Harbin Hongbo Environment Protection Material, Inc.
Hongbo was organized late in 2004, when Su Yu contributed to it a patent for technology that enables construction materials to be developed from waste products. Hongbo has subsequently added eleven patents, some for products and some for production techniques. Its progress toward a significant place in the construction materials industry has been recognized by both the Chinese government, which awarded Su Yu the “Gold Medal for Industrial Innovation Contribution,” and by the industry itself, as demonstrated by the Gold Medal awarded to Hongbo at the Hong Kong International New Technology and Product Exposition.
Hongbo’s business is the development and production of products utilizing SF synthetic material. SF material is a composite of waste plastic and coal ash. We currently obtain the waste plastic from six recycling facilities in Harbin and we obtain the coal ash from the Harbin Power Station. Hongbo removes these two burdens from the environment and transforms them into a highly variable construction material. In the process, we produce no pollution, and incur insignificant expenses relating to compliance with environmental regulations.
Our factory has now been developed to the point where we are capable of producing 1,430 tons of SF materials per year. Full production, therefore, would yield annual revenues of approximately $900,000, based on our present quoted price of $625 per ton. At the present time, however, we have no backlog of orders. We are actively engaged in negotiations with a number of large construction companies located near our plant in Harbin, China. But we do not anticipate that full utilization of our facility will occur until May 2007. Until then, we will be focused on completing the build-out of our factory and organizing our marketing program.
When full production does commence, we anticipate that a number of factors will help us to achieve profitability:
The cost of our raw materials, relative to the resale price of our product, is modest. We currently pay $50 to $62 per ton to have waste plastic separated from other trash for us, and we obtain coal ask free-of-charge. We pay less than $3 per ton to have the waste products transported to our plant. So the efficiency of our plant operations will the primary factor in determining our gross profit.
Because of our low cost of production, our SF materials will be sold at prices substantially below the prices of the products they replace. For example, our quoted price for SF material is now less than 50% of the prevailing price of PVC. This disparity should give us flexibility to increase prices without significantly hindering sales, if our initial operations prove unprofitable.
Our operations are looked on with favour by the Chinese government, which has become very conscious of the need to improve the environmental condition of China. One result of the government’s support for us has been a five year exemption from income tax.