China Yurun Food Group Limited Announces its Interim Results for the Six Months Ended 30 June 2010

By China Yurun Food Group Limited, PRNE
Monday, August 23, 2010

Solid Business Growth Driven by Forward Looking Capacity Planning

HONG KONG, August 24, 2010 - Financial Highlights

                                            For the six months ended 30 June
                                                             (HK$ in million)
                                          2010         2009        Change (%)

    Turnover                             8,693        5,834           +49.0%
    Gross profit                         1,345          976
     (Gross profit margin)              (15.5%)      (16.7%)          +37.8%
    Profit attributable to
     shareholders                        1,309          841
     (Net profit margin)                (15.1%)      (14.4%)          +55.7%
    Diluted earnings per share        HK$0.743     HK$0.545           +36.3%
    Proposed interim dividend
     per share                         HK$0.20      HK$0.15           +33.3%

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, announced
today its interim results for the six months ended 30 June 2010 (the

During the Period, the Group recorded HK$8,693 million (1H2009: HK$5,834
) in turnover, representing a 49% increase over the same period last
year. The increase in turnover was mainly attributable to the Group's
anticipated production capacity expansion plans and brand building over the
past years, as well as the prosperity of the Chinese consumer market during
the Period, which further accelerated demand for branded quality meat
products. As a result, the Group's overall business recorded robust growth.

The Group's gross profit and net profit reached HK$1,345 million (1H2009:
HK$976 million) and HK$1,309 million (1H2009: HK$841 million) respectively
during the Period, representing an increase of 37.8% and 55.7% respectively.
The Group's gross profit margin decreased 1.2 percentage points to 15.5%, as
compared to 16.7% in the same period last year, and net profit margin
increased 0.7 percentage point to 15.1% as compared to 14.4% in the same
period last year. The slight decrease in gross margin was mainly attributable
to the increase in the proportion of sales from the upstream segment, which
has a relatively lower profit margin.

The board of directors of the Company has resolved to declare an interim
dividend of HK$0.20 per share for the Period (1H2009: HK$0.15).

Mr. Zhu Yicai, Chairman of Yurun Food, said, "In the first half of 2010,
domestic consumption in China continued to be promising, which provided great
momentum to the development of the Chinese meat product market. In addition,
with our nationwide capacity expansion and market strategy in recent years,
the Group maintained a sustainable business growth. Moreover, to ensure the
systematic development of the hog slaughtering industry in China, the Central
Government has gradually implemented a series of favourable policies, with a
purpose of consolidating the industry by eliminating outdated hog
slaughtering capacity which are below safety and hygiene standards in the
coming five years, leading to a systematic increase in sales proportion of
chilled and small packaged pork products in the market. Given the rising
awareness of the Central Government and consumers to food safety, the
regulatory and operational environment is favourable to the sustainable
development of Yurun Food. Opportunities arising from industry consolidation
continued to further promote the Group's sales and profitability of upstream
branded chilled pork and downstream low temperature meat products ("LTMP").
Looking forward, the Group will continue to realize its strategic production
capacity expansion plans, actively expand its distribution channels, and
capture the tremendous business opportunities brought about by industry
consolidation in order to continuously enhance the Group's market share and
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)
                                                               Proportion to
                                     Turnover    Change       Total Turnover
                                2010     2009         %       2010      2009

    Upstream Chilled and
     Frozen Meat, inter
        - Chilled Pork         5,930    3,926    +51.1%      78.9%     82.0%
        - Frozen Pork          1,590      863    +84.2%      21.1%     18.0%
        - Segment Total        7,520    4,789    +57.0%       100%      100%
    Downstream Processed
     Meat Products,
     inter alia:
        - LTMP                 1,747    1,536    +13.7%      93.8%     94.5%
        - HTMP*                  116       90    +28.0%       6.2%      5.5%
        - Segment Total        1,863    1,626    +14.5%       100%      100%
     Elimination                (690)    (581)       --         --        --
    Total Revenue              8,693    5,834    +49.0%         --        --

    *HTMP is defined as high temperature meat products.

