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China Yurun Food Group Limited Financial Results of the First Half of 2007.



Net Profit Up 49.5% to RMB RMB Right Mouse Button
RMB Regional Management Board (USACE)
RMB Rolf Maier Bode (musician, band)
RMB Ren Min Bi (currency of People's Republic of China) 
 380 Million

HONG KONG Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov.  -- China Yurun Food Group Limited (HKEX: 1068):
[TABLE OMITTED]


China Yurun Food Group Limited ("Yurun Food" or "the Company", together with its subsidiaries, collectively "the Group"; HKEX: 1068), a leading meat products provider in China, announced its interim results today for the six months ended June June: see month.  30, 2007 (the "Period" or the "Review Period").

During the Review Period, the turnover of Yurun Food reached RMB 3.407 billion, a substantial increase of 63.7% over the same period of last year. Gross profit was RMB 506 million, an increase of 42.9%. Gross profit margin Gross profit margin

Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold.


gross profit margin

A measure calculated by dividing gross profit by net sales.
 decreased to 14.8% from 17.0% in the same period of last year, but rebounded from 14.1% in the second half of last year. Operating profit Operating profit (or loss)

Revenue from a firm's regular activities less costs and expenses and before income deductions.


operating profit

See operating income.
 was RMB 403 million, an increase of 58.9% over the same period of last year, an increase of 65.7% over the same period last year has been recorded after taking into account the operating profit of negative goodwill of RMB 353 million.

During the Review Period, the Company posted a net profit of RMB 380 million, an increase of 49.5% over the same period of last year after deducting the negative goodwill of RMB 330 million, an increase of 54.2% has been recorded over the same period last year. Diluted earnings per share diluted earnings per share

An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of
 were RMB 0.261 compared to RMB 0.175 in the first half of 2006. The Board of Directors has resolved to pay an interim dividend of HK$ 0.070 per share. The payout ratio Payout Ratio

The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share.

Notes:
The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend.
 is 26.7%.

Commenting on the first half results, Mr. Zhu Yicai, Chairman of Yurun Food, said, "In the first half of 2007, we faced a short-term Short-term

Any investments with a maturity of one year or less.


short-term

1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time.
 imbalance imbalance /im·bal·ance/ (im-bal´ans)
1. lack of balance, such as between two opposing muscles or between electrolytes in the body.

2. dysequilibrium (2).
 between domestic hog supply and demand. As a result, the national average domestic hog price jumped by 46% over the same period of last year. Despite these challenging conditions, the Group still achieved solid growth in its business by taking advantage of the strength of its brand and leading market position, its successful marketing strategy in the medium and high-end high-end
adj. Informal
1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment.

2.
 market segments, its extensive experience in management and operations, as well as flexible and solid capacity expansion strategies. Low temperature meat products (LTMP) and chilled chill  
n.
1. A moderate but penetrating coldness.

2. A sensation of coldness, often accompanied by shivering and pallor of the skin.

3.
 pork pork, flesh of swine prepared as food, one of the principal commodities of the meatpacking industry. Pork has long been a staple food in most of the world, although religious taboos have limited its use, especially among Jews and Muslims.  became the key drivers of this business expansion."

"The Group pursued its highly effective branding strategy in the first half of the year, in particular in the LTMP and chilled pork market. We experienced rapid growth in our core product lines, thanks to our nationwide network of production facilities, highly efficient supply chain management as well as sound and flexible marketing strategy. All these, ensured that the Group had the necessary pricing power Pricing Power

An economic term referring to the effect that a change in a firm's product price has on the quantity demanded of that product. Pricing power ties in with the "Price Elasticity of Demand.
 to deal with the increasing hog prices and hence further enhance its profitability," added Mr. Zhu.

Business Review

Upstream From the consumer to the provider. See downstream.

(networking) upstream - Fewer network hops away from a backbone or hub. For example, a small ISP that connects to the Internet through a larger ISP that has their own connection to the backbone is downstream from the larger
 Business

In the first half of 2007, the Group persisted in its market-oriented pricing strategy by adjusting upstream product prices accordingly when hog prices rose significantly. As a result, its upstream sales increased by 80.7% over the same period of last year to RMB 2.772 billion. Sales of chilled pork were RMB 1.682 billion, an increase of 85.7% over the same period of last year and accounting for 60.7% of upstream sales. Sales of frozen pork were RMB 1.09 billion, an increase of 73.5% over the same period of last year and accounting for 39.3% of upstream sales.

