Zhongpin Inc., a leading meat and food processing company in the People's Republic of China, has reported higher revenues and net income for the third quarter 2010 from the third quarter 2009.

Highlights of the third quarter results include an increase in net sales revenues of 24 per cent in the three months ended 30 September 2010 to $241.1 million from $194.9 million in the third quarter 2009. Net income increased 11 per cent to $14.7 million in the third quarter 2010 from $13.2 million in the third quarter 2009.

Basic and diluted earnings per common share declined $0.02 or five per cent to $0.42 in the third quarter 2010 from $0.44 in the third quarter 2009, on higher net income but with higher weighted average number of shares outstanding in the third quarter 2010.

Since the end of the second quarter of 2010 through early November, hog prices have increased more rapidly than pork prices. The company estimate that pork prices will gradually increase so that the spread between pork prices and hog prices will return to their historical relationship.

Prior guidance for the year 2010 has been maintained.

CEO's comments

Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin Inc., said: "Our third quarter continued our good long-term trend of higher sales and net income. The consistency of our operating and financial performance comes from our established strategy, business model, and effective execution, all of which have remained in place.

"We have two primary goals. Our operating goal is to become a major consolidator of the Chinese meat industry and our financial goal is to increase value for our shareholders.

"Our strategy and actions to achieve that goal can be summarised in six points.

"First, we determine our new growth markets for pork based on several factors that include China's meat industry development policies, market size, potential growth, hog production and the supporting infrastructure needed for success.

"Second, we develop all the critical success factors, including good relationships with hog farmers; our proven production, high-quality, and logistics systems; marketing and promotion to create brand recognition and market demand; our own stores; and sales contracts with retailers, wholesalers, local and chain restaurants, government organizations, and others.

"Third, in our current markets, we further optimize our product structure, working to increase the sales of our most profitable products and further expand our retail outlets and sales channels to gain more market share and higher sales.

"Fourth, we actively continue to apply advanced technology to our business.

"Fifth, we maximise the yield from our raw materials, maximise our energy efficiency and minimise our waste.

"And sixth, given that our primary product is pork, we look for every logical extension of our primary business. For example, this year, we started a new product line by opening our new premium pork oil facility.

"We also have been expanding our cold-chain logistics system into a new commercial service.

"Our strategy, business model, and actions have proven to be very effective, and we are delivering the expected good results. We expect that to continue in the future."

Outlook for pork demand in China

China's economy continues to expand, with pork at the top of the food buying list as China's preferred protein. The industry outlook for pork processing remains positive. Zhongpin's brand awareness and higher market share in the pork category continues to strengthen, and we are continuing to broaden into additional geographic markets and new products lines based on our research and development. The expansion of our processing plants and distribution networks is giving us the ability to satisfy the increasing market demand for our high quality products.

Government and consumers take the food safety as one of their top priorities. With the government support, the consolidation of the industry is accelerating. We believe the government targets stated in Hog Slaughtering Industry Development Guidelines for 2010-2015 can be achieved in the next five years.

Because Zhongpin has a strong brand presence in the meat industry, high quality facilities and products, outstanding quality assurance, and rapid-responding logistics systems, the company believes it has the opportunity to expand its market share in China as the pork industry consolidates in the next several years.

Mr Zhu added: "Through 2015, we expect to expand our production capacity within the government's selected markets and further increase our market share across China, while continuing to expand our leadership in the meat industry.

"Given our good performance during the first nine months this year, we believe the outlook for the remainder of 2010 continues to be good, so we are reaffirming our previous performance guidance."

Further Reading

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