Leading Production Network to Seize Opportunities from Industry Consolidation
Strong Brand Drives Business to New Heights
HONG KONG, March 29 /PRNewswire-Asia/ --
Financial Highlights For the year ended 31 December
(HK$ in million) 2009 2008 Change
Turnover 13,870 13,024 +6.5%
Gross profit 2,161 1,690
(Gross profit margin) (15.6%) (13.0%) +27.9%
Profit attributable to 1,745 1,138
shareholders (Net profit
margin) (12.6%) (8.7%) +53.4%
Diluted earnings per share HK$1.074 HK$0.736 +45.9%
Proposed final dividend per
share HK$0.15 HK$0.08 +87.5%
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 2009 (the "Year").
During the Year, the Group recorded a turnover of HK$13,870 million (2008: HK$13,024 million), representing a 6.5% growth over the same period last year. In spite of over 20% decrease in hog prices during the Year, the Group was able to significantly increase the sales volume of its products by leveraging on the competitive edge of its "Yurun" brand, as well as its optimized nation-wide production network, therefore boosted the stable growth of its business.
During the Year, the Group’s gross profit and net profit were HK$2,161 million (2008: HK$1,690 million) and HK$1,745 million (2008: HK$1,138 million) respectively, representing a considerable growth of 27.9% and 53.4% respectively as compared to that of 2008. The Group’s gross profit margin and net profit margin increased to 15.6% (2008: 13.0%) and 12.6% (2008: 8.7%) respectively. The increases were mainly attributable to the Group’s flexible strategies and strong market position. Under the highly volatile market conditions, by proactively adjusting the strategies of its two main business segments, as well as successful production planning, the Group was able to take advantage of its strong "Yurun" brand and pricing power to drive the growth of its overall gross margin. At the same time, the Group further realized economies of scale by enlarging its market share, and thus achieving further improvement in gross margins of its upstream and downstream businesses.
The Board of Directors of the Company recommended a final dividend of HK$0.15 per share for the Year (2008: HK$0.08). This final dividend together with the interim dividend of HK$0.15 per share (2008: HK$0.11), will make a total dividend of HK$0.30 (2008: HK$0.19) per share for the year ended 31 December 2009.
Mr. Zhu Yicai, Chairman of Yurun Food said, "Amid the challenging market conditions in 2009, the Group achieved remarkable results due to the experienced management team’s thorough understanding of the hog breeding cycles and the meat products market. The Group managed to overcome the challenge of fluctuating hog prices by adopting flexible strategies for its chilled meat and low temperature meat products ("LTMP") businesses, as well as utilizing its optimized nation-wide production network. Following the promulgation of guidelines by the Chinese Government to restructure China’s hog slaughtering industry in late 2009, which aims to accelerate industry consolidation and systematically increase the sales of chilled meat and small packaged pork products, the Group will be well positioned to further increase its market share, which will drive long-term business development and continue to enhance the "Yurun" brand. Looking forward, by leveraging on its established business model and sophisticated management team, the Group will continue to implement its long-term development strategies and further enhance its brand recognition and production network in order to achieve economies of scale, increase market share, and drive business growth to maximize value for our shareholders."
Business Review
The Group’s business is divided into downstream processed meat products and upstream chilled and frozen meat segments.
For the year ended 31 December
(HK$ in million) Turnover Change Percentage to Total Turnover
2009 2008 % 2009 2008
Downstream
Processed
Meat Products:
- LTMP 3,081 2,644 +16.5 % 93.7 % 89.8 %
- HTMP* 208 302 -31.3 % 6.3 % 10.2 %
- Segment Total 3,289 2,946 +11.6 % 100 % 100 %
Upstream Chilled
and Frozen Meat:
- Chilled Pork 9,421 8,130 +15.9 % 80.2 % 73.9 %
- Frozen Pork 2,325 2,877 -19.2 % 19.8 % 26.1 %
- Segment Total 11,746 11,008 +6.7 % 100 % 100 %
Inter-segment
Elimination (1,165) (930)
Total Revenue 13,870 13,024 +6.5 %
*HTMP is defined as high temperature meat product.