During the Period, the Group maintained a stable gross margin for its upstream businesses by strengthening sales efforts and implementing flexible sales strategy for chilled and frozen pork. The overall gross margin of the upstream business was 10.1%, a decrease of 1.4 percentage points from the same period of last year. The gross margin of the frozen pork business was 8.1%, an increase of 0.2 percentage points over the same period of last year. The gross margin of the chilled pork business was 11.5%, a decrease of 2.5 percentage points from the same period of last year.

Downstream From the provider to the customer. Downloading files and Web pages from the Internet is the downstream side. The upstream is from the customer to the provider (requesting a Web page, sending e-mail, etc.).  Business

In the downstream business, the Group stepped up its brand promotional efforts through China Central Television and various mobile media to increase the brand awareness of Yurun. At the same time, it launched high value-added val·ue-add·ed
adj.
Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution:
 new products, optimized its product mix and adjusted product prices to optimum levels. As a result, sales of the processed meat business experienced strong growth.

Downstream sales in the first half of 2007 were RMB 870 million, an increase of 31.8% over the corresponding period of last year. Sales from LTMP business generated RMB 761 million, up 36.8% over the corresponding period of last year and accounting for 87.5% of the Group's total downstream sales. Sales from HTMP business were RMB 109 million, up 4.9% over the corresponding period of last year and accounting for 12.5% of the Group's total downstream sales.

Despite the surge in hog price during the period, the gross profit margin of LTMP remained stable, mainly due to the Group's effective cost control on raw pork, increased selling prices of LTMP and enhanced sales of high margin and high value-added products. In the first half of 2007, overall gross profit margin for the downstream business was 25.9%, a decrease of 0.3 percentage points over the same period of the year. The gross profit margin of LTMP was 27.0% and the gross profit margin of high temperature meat products (HTMP) was 18.3%.

Other Operating Income Operating Income

The profit realized from a business' own operations.

Notes:
This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit.
 

Other operating income totaled RMB 118 million, an increase of 148.1% over the same period of last year. It mainly came from government subsidies and negative goodwill including RMB 58.48 million of government grants (first half of 2006: RMB 600,000) as an incentive to the Group's business development.

Upgrading of Production Facilities

In the upstream business, the Group spent RMB 228 million in the first half of the year on the acquisition of three hog slaughtering companies in Jiangxi Jiangxi (jyäng`sē`) or Kiangsi (kyăng`sē`, jyäng`–), province (1994 est. pop. 38,930,000), c.66,000 sq mi (170,940 sq km), SE China. Nanchang is the capital.  Province, Hunan Hunan (h`nän`) [south of the lake], province (1994 est. pop. 63,050,500), c.80,000 sq mi (207,254 sq km), S central China, S of Dongting lake. Changsha is the capital.  Province and Sichuan Province to increase the annual aggregate slaughtering capacity by 1.5 million heads. As a result, the Group's market position in central and south-western China was further strengthened. In addition, the Group's new slaughtering facility in Harbin commenced operation during the Period, further expanding the Group's production capacity in north-eastern China. As at June 30, 2007, the Group's annual hog slaughtering capacity reached 12.05 million heads, an increase of 36% over the last corresponding period.

In the downstream business, as production capacity in Nanjing and Xinjiang Province continued to expand and the new plant in Harbin commenced operation, the Group's downstream production capacity grew significantly in the Period. As at June 30, 2007, the Group's downstream production capacity reached 187,000 tonnes, up by 11.3% over the last corresponding period. Furthermore, the processing plants in Maanshan and Shenyang are under construction and are expected to be completed by the end of this year, adding an additional production capacity of 30,000 tonnes. This downstream capacity expansion not only further improved the Group's market coverage in eastern, north-eastern and northern China, but also established a stronger infrastructure for the launch of new products and the sustainable development Sustainable development is a socio-ecological process characterized by the fulfilment of human needs while maintaining the quality of the natural environment indefinitely. The linkage between environment and development was globally recognized in 1980, when the International Union  of the downstream business of the Group.

