07% year on year, respectively.

In 2020, despite the impact of the pandemic, the company still achieved a performance rebound. According to the performance express, the company achieved annual operating revenue of 10.557 billion yuan, up 12.68% year on year, and net profit of 703 million yuan, up 2.96% year on year.

According to previously disclosed quarterly performance, in the first and second quarters of last year, the company's net profit was 44 million yuan and 138 million yuan, down 81.42% and 44.79% year on year, respectively. In the third and fourth quarters, after the pandemic was brought under control, the company's net profit rebounded significantly, reaching 301 million yuan and 220 million yuan, both showing substantial year-on-year growth.

In this regard, the company explained that it continued to optimize product structure, implement cost reduction and efficiency enhancement, lean production, etc., leading to improvements in relevant operating indicators.

-02- From Hiding Behind Red Bull to Stepping into the Spotlight

Org Technology, which relied on Red Bull for its livelihood, has bid farewell to the era of quietly making big money behind Red Bull and has completely stepped into the spotlight.

Org Technology is mainly engaged in the research and development, production, and sales of metal packaging products for food and beverages, simply put, cans. Among them, the three-piece can metal packaging, made mainly of tinplate and consisting of a can body, top lid, and bottom lid, is the company's founding business, mainly supplied to Red Bull.

It is said that at the beginning of Guan Yuxiang's entrepreneurship, Org Technology and Red Bull were bundled together. Wherever Red Bull built its factory, Org Technology's factory was built nearby, with the closest distance being no more than 800 meters.

Without advertising or market development, relying on Red Bull, Org Technology's cans were distributed across the country.

Data shows that from 2008 to 2016, Org Technology's sales to Red Bull climbed from 771 million yuan to 4.975 billion yuan, an increase of about 5.45 times in eight years. During this period, Org Technology's net profit increased from 96.6026 million yuan to 1.154 billion yuan, an increase of about 11 times.

This shows that Org Technology was once highly dependent on Red Bull.

2016 was a turning point for both Red Bull and Org Technology. In August of that year, Thai Tencel sued several companies of Huabin Group in court, attempting to take back the operation of the Red Bull brand from China Red Bull on the grounds of unfair competition and infringement of trademark rights. This marathon lawsuit lasted for years, during which upstream and downstream enterprises of Red Bull, including Org Technology, were also involved in litigation.

It was also from 2016 that Org Technology seemed to suddenly wake up and actively developed "non-Red Bull" clients.

In 2017, Org Technology cooperated with Dongpeng Special Beverage and Jianlibao, Red Bull's main competitors in China, continuing the "factory-in-factory" and integrated filling business model. In 2018, its cooperative factory with Feihe Dairy (ADY) went into production.

The company also joined forces with COFCO Packaging to acquire Jihong Packaging, investing $205 million to acquire 100% of Ball Foshan and 100% of Ball Beijing. In January this year, the company signed a transfer agreement with Aorun Industrial Group to acquire 100% of Hong Kong Jingshun Investment Holding Co., Ltd. for 400 million yuan.

In addition, the company also entered the sports events arena, investing 7 million euros to acquire 59.95% of French football club AJ Auxerre. These moves have made the market recognize the real Org Technology.

Now, besides the three-piece can business, Org Technology's two-piece can business is growing rapidly. In 2019, revenue from the two-piece can business was 2.509 billion yuan, accounting for 26.78% of main business revenue. In the first half of 2020, revenue from the two-piece can business was 1.646 billion yuan, accounting for 35.45%.

Currently, Org Technology's clients include not only Red Bull but also a large number of well-known enterprises such as Dongpeng, JDB, Jianlibao, Feihe, Zhanma, Want Want, Wahaha, Tsingtao Beer, Yanjing Beer, Budweiser, Junlebao, Snow, Coca-Cola, and Yili. The company stated that its products have covered major enterprises in the domestic food and beverage industry.

Since 2019, Org Technology has achieved sustained net profit growth, which seems to indicate that the company has shaken off the impression of being tied to Red Bull, and its product and client diversification is becoming increasingly evident.

Source: Changjiang Business Daily (ID: FMCG-CLUB) Author: Shen Yourong