For the year ended 31 December
Gross Margin Change
2009 2008 Percentage Points
Downstream Processed Meat
Products, inter alia:
- LTMP 29.0 % 28.0 % +1.0ppt
- HTMP 21.4 % 16.8 % +4.6ppt
- Overall 28.6 % 26.9 % +1.7ppt
Upstream Chilled and Frozen
Meat, inter alia:
- Chilled Pork 11.5 % 9.6 % +1.9ppt
- Frozen Pork 6.3 % 4.3 % +2.0ppt
- Overall 10.4 % 8.2 % +2.2ppt
Sales and Distribution
As the Group’s high value-added and high-end products with relatively higher gross margins, LTMP and chilled meat continued to play an important role in contributing to the Group’s overall sales and profits.
Furthermore, benefited from Yurun Food’s strong brand and pricing power, the Group was able to sustain stable product prices and competitive advantages, leading to improved overall gross margin.
Research and Development and Production Capacity
The Group has always adhered to producing products of highest quality. We implemented stringent internal quality control over every production process ranging from procurement, production, and sales to logistics. In addition, the Group continued to expand its R&D team, focus on research and development of mid-to-high end products, develop products with market competitiveness and create new trend in food consumption so as to maintain its competitive advantage in the market and strengthening its leading position in the industry.
To enlarge its market share and capture the growing demand for Yurun Food’s products, the Group continued to increase its capacity through selective acquisitions, improvements in current production facilities and construction of new plants. As at 31 December 2009, the Group’s downstream meat processing business achieved an annual production capacity of 278,000 tons. The Group will continue to expand its capacity in the coming years in an orderly manner, targeting to increase market coverage, reduce bottlenecks and upgrade key production facilities. By the end of 2009, slaughtering capacity of the Group reached 25.55 million heads per year, representing an increase of 7.5 million heads as compared to that as at the end of 2008.
Consolidation Opportunities Under New Industry Policy
Following the gradual recovery of the global economy and continued improvement in business environment, as well as a series of favorable policies by the Chinese Government to stabilize hog prices and support the development of the hog slaughtering industry, the hog slaughtering and meat products industry is set to maintain its ongoing development.
The Chinese Government promulgated the "Guideline for National Hog Slaughtering Industry Development (2010-2015)" in late 2009. The plan aims to accelerate industry consolidation and systematically increase the sales percentage of chilled meat and small packaged pork products in China. 30% of the outdated manual and semi-automated slaughtering plants will be eliminated by 2013 and 50% by 2015. About 80% of slaughtering plants in major cities and developed regions that are below hygienic standards will be eliminated. Industry consolidation will optimize the market structure of meat products by increasing sales ratio of chilled pork over fresh pork. Sales ratio of small packaged meat in regions above county level are targeted to rise from the current 10% to 15%; and that of chilled pork from 10% to 20% by 2013. These ratios will reach to 20% and 30% respectively by 2015 in order to gradually encourage customers’ consumption of modernized meat products. Moreover, by 2015, no more than 4 licences will be issued in cities with a population of over 5 million, and no more than 2 licences in regional cities and 1 at county level. It is estimated that the total number of licences will significantly decrease from the current over 20,000.
Following the implementation of the guideline, as a leading enterprise in the hog slaughtering and meat products industry, the Group will further strengthen its advantages in production network, brand, distribution and food safety standards, which will become a strong driving force for future development of its core businesses of chilled meat and LTMP, allowing the Group to further expand its market share, and strengthening its leading status in the industry to ensure long-term business development. In future, Yurun Food will continue to implement its highly disciplined capacity expansion strategies, so as to capture the business opportunities arising from industry consolidation, increase its competitiveness and market share, thus fuelling business development and maximizing returns for shareholders.
For further details about the Group’s 2009 Annual Results Presentation, please kindly click: http://www.todayir.com/webcasting/yurun_09ar/index.php .
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 last 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
Email: ir@yurun.com.hk
Fax: +852-3927-3300
Elite Investor Relations Limited
(for and on behalf of China Yurun Food Group Limited)
Investor Relations
Ms Cindy Xin
Tel: +852-3183-0226
Fax: +852-2155-9165
Email: cindy.xin@elite-ir.com
Media Relations
Mr Bunny Lee
Tel: +852-3183-0282
Fax: +852-2155-9165
Email: bunny.lee@elite-ir.com