Sales and Distribution

During the Period, the Group continued to leverage its sales model of direct sales supplemented with third-party distribution. By reinforcing its cooperation with supermarkets and chain stores, the Group enhanced its sales through these supermarkets. Meanwhile, the Group further strengthened the cooperation with high-end hotels and catering chains so as to enhance its profitability by increasing the sales of products with high margin and high added-value.

In the first half of the year, supermarkets accounted for 39.1% and 54.5% of the Group's upstream and downstream sales respectively, up by 3.1 and 8.3 percentage points over the same period of last year. Sales to high-end hotels increased by 44.3% over the corresponding period of last year, representing 10.1% of the Group's downstream sales (the corresponding period in 2006: 9.1%). Sales of upstream products to catering chains accounted for 9% of the Group's upstream business sales (the corresponding period in 2006: 7.9%).

Financial Analysis

During the Review Period, the operating expenses Operating expenses

The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted.
 of the Group were RMB 221 million, an increase of 49.2% over the same period of last year. It was primarily attributable to the Group's increased advertising expenses spent on mainstream and mobile media channels, increased administrative expenses caused by higher transportation cost driven by sales volume growth and increased management expenses due to the start of an employees' option scheme at the end of last year. Operating expenses represented 6.5% of the Company's turnover, down by 0.6 percentage points over the same period of last year.

The Company had a net financing income of RMB 2.73 million in the Period. As at June 30, 2007, the cash balance of the Company was RMB 778 million, a decrease of RMB 66 million over the end of last year, as the Group paid for strategic acquisitions and investments in production facilities.

As at June 30, 2007, the Company's total assets were RMB 3.584 billion, an increase of 13.7% over the end of last year. The Company's gearing ratio Gearing Ratio

A general term describing a financial ratio that compares some form of owner's equity (or capital) to borrowed funds. Gearing is a measure of financial leverage, demonstrating the degree to which a firm's activities are funded by owner's funds versus creditor's funds.
 was 10.1%, an increase of 1.5 percentage points from 8.6% at the end of last year.

Prospects

Looking into the future, Mr. Zhu Yicai, Chairman of Yurun Food, said, "We will leverage the market opportunities from the upgrading of consumer mix in large and medium cities in China China is a geographical area encompassing multiple territories, under two states. You may be looking for:
  • List of cities in the People's Republic of China
  • List of cities and towns in Hong Kong
 to strengthen our market position. We will take advantage of Yurun's established brand image as a 'healthy, quality, tasty tast·y  
adj. tast·i·er, tast·i·est
1. Having a pleasing flavor; savory.

2. Having or showing good taste; tasteful.



tast
 and high-end' through advertising in mainstream media to achieve rapid sales growth of LTMP and chilled pork products over the next 3-5 years.

The Group will further increase its upstream and downstream capacity through acquisitions, and green field and brown field projects, building a solid foundation to meet the increasing market demand for its products. It will further strengthen its research and development in high value-added products. Finally, it will strengthen its marketing efforts in the middle-end and high-end markets and leverage its market-oriented pricing mechanism to ensure generally stable gross margins."

About Yurun Food

China Yurun Food Group Limited is one of the leading meat product suppliers in China. The Company offers a wide range of raw pork and processed meat products. By combining advanced production equipment and processing technologies with proprietary recipes, the Company has grown rapidly by successfully developing an array of processed meat products under the flagship brands of "Yurun", "Furun", "Wangrun" and "Popular Meat Packing" that specifically cater to Chinese consumer tastes. The Company was listed on the Hong Kong Stock Exchange The Hong Kong Stock Exchange (Traditional Chinese: 香港交易所, also 港交所; abbreviated as HKEX; HKSE: 0388 ) is the stock exchange of Hong Kong.  on October 3, 2005.

Disclaimer (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the  

This press release includes "forward-looking statements forward-looking statement

A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections.
". All statements, other than statements of historical facts, that address activities, events or developments that Yurun Food expects or anticipates will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. Yurun Food's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the level of demand for the products, competitiveness, changes in the regulatory policies and other risks and factors beyond Yurun Food's control. In addition, Yurun Food makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.
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Publication:Business Wire
Geographic Code:9CHIN
Date:Aug 29, 2007
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