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

HONG KONG - Healthy Business Growth Amid Economic Downturn

- Strengthen Market Leadership with Emphases on Quality Control

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: 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

China Yurun Food Group Limited, fax +852-3927-3300, ir at yurun.com.hk ; Elite Investor Relations Limited, Investor Relations, Ms Gloria Chan, +852-3183-0227, fax, +852-2155-9165, gloria.chan at elite-ir.com ; Media Relations, Mr. Bunny Lee, +852-3183-0282, fax, +852-2155-9165, bunny.lee at elite-ir.com, for China Yurun Food Group Limited