China Yurun Food Group Limited Announces Its Interim Results For The Six Months Ended 30 June 2009

By Prne, Gaea News Network
Tuesday, September 8, 2009


- Significant margin growth a result of foresight and strategic planning

- Optimization of production to capture opportunities arising from economic recovery

For the six months ended 30 June Financial Highlights (HK$ in million) 2009 2008 Change (%) Turnover 5,834 6,043 -3.5% Gross profit 976 821 +18.9% (Gross profit margin) (16.7%) (13.6%) Profit attributable to shareholders 841 615* +36.9% (Net profit margin) (14.4%) (10.2%) Diluted earnings per share HK$0.545 HK$0.398* +36.9% Proposed interim dividend per share HK$0.150 HK$0.110 +36.4% * Revised based on 2008 FY audited report

China Yurun Food Group Limited (”Yurun Food” or the “Company”, and together with its subsidiaries, the “Group” (SEHK: 1068), a leading vertically-integrated meat-product processor and supplier in China, announced today its interim results for the six months ended 30 June 2009 (the “Period”).

During the Period, the Group recorded HK$5,834 million (1H2008: HK$6,043 million) in turnover, representing a 3.5% decrease over the same period last year. The prices of upstream chilled pork and frozen pork were determined according to market prices of live hogs. In the face of significant price decrease of live hogs, the Group was able to increase its sales volume by 35.1% through its well-established sales network which has, to a large extent, offset the adverse impact of market price fluctuations.

During the Period, the Group’s gross profit and net profit were HK$976 million (1H2008: HK$821 million) and HK$841 million (1H2008: HK$615 million) respectively, representing an increase of 18.9% and 36.9% respectively. The Group’s gross profit margin and net profit margin increased significantly to 16.7% (1H2008: 13.6%) and 14.4% (1H2008: 10.2%) respectively. The increase in gross margin was largely achieved due to a strong underlying foundation built by the Group. In the past few years, based on its foresight and deep understanding of the pricing trends and cycles of live hogs, the Group has prudently expanded its capacity and implemented strategic policies. As a result, it is now reaping the benefits of economies of scale, enhanced capacity utilization, and significant reduction in unit cost. Furthermore, sales of relatively higher margin LTMP (Low Temperature Meat Product) and chilled meat products during the Period were proportionally higher, aiding to lift the overall gross margin.

The board of directors of the Company has resolved to declare an interim dividend of HK$0.150 per share for the Period. (1H2008: HK$0.110).

Mr. Zhu Yicai, Chairman of Yurun Food, said, “Despite the challenging economic environment, we are pleased to announce our satisfactory 2009 interim results. Leveraging on its stringent quality control systems, strong brand recognition and successful strategic planning, the Group’s core business was not affected by the H1N1 influenza during the Period; hog slaughtering volume increased by 35.6% as compared to the same period last year. Furthermore, the fluctuation of hog price in the first half of the year affected the Group’s total turnover, but profit maintained satisfactory growth as a result of economies of scale, prudent live hog procurement and flexible inventory management. Looking forward, in view of the supportive policies implemented by the central government to consolidate the industry, Yurun Food, as a leading enterprise in the meat products industry will continue to increase market share, and thereby strengthen market leadership through prudent capacity expansion. Given the economic recovery and rebounding hog price, the Group is confident that its business will maintain steady growth in order to maximize shareholders’ returns.”

Business Review

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

For the six months ended 30 June (HK$ in million) Revenue Change Proportion to Total Revenue 2009 2008 % 2009 2008 Downstream Processed Meat Products, inter alia: - LTMP 1,536 1,273 +20.6% 94.5% 90.6% - HTMP* 90 132 -31.7% 5.5% 9.4% - Segment Total 1,626 1,405 +15.7% 100% 100% Upstream Chilled and Frozen Meat, inter alia: - Chilled Pork 3,926 3,728 +5.3% 82.0% 72.4% - Frozen Pork 863 1,425 -39.4% 18.0% 27.6% - Segment Total 4,789 5,153 -7.1% 100% 100% Inter-segment Elimination (581) (515) — – — Total Revenue 5,834 6,043 -3.5% — – For the six months ended 30 June Gross Margin Change 2009 2008 Percentage Points Downstream Processed Meat Products, inter alia: - LTMP 28.4% 27.5% +0.9 ppt - HTMP* 20.5% 18.5% +2.0 ppt - Overall 28.0% 26.7% +1.3 ppt Upstream Chilled and Frozen Meat, inter alia: - Chilled Pork 11.9% 9.5% +2.4 ppt - Frozen Pork 6.5% 6.4% +0.1 ppt - Overall 10.9% 8.6% +2.3 ppt *High Temperature Meat Product

During the Period, despite the competitive environment, the Group achieved satisfactory growth in its downstream business due to strong brand recognition, marketing promotion, optimized product mix and the launch of new products with higher profit margins. With respect to its upstream business, the Group relieved the pressure on selling price brought by the lowered hog price through increasing slaughtering volume significantly and proportion of sales of chilled pork with higher margins. Therefore, the adverse impact of hog price fluctuation was minimized.

Production Capacity

During the Period, the Group acquired several slaughtering plants. One of the slaughtering plants has commenced trial production in May 2009 and other plants will commence production in the second half of the year and next year, which lays a solid foundation for sustaining growth in production capacity. As at 30 June 2009, slaughtering capacity of the Group reached 19.3 million heads per year, representing an increase of 1.25 million heads as compared to that as at 31 December 2008.

Significant Subsequent Events: Issuance of shares

The Company issued 130 million new ordinary shares at a price of HK$13.23 per share in late July, 2009. The net proceeds was HK$1.675 billion and will be used for capacity expansion in order to capture the business opportunities offered by the sufficient hog supply to cope with the market demand and the industry consolidation. The Group’s net debt/total equity ratio will be improved significantly and net cash position will be restored upon the issuance of new ordinary shares.


Given the overall economic outlook seems to be promising for the second half of 2009, it is expected that with a continued abundant supply of hogs, the Group is in a strong position to steadily expand its business operations. Meanwhile, given the expectation that hog price has reached a bottom and will rebound in the second half of 2009, the Group plans to expand its capacity in order to capture the business opportunities offered by the increasing hog price. Besides, the Group will strive to capture business opportunities offered by industry consolidation and strengthen its upstream and downstream businesses.

Looking forward, the Group will continue to ensure the finest quality products by monitoring the development of the H1N1 influenza and maintaining stringent quality control systems. The Group will also strive to capture the business opportunities in the market, continue to enhance its brand competitiveness, expand market share, accelerate its business development and maximize shareholders’ returns by leveraging on the Group’s strong brand recognition, superior corporate image, strategic sales and distribution channels, successful capacity expansion plan, seasoned management team and strong government support.

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:

For further information, please contact: China Yurun Food Group Limited Email: Fax: +852-3927-3300 Elite Investor Relations Limited Investor Relations: Ms Cindy Xin Tel: +852-3183-0226 Fax: +852-2155-9165 Email: Media Relations: Mr Bunny Lee Tel: +852-3183-0282 Fax: +852-2155-9165 Email:

Source: China Yurun Food Group Limited

China Yurun Food Group Limited, fax, +852-3927-3300, ir at ; Elite Investor Relations Limited, Investor Relations, Ms Cindy Xin, +852-3183-0226, fax, +852-2155-9165, at; Media Relations, Mr. Bunny Lee, +852-3183-0282, fax, +852-2155-9165, bunny.lee at, for China Yurun Food Group Limited

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