China Green (Holdings) Limited Announces 2006 Annual Results; Net Profit Surges 47.9% as a Result of Developing New Markets.

HONG KONG -- China Green (Holdings) Limited (SEHK: 0904):

Summary:  Turnover Increased 45.9% to RMB 686,602,000
          Gross Profit Increased 39.2% to RMB 354,416,000
          Operating Profit Increased 26.2% to RMB 262,266,000
          Profits Attributable to Shareholders Increased 47.9% to
          RMB 271,275,000
          Earnings Per Share Amounted to RMB 37 cents
          Proposed final dividend of HK$ 0.062

China Green (Holdings) Limited (the "Company"; HKSE code 0904), China's leading integrated agricultural enterprise in green foods and fresh produce with principal businesses comprising cultivation, fresh-keeping, processing, export and domestic sales of fresh produce today announced its results for the 2006 fiscal year ended April 30, 2006. The Company's net profit surged 47.9% to RMB 271,275,000.

For the year under review, China Green focused on the development of overseas and local markets, and concentrated its efforts on the development and promotion of new products, contributing to an increase in annual turnover of 45.9%, to RMB 686,602,000 compared to the previous year. Gross profit was RMB 354,416,000, up by 39.2% over last year, with gross profit margin at 51.4%. Retail and wholesale expenses along with administrative costs comprised 9.5% and 5.7% of the Group's annual turnover, respectively. Earnings per share stood at RMB 271, 275,000, an increase of 47.9% over the last corresponding period, while net profit margin was 39.5%, rising 0.5 percentage points.

Commenting on the encouraging results, the Chairman of China Green Sun Shao Feng said, "Looking back on the past year, China Green's business saw. rapid development. To sum up, we further consolidated and defined our targets for the Group's future growth. Utilizing the Company's cultivation, processing and logistics capacities as an integrated platform, with strict adherence to the Group's obligation to 'ensure the freshness and greenness of its products', China Green will strive to become the premier green foods brand with a comprehensive value chain.

"In terms of business development, we will continue to develop our existing markets as the Group has successfully enhanced the export rate of its existing markets. Meanwhile, the Group has also achieved encouraging results in the cultivation of new markets. At the same time, we have begun retail operations in the Mainland market in stages, pushing forward China Green's development strategy of combining internal sales and external trade. "

Business Categories

Fresh Produce

In 2006, the turnover for fresh produce products amounted to RMB298 million, representing 43.4% of the Group's income. The sale of fresh produce has become a steady source of income for the Company after proactive expansion efforts, helping China Green consolidate its financial position. Among the Group's array of fresh produce products, the product achieving the best sales volume was naganegi, broccoli and onion, with sales revenue at RMB98 million, representing 33% of turnover.

Processed Products

During the year, turnover of the Group's processed products was RMB 389 million, which was accounted for 56.6% of the Group's total revenue. The products included in this category was the water boiled product, frozen product, pickled product and canned product series, beverage series, rice product and rice four series.

Water boiled products was another growth item, accounted for about 15% of total turnover. Among those, water boiled radish achieved the best sales, with turnover amounting to RMB38 million. Quick frozen food was another growth driver, with turnover of RMB17.9 million.

Pickled Products

Turnover for the Group's pickled products amounted to RMB 83.09 million, representing approximately 12.1% of the Group's income. Among the Group's preserved products, pickled plum and pickled mushroom achieved the best sales, with turnover at RMB26.97 million and 34.62 million.

Beverage Products

In 2006, the Group's turnover for vegetable and fruit juice products amounted to RMB70 million, representing a significant growth of RMB 63.6 million over the previous year, while its contribution to the Group's income increased from last years' 1.3% to about 10%. This resulted from the Group's focused sales strategies, with concentrated sales of beverage products in specific areas. Among the Group's beverage products, corn milk achieved the best sales volume in the period under review, standing at RMB55.7 million.

Rice Products

The Group's rice products also recorded considerable growth in the period under review. In 2006, the turnover of rice products amounted to RMB81 million, representing 11.8% of the Group's income.

Rice Flour Products

The Company began to sell rice flour products in the period under review, and achieved encouraging results. In 2006, the turnover of rice flour amounted to RMB30 million, representing 4.4% of the Group's income.

Integrated Supply Chain

The Group has successfully developed its own green products production base with value-added platforms including processing and fresh-keeping capacities, attaining international standards. Complementing the Group's centralized brand promotion efforts, China Green's green food supply chain is under continual consolidation.

Cultivation and Production Base

The Group has a total of 44, 000 Mu of cultivation bases,, providing the Group with a raw material supply chain from the country's north to its southern regions, thus, it was enabled the Gorup to take full control of its supply chain of green food.

Furthermore, as the construction of the facilities in Hebei Wenchuen, Jiangxi Fengxin, and Fujian Zhongpu were completed and were deployed to production during the year under review, the processing capacity of the Group was further increased to 360,000 tonnes, reflecting that the Group attained satisfactory progress in both the scale of cultivation and the scope of the business.

Product Variety

The Group will continue to upgrade its product lines. Besides the products mentioned above, China Green will strive to enhance its research and development capability to create new products. Following the completion of the new frozen storage production lines under Zhonglu Zhangbu / Zhonglu Hebei, the export rate of frozen products is expected to surge in the next fiscal year. Furthermore, through market analysis, Zhonglu Jiangxi under the Group has defined a clear development strategy for non-fried foods. For beverage products, apart from the existing product line of corn milk, the Group's subsidiary Zhonglu Quanzhou has developed new product lines including oat milk and purple glutinous rice to meet the market demand for cereal drinks.

