For the year ended 31 December Financial Highlights (HK$ in million) 2007 2006 Change(%) Turnover 8,635 4,621 +86.9% Gross profit 1,220 711 +71.6% Profit attributable to shareholders 859 481 +78.7% Diluted earnings per share HK$0.582 HK$0.331 +75.8% Proposed final dividend per HK$0.080 HK$0.042 +90.5% 2007 2006 -- Gross profit margin 14.1% 15.4% -- Net profit margin 10.0% 10.4% --
During the Year, Yurun''s turnover amounted to HK$8,635 million (2006: HK$4,621 million), representing a significant increase of 86.9% as compared to last year. The chilled meat and low temperature meat product ("LTMP") business remained the main growth driver of the Group''s overall revenue in 2007.
During the Year, the Group''s gross profit and net profit amounted to HK$1,220 million (2006: HK$711 million) and HK$859 million (2006: HK$481 million), respectively, representing significant growth of 71.6% and 78.7%, respectively, over 2006. Despite the challenging market conditions of rising hog prices, the Group''s gross profit margin and net profit margin have remained stable at 14.1% (2006: 15.4%) and 10.0% (2006: 10.4%), respectively. The board of directors of the Group has proposed a final dividend of HK$0.080 per share for 2007 (2006: HK$0.042), together with the 2007 interim dividend paid, which amounted to HK$0.070 per share (2006: HK$0.042), total dividend for 2007 amounted to HK$0.150 per share (2006: HK$0.084).
Mr. Zhu Yicai, Chairman of Yurun, said, "We are pleased to announce our remarkable 2007 annual results despite the challenging market conditions of surging hog price. During the Year, we have boosted up the recognition of our brand name and focused on mid to high-end market segments. Through economies of scale, selective capacity expansion, strong R&D and nimble pricing strategy, we have achieved robust turnover growth. Looking ahead, we will focus on brand-building, diversifying distribution channels and penetrating in mid to high-end markets to achieve higher profit margins. Together with the pork market consolidation which is favourable to large-scale production corporation, we are confident that, going onward, Yurun will be able to maximise our shareholders'' returns."
Information on products segments
The Group''s business is divided into the segments of downstream processed meat products and upstream chilled and frozen meat.
For the year ended 31 December (HK$ in million) Revenue Proportion to (Gross Profit Margin) Change Total Revenue 2007 2006 % 2007 2006 Downstream Processed Meat Products, inter alia: -- LTMP 1,753(28.4%) 1,159(26.1%) +51.2% 86.4% 83.8% -- HTMP 277(16.7%) 225(19.3%) +23.2% 13.6% 16.2% -- Segment Total 2,030(26.8%) 1,384(25.0%) +46.7% 100% 100% Upstream Chilled and Frozen Meat, inter alia: -- Chilled Pork 4,677(10.7%) 2,083(12.4%) +124.6% 63.1% 58.6% -- Frozen Pork 2,736(6.6%) 1,469(7.5%) +86.3% 36.9% 41.4% -- Segment Total 7,413(9.2%) 3,552(10.3%) +108.8% 100% 100% Inter-segment Elimination (808) (315) N/A -- -- Total Revenue 8,635 4,621 +86.9% -- --
The increase in the gross profit margins for the downstream business during the Year was mainly attributable to effective inventory management, cost control, increase in LTMP selling price, as well as increased sales of high-margin products. The Group sustained a stable gross profit margin for the upstream business segment by leveraging on our well-established brand name, economies of scale, focusing on mid to high-end markets and nimble pricing strategies.
Production Facilities and Production Capacity
In the downstream segment, the Group has broadened its geographic market coverage, reduced bottlenecks and upgraded production facilities. Annual production capacity of the meat processing business reached 218,000 tons at the end of 2007, representing an increase of 50,000 tons from the end of 2006. The utilization rate of this business segment has reached 62% in 2007 from last year''s 57%.
During the Year, the Group expanded its upstream capacities for chilled and frozen meat production. In 2007, the Group acquired six factories in Jiangxi, Hunan and Sichuan, Hubei and Jilin. By the end of 2007, the Group''s annual slaughtering capacity reached 14 million heads, representing an increase of 3.85 million heads over 2006. The utilisation rate of this segment decreased moderately to 57% in 2007 from last year''s 66% amid temporary low hog supplies.
Sales and Distribution
To enhance the profitability, apart from developing products with high profit margin and enriching product mix, the Group leveraged its media campaign on CCTV and mobile media to further strengthen Yurun''s brand name in target markets, contributing to the remarkable revenue growth subsequently.
To enhance its distribution channels, the Group has focused on direct sales supplemented by independent party distribution and to increase the sales to mid to high-end markets such as supermarkets and chain stores. Besides, the Group further extended its product distribution network in order to improve its reach to potential customers.
Product Quality and R&D
Quality has been the most important management objective of the Group since its establishment. Internal quality control procedures have properly been set up and implemented at each stage of the procurement, production, sales and logistics process, gaining the Group a good reputation among consumers and in the industry.
The Group''s R&D team comprises more than 300 members. During the Year, the Group''s R&D team focused on new and competitive products to cultivate a new meat consumption trend. In 2007, the Group launched approximately 190 new products such as the Sunshine series across China. These meat products have been well received by the market, as they are fresh, tasty, nutritious and convenient.
Future Prospects and Development Strategies
Looking into the future, the Group will take advantage of the growth opportunity provided by changing consumption pattern of large and medium-sized cities in China. The Group will further strengthen the "Yurun" series brands for its "Healthy, Quality, Delicious and High-end" reputation and maintain robust sales growth of LTMP and chilled pork businesses in the next three to five years. The industry consolidation will allow the Group to expand both its upstream and downstream capabilities through acquisitions, green field and brown field projects.
At the same time, the Group is committed to industry upgrade and technological innovations in order to meet the rising market demand. To enhance its value-added capability and sales forces, the Group will penetrate vigorously the mid to high-end markets and develop new products and customers, extending the scope and depth of market coverage. The Group will also leverage its market-oriented pricing mechanism to ensure a stable gross margin.
About Yurun Food (HKEx: 1068)
Leveraging on its vertically-integrated business model and strategically located production plants, Yurun 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 has achieved a solid track record with robust growth for five consecutive years. By further enhancing its brand names and product quality, Yurun will further strengthen its leading market position.
Company website: http://www.yurun.com.hk For further information, please contact: China Yurun Food Group Limited Email: firstname.lastname@example.org Fax: +852-3927-3300 CCG Elite Investor Relations Limited Investor Relations: Ms Gloria Chan / Joanna Rui Tel: +852- 3183-0227 / +852-3183-0229 Fax: +852-2155-9165 Email: email@example.com firstname.lastname@example.org Media Relations: Mr. Bunny Lee Tel: +852-3183-0282 Fax: +852-2155-9165 Email: email@example.com
Source: China Yurun Food Group Limited