Yurun Food Reports 56 Per Cent Profit Jump

by 5m Editor
30 March 2011, at 8:53am

HONG KONG - China Yurun Food Group Limited has announced its annual results for the year ended 31 December 2010, including a 55 per cent increase in turnover.

Turnover increased significantly by 54.8 per cent to HK$21.473 billion, according to the report, and net profit soared 56.3 per cent to HK$2.728 billion. Diluted earnings per share reached HK$1.551.

China Yurun Food Group Limited, a leading vertically-integrated meat-product processor and supplier in China, has announced its annual results for the year ended 31 December 2010.

During the year, the Group recorded a turnover of HK$21,473 million (2009: HK$13,870 million), representing a 54.8 per cent growth over the same period last year. In spite of volatility in hog prices during the year, the Group was able to significantly increase the sales volume of its products by leveraging on the competitive edge of its 'Yurun' brand, its optimized nation-wide production network as well as abundant hog supply, therefore driving the strong growth of its business.

During the year, the Group's gross profit and net profit were HK$3,098 million (2009: HK$2,161 million) and HK$2,728 million (2009: HK$1,745 million) respectively, representing a considerable growth of 43.3 per cent and 56.3 per cent respectively as compared to that of 2009. The Group's gross profit margin slightly decreased by 1.2 percentage points to 14.4 per cent, as compared to 15.6 per cent in the same period last year. The slight decrease was attributable to the segment mix change with extraordinarily strong growth of the upstream business, which has a relatively lower gross margin. However, our profitability remained strong with four major profitability ratios at their historical best levels, namely the gross profit margin of our upstream segment at 10.5 per cent, the gross margin of low temperature meat products ('LTMP') at 29.9 per cent, the selling, general and administrative expenses as a percentage of turnover at 5.1 per cent, as well as the net profit margin at 12.7 per cent.

The Board of Directors of the Company recommended a final dividend of HK$0.20 per share for the Year (2009: HK$0.15). This final dividend together with the interim dividend of HK$0.20 per share (2009: HK$0.15), will make a total dividend of HK$0.40 (2009: HK$0.30) per share for the year ended 31 December 2010.

Chairman's comment

Zhu Yicai, Chairman of Yurun Food said: "Amid the challenges posed by increasing hog prices and production costs in 2010, by leveraging on its experienced management and strong brand name recognition, as well as the thorough implementation of the market based pricing strategy of upstream chilled meat segment, and the continuous optimization of product mix and distribution channel of downstream LTMP, the Group not only effectively mitigated the pressures from various rising costs, but also propelled its profitability to new heights. The Central Government aims to eliminate outdated hog slaughtering capacity which does not conform to the hygienic and technological management standards across the nation before 2015, further facilitating industry consolidation.

"With its leading production capacity network and brand name recognition, Yurun Food will be able to drive the sustainable development of its overall business. In addition, with the enlarging scale of industry consolidation and a continuously improving product mix, Yurun Food proposes to achieve strategic upstream and downstream expansion through greenfield projects, mergers and acquisitions, as well as the enhancement and upgrading of equipment, with an aim to further strengthen its leading position in the industry and capture the tremendous business opportunities brought by industry consolidation."

Mr Zhu continued: "Ensuring the highest quality of our products has always been Yurun Food's philosophy. With our unrelenting effort and determination in our quality control, we have established a positive image of product quality and food safety among consumers. Benefited from robust market demand and our brand, Yurun Food maintained its growth in 1Q2011.

"Looking forward, the Group will continue to implement the most stringent quality control procedures to ensure that rigorous tests are in place throughout processes ranging from raw material procurement to production and in line with national and international food safety standards. We will remain committed to the highest level of quality and safety, and by upholding the philosophy of 'You trust because we care', we strive to bring meat products of the highest quality to consumers as well as satisfactory returns to shareholders," concluded Mr Zhu.

Production capacity

As at 31 December 2011, slaughtering capacity of the Group was 35.60 million head per year, representing an increase of 10.05 million head as compared to 25.55 million head at the end of 2009, while the Group's annual capacity of downstream meat processing was 304,000 tons. The Group will continue to expand its capacity, accelerate the enhancement of its nation-wide production capacity in the coming years and aim to reach a slaughtering capacity of 70 million head per year, as well as a downstream capacity of 600,000 tons per year by 2015, so as to further strengthen its leading position in the industry and capture the tremendous business opportunities in both upstream and downstream markets.

Product quality and R&D

Quality control and food safety are crucial to the success of the Group as well as the whole industry. The Group has implemented rigorous internationally recognized internal quality controls in every production process, ranging from procurement, production, logistics to sales, to ensure our products are in line with national and international food safety standards.

Looking ahead, Yurun Food will continue to enhance its quality control procedures and maintain highest level of hygiene and product safety in our production, and from transportation to distribution. Besides, 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.


Following the continuous prosperity of the Chinese economy and continued improvement in the business environment, as well as a series of favorable policies by the Chinese Government to stabilize hog prices and support the development of the hog slaughtering industry, the hog slaughtering and meat products market is set to maintain its ongoing development.

The Chinese Government promulgated the 'Guideline for National Hog Slaughtering Industry Development (2010-2015)' in late 2009. The plan aims to accelerate industry consolidation, significantly eliminate outdated hog slaughtering plants nationwide and systematically increase the sales percentage of chilled meat and small packaged pork products in China. As a leading enterprise in the hog slaughtering and meat products industry, the Group will further strengthen its advantages in its production network, brand, distribution and food safety standards, which will become a strong driving force for future development of its core businesses of chilled meat and LTMP, allowing the Group to further expand its market share, and strengthen its leading status in the industry to ensure long-term business development.

In the future, Yurun Food will continue to steadily enlarge its upstream and downstream production capacity, further leverage on its competitive advantages in branding and products, so as to capture the business opportunities from the rising demands for quality meat products in the market. Specifically, our 100,000-ton production facility in Nanjing, which is under construction and is expected to commence operations next year, will become a significant driving force for continued downstream growth in the future.

Looking forward, Yurun Food will continue to thoroughly implement stringent quality control procedures, and steadily realise its capacity expansion strategies, so as to increase its competitiveness and market share, as well as to enhance its brand competitiveness, thus fuelling business development and maximising returns for shareholders.

For further details about the Group's 2010 Annual Results Presentation, click here.