Newly Developed Products

The Group established its research and development department to better answer market needs. To step up the development of new products, the Company signed a cooperation agreement with the bio-engineering faculty of Jimei University to cooperate in case study-based product development, buying of patents and professional training and enhancement of human resources while maintaining close ties with the food research department at Fujian Agriculture University Group's various subsidiaries have initiated cooperative efforts or opportunities with tertiary institutions and professional bodies according to local resources to open new product channels and enrich product variety.

Brand Management

In the past year, China Green has begun to integrate its brand positioning efforts. Based on the core China Green logo, the Group has developed a number of new brand names. At the same time, the Group focused on the promotion of its new brands, with promotion campaigns targeting the Xiamen and Jiangxi areas, via advertisements on public transport vehicles, road signs and television. Additionally, the Group seized opportunities presented by the Fourth Xiamen Food Expo and the Fujian Province Commodities Trade Fair to introduce its products to consumers, generating comprehensive coverage from local media.

Furthermore, in order to enhance the corporate image as well as the corporate positioning in the retail market, the Group appointed local and foreign consulting bodies.

Quality Maintenance

In 2005, Zhonglu Huian maintained its status as the 'country-level leading agricultural enterprise'. The Group was once again awarded the ISO 90001:2000 and the HACCP certifications for safe organic foods as well as green foods. Meanwhile, the Group's newly established subsidiaries have begun their applications for various quality certificates. Among them, Zhonglu Hebei has been awarded the HACCP certificate, and the beverage products of Zhonglu Quanzhou have also met the requirements for the QS certification. Going forward, China Green will continue to implement international standards of food hygiene and quality control for its products.

Future Development Strategies

Looking ahead, the Group is confident in its future development and has set up comprehensive business strategies to position China Green as a top enterprise in the green food industry. The Group's objectives are as follow:

The Most Standardized Green Agricultural Plantation Model in the PRC

China Green Group took the lead to introduce advanced cultivation technology within and outside the PRC, implemented an agricultural and production industrialized management operating model and set the standard for modern agriculture. Such developments include implementing strategic operating policies to align production with sales, adopting a different plantation supply model for Northern and Southern China, ensuring stable product supply as well as formulating China Green's standardized plantation product manual. In addition, China Green implemented comprehensive green controls in its plantations, from seed selection, soil testing, establishment of irrigation facilities, training of plantation management team to the application of pesticides, in order to efficiently ensure food safety and continue to supply green food to consumers.

The Largest Cultivation and Processing Platform for Green Food

To cater to the sustained rise in demand from around the world, the Group is set to enhance processing capacity and expand processing categories as its major strategy. The Group is currently planning to construct a second phase of processing facilities in Zhangpu, Fujian Province, and Fengxin, Jiangxi Province. The new facilities will be equipped with various processing production chains to increase the annual processing volume of the Group to a total of 400,000 tons. The plant expansion will not only enhance the Group's processing capacity and economies of scale but will also allow the Group to efficiently utilize its all-altitude plantation base. Apart from the application of advanced technologies to enhance its processing business, the Group will further use any surplus fruits and vegetables from the fresh produce delivery business and process them into value-added products. In the long run, the new complex is expected to enhance the Group's profitability significantly.

China Green's No.1 Fast Consumer Foods

China's GDP and urbanization continue to grow, further increasing demand for China Green's food. In order to expand its market share of the green consumer food market, the Group will further explore more varieties of its domestic brands and develop various green food products aimed at increasing brand awareness and popularity for the Group's green food amongst the PRC consumers and solidify consumers' confidence in the Group's products.

The PRC's Most Comprehensive Green Fresh Logistics and Frozen Food Supply Chain

In light of the rapid changes in the spending patterns PRC consumers, the Group will further develop its downstream businesses in the coming year. On this front, the Group is planning to establish a green food logistics and delivery centre in Shanghai to focus on the purchasing and distribution of green food within and outside the PRC. The construction of this centre will not only enhance the Group's distribution capacity but will also strengthen its upstream businesses and allow the Group to efficiently utilize its own cultivation and processing platforms to achieve its goal of becoming a global vertically-integrated supply chain supplier.

To sum up the year under review, Chairman Sun said, "Looking ahead, the Group will face an increasing number of opportunities. Consumers are becoming increasingly aware of heath issues and we anticipate that demand for health foods and green foods in China as well as the world at large will continue to rise. As China Green's brand value and awareness continues to increase, the Group will further strengthen and assume a leading status in China's green food industry. "

About China Green:

China Green was founded in 1998 and listed on the SEHK on 13 January 2004. Its principal business is the production and supply of safe crop-compliant vegetables and fruits, including fresh produce, processed products, pickled products, canned food, beverages, rice and rice flour. The Group is a well established agricultural grower and processor in the PRC having adopted advanced cultivation methods and well organized industrial management in production. China Green has leased 30 cultivation bases with a total area of approximately 44,000 MU and operated production plants strategically located in the Fujian, Zhejiang, Hubei, Hebei and Jiangxi provinces in China. In FY2006, export sales contributed over 50% of total revenue with Japan as a major market. China Green has been recognized as a State Level Leading Agriculture Enterprise since October 2004.