                                            For the six months ended 30 June
                                          Gross Margin                Change
                                       2010       2009     Percentage Points

    Upstream Chilled
     and Frozen Meat,
     inter alia:
        - Chilled Pork                11.7%      11.9%              -0.2 ppt
        - Frozen Pork                  6.6%       6.5%              +0.1 ppt
        - Overall                     10.6%      10.9%              -0.3 ppt
    Downstream Processed Meat
     Products, inter alia:
        - LTMP                        29.9%      28.4%              +1.5 ppt
        - HTMP                        21.0%      20.5%              +0.5 ppt
        - Overall                     29.4%      28.0%              +1.4 ppt

Production Capacity

As at 30 June 2010, slaughtering capacity of the Group was 28.55 million
heads per year, representing an increase of 3 million heads as compared to
25.55 million heads at the end of 2009, while the Group's annual capacity of
downstream meat processing was 283,000 tons, representing an increase of
5,000 tons as compared to that at the end of 2009. The Group will continue to
systematically expand in the coming years, with focus on increasing market
coverage, reducing bottlenecks and upgrading key production facilities.

Product Quality and R&D

Strict internal quality control procedures of international standards
have been applied to processes ranging from procurement, production, and
sales to logistics. Meanwhile, the Group continued to expand its R&D team and
strengthen its research efforts, focusing on mid-to-high-end products and new
competitive products, as well as to lead the trends of meat product
consumption in order to gain competitive advantages.

Consolidation Opportunities Under New Industry Policy

With the stable and continuous rapid growth of the Chinese economy and
broadening urbanization in China, the middle class are increasingly
purchasing meat products from modern supermarkets as compared to traditional
wet markets to ensure quality. Meanwhile, demand for mid-to-high-end branded
meat products has been increasing correspondingly. The Group believes that,
against the backdrop of abundant hog supply, the growing demand for meat
products will continue to support the steady expansion of its overall

Furthermore, to ensure the systematic development of the hog slaughtering
industry in China, the Central Government has gradually implemented a series
of favorable regulations, such as the "Administrative Provision for Live Pig
Slaughtering", the "Food Safety Law" and the "Guideline For National Hog
Slaughtering Industry Development (2010-2015)" (the "Guideline"). The
Guideline, which was published in late 2009, aims to expand the scale of
industry consolidation in the coming five years, leading to a systematic
increase in the sales proportion of chilled and small packaged pork products
in the market. Specifically, 30% of the outdated manual and semi-automated
slaughtering plants will be eliminated by 2013 and further to 50% by 2015.
Among them, about 80% of slaughtering plants in major cities and developed
regions which are below hygienic standards will be eliminated. The mix of
pork products will be further improved through expanding the scale of
industry consolidation, which will change the current market position that
supply of fresh meat surpasses that of chilled meat, gradually leading to
increasing demand from consumers for modern meat products. The Guideline will
be propitious for the future development of chilled meat and LTMP, the two
core businesses of the Group, driving further development of Yurun Food.

Benefiting from the favourable market and regulatory environment,
supported by a dynamic management team with proven track record, the Group
aims to fully leverage the opportunity arising from the industry
consolidation and further strengthen our advantages in brand recognition,
nationwide production and marketing network.

About China Yurun Food Group Limited (HKEx 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. Furthermore, with the support of our products' high
hygienic and safety standards and stringent internal quality control
procedures, Yurun Food will aim to continue to expand its market share and
further strengthen its leading market position as a result of the
implementation of industry consolidation and food safety laws by the Chinese
Government. Yurun Food was included in the MSCI Global Standard Index (MSCI
China Index) on 29 August 2008, which is an important recognition of Yurun
Food as one of the leading companies in the meat processing industry by the
investment community.

Company website:

    For further information, please contact:

    China Yurun Food Group Limited
     Fax: +852-3927-3300

    Elite Investor Relations Limited
    Investor Relations:
     Ms Cindy Xin
     Tel: +852-3183-0226
     Fax: +852-2155-9165

    Media Relations:
     Mr Bunny Lee
     Tel: +852-3183-0282
     Fax: +852-2155-9165

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

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