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China Yurun Food Group Limited Announces Its Annual Results for the Year Ended 31 December 2008

China Yurun Food Group Limited
2009-03-23 19:55 1032

Healthy Business Growth Amid Economic Downturn

Strengthen Market Leadership with Emphases on Quality Control

HONG KONG, March 23 /PRNewswire-Asia-FirstCall/ --

Financial Highlights

For the year ended 31 December

(HK$ in million)

2008 2007 Change(%)

Turnover 13,024 8,635 +50.8%

Gross profit 1,690 1,220 +38.5%

Profit attributable to

shareholders 1,138 859 +32.4%

Diluted earnings per share HK$0.736 HK$0.582 +26.5%

Proposed final dividend per

share HK$0.080 HK$0.080 +0%

2008 2007

Gross profit margin 13.0% 14.1%

Net profit margin 8.7% 10.0%

China Yurun Food Group Limited ("Yurun Food" or "the Company", and together with its subsidiaries, the "Group" (HKEx: 1068), a leading vertically-integrated meat-product processor and supplier in China, today announced its annual results for the year ended 31 December 2008 (the "Year").

During the Year, the Group recorded HK$13,024 million (2007: HK$8,635 million) in turnover, representing a 50.8% increase over turnover for 2007. The chilled meat and low temperature meat product ("LTMP") segments remained the main revenue growth drivers for the Group in 2008.

During the Year, the Group's gross profit and net profit were HK$1,690 million (2007: HK$1,220 million) and HK$1,138 million (2007: HK$859 million), respectively, representing an increase of 38.5% and 32.4%, respectively, over gross profit and net profit in 2007. The Group's gross profit margin and net profit margin remained stable at 13.0% (2007: 14.1%) and 8.7% (2007: 10.0%), respectively. The slight decrease in the profit margin was mainly attributable to the reduction in the gross profit margin of frozen pork products and an increase in percentage of upstream products of total turnover which generally have a lower profit margin than the downstream products.

The Board recommends a final dividend of HK 8 cents per share for the year ended 31 December 2008. In addition to the interim dividend of HK 11 cents per share, total dividend payment for the year is HK 19 cents for a payout ratio of approximately 26%. The decision for the dividend payment amount was made after thorough evaluations by the Board with special consideration to maintain a strong balance sheet, retain a strong cash balance for new business opportunities and enable the Group the flexibility to respond to any unforeseen events.

Mr. Zhu Yicai, Chairman of Yurun, said, "We are pleased to announce our relatively satisfactory 2008 annual results despite challenging economic environment. During the Year, we implemented several measures to sooth the pressure brought by hog price fluctuation throughout 2008. In addition, thanks to our stringent quality control, the Group was immune from the adverse impacts brought by food crises in 2008 and, in fact, able to attract more customers and strengthen its premier brand. While the financial crisis is expected to persist in 2009, small-scale enterprises with low hygiene standards will be weeded out as a result of new regulation, accelerating the industry consolidation. Looking ahead, the Group expects to capture new business opportunities brought by the industry consolidation in an effort to further strengthen its market position and enhance shareholders' returns in a prudent manner."

Segmental Information

The Group's business is divided into downstream processed meat products and upstream chilled and frozen meat segments.

For the year ended 31 December

(HK$ in million)

Revenue Proportion to

(Gross Profit Margin) Change Total Revenue

2008 2007 % 2008 2007

Downstream

Processed

Meat Products,

inter

alia:

-- LTMP 2,644(28.0%) 1,753(28.4%) +50.9% 89.8% 86.4%

-- HTMP 302(16.8%) 277(16.7%) +9.0% 10.2% 13.6%

-- Segment

Total 2,946(26.9%) 2,029(26.8%) +45.2% 100% 100%

Upstream Chilled

and Frozen Meat,

inter

alia:

-- Chilled

Pork 8,130(9.6%) 4,677(10.7%) +73.8% 73.9% 63.1%

-- Frozen

Pork 2,877(4.3%) 2,736(6.6%) +5.2% 26.1% 36.9%

-- Segment

Total 11,008(8.2%) 7,413(9.2%) +48.5% 100% 100%

Inter-segment

Elimination (930) (808) -- -- --

Total Revenue 13,024 8,635 +50.8% -- --

The Group's ability to sustain a stable gross profit margin for the downstream business segment during the Year was mainly attributable to the Group's strong brand recognition and optimized product mix, which offered the Group with strong pricing power. For the upstream business segment, the Group advanced its strategies to increase sales of chilled pork which has a low inventory cost and adopted a market-oriented policy which contributed to a stable profit margin for the period.

Business Review

Sales and Distribution

With respect to the target markets and distribution channels, the Group continued its strategy to focusing on direct sales with third parties and supplement distribution as a secondary sales channel. The Group also continued to increase its brand promotion efforts during the Year to secure the sales of LTMP and chilled pork amid the competitive environment and expand its product line by developing high profit margins products. Furthermore, Yurun Food optimized the product distribution network to further extend its reach to existing and potential customers in the domestic consumer market. At the same time, the Group continued to strengthened its co-operation with high-end hotels and catering chains to promote sales of high margin products so as to enhance the profitability of the Group.

R&D and Production Capacity

Product quality is always top priority for Yurun Food. Stringent quality control procedures are properly in place throughout the process of procurement, production, sales and logistics. The Group closely monitors the quality of hogs including selecting fine hog species and detailed inspection to ensure the compliance with required hygiene standards.

With respect to its downstream business, the Group focused on supplementing market coverage, reducing bottlenecks and upgrading key production facilities. Annual production capacity of its downstream meat processing segment increased by 258,000 tons as at the end of 2008, representing a net increase of 40,000 tons as compared to the end of 2007.

With respect to its upstream slaughtering segment, the Group increased its production capacity by increasing its equity interest in the Hunan plant, acquiring production plants in Shangqiu and Jiamusi, as well as upgrading its existing production facilities during the Year. At the end of 2008, the slaughtering capacity of the Group was 18.05 million heads per year, representing an increase of 4.00 million heads as compared to that at the end of 2007.

Prospects

Although we expect the market will be highly challenging in 2009, we believe the pork industry of China would be less affected by the economic slowdown. The Group believes that by leveraging on its high quality products, strong brand recognition, strategic sales distribution channels, flexible pricing strategy and experienced management, the Group will continue to expand and further enhance the competitiveness of its brand products.

Moreover, it is expected that the Chinese government will continue to implement regulations to ensure the quality of the slaughtering industry and facilitate the healthy industry growth. Small-scale slaughtering enterprises with low hygiene standards are expected to be weeded out as a result of the tightened regulations, which will in turn accelerate the industry consolidation and create more opportunities for merger and acquisitions. The Group intends to strengthen its slaughtering business through various acquisitions and by enhancing the Group's upstream and downstream business.

About China Yurun Food Group Limited (Stock Code: 1068)

Leveraging on its vertically-integrated business model and strategically located production plants, Yurun Food is the leading meat-processor and meat products supplier in China. With its well-established food brands, state-of-the-art production facilities and diversified distribution channels, Yurun Food has achieved a solid track record with robust growth for five consecutive years. By further enhancing its brand names and product quality, Yurun Food will further strengthen its leading market position. Yurun Food was included in MSCI Global Standard Index (MSCI China Index) on 29 August, 2008, which is an important recognition of Yurun Food as a leading company in the meat processing industry by the investment community.

Company website: http://www.yurun.com.hk

For further information, please contact:

China Yurun Food Group Limited

Fax: +852-3927-3300

Email: ir@yurun.com.hk

Elite Investor Relations Limited

Investor Relations:

Ms Gloria Chan

Tel: +852-3183-0227

Fax: +852-2155-9165

Media Relations:

Mr Bunny Lee

Tel: +852-3183-0282

Fax: +852-2155-9165

Source: China Yurun Food Group Limited
Keywords: Food/Beverages
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