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Zhongpin Chairman Forecasts 'Very Good Year'

by 5m Editor
9 August 2011, at 9:12am

CHINA - Pork producers, Zhongpin, has reported higher revenues, net income and earning per share for the second quarter of 2011 than a year previously.

Zhongpin Inc., a leading meat and food processing company in the People's Republic of China, has reported higher revenues, net income and earnings per share for the second quarter 2011 from the second quarter 2010.

For the second quarter, the company highlights revenues increased 70 per cent in the second quarter 2011 to $366.5 million from $215.1 million in the second quarter 2010.

Gross profit margin was 10.7 per cent in the second quarter 2011 from 11.8 per cent in the second quarter 2010. Operating profit margin was 6.5 per cent in both second quarters. Net profit margin was 5.3 per cent in the second quarter 2011 from 5.7 per cent in the second quarter 2010.

Net income increased 56 per cent to $19.3 million in the second quarter 2011 from $12.4 million in the second quarter 2010

Basic earnings per share increased 33 per cent to $0.48 in the second quarter 2011 from $0.36 in the second quarter 2010 on average basic shares outstanding that were 16 per cent higher. Diluted earnings per share increased 37 per cent to $0.48 in the second quarter 2011 from $0.35 in the second quarter 2010 on average diluted shares outstanding that were 15 per cent higher.

Zhongpin has revised its guidance for the year 2011.

Chairman's comments

Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin Inc., said: "Our operations and growth strategy continued on plan in the second quarter.

"Revenues were up 70 per cent and net income was up 56 per cent from the prior second quarter, even with the expense associated with our aggressive expansions in markets and facilities. Total tonnage was up six per cent, with average prices up 60 per cent, second quarter over second quarter.

"Given our good results in the first half of 2011, we have revised our guidance and have fine-tuned our assumptions supporting our guidance.

"Product quality and safety, which remain our highest priorities, are engineered into our raw material selection, production, quality assurance and control processes, integrated IT system, and cold-chain logistics. Consumers and customers, when they choose Zhongpin products, can be sure that they are getting the highest food quality and safety, as well as great taste.

"We are on schedule in our construction projects. Those expansions will support growth in our current markets and in our geographic market expansions in northern and eastern China, which we expect will result in higher sales and a larger market share in the national pork market.

"In 2011, we are continuing our proven strategy and actions to sustain the trend-line growth we have achieved in the past several years. Our actions include supporting the breeding of premium sire boars to produce better hogs for food, expanding our geographic markets and distribution channels, building more production capacity to serve current and new markets, aggressive marketing to increase brand awareness and encourage higher sales, further streamlining our supply chain, extending our cold-chain logistics system, continuing to leverage our integrated information technology system, continuing product and process improvements, developing new products, and continuing employee training, all to sustain our rapid healthy growth to deliver our company's good financial performance for our shareholders.

"Although we usually prefer our own greenfield expansions, to augment our internal growth, we may also consider acquiring companies that have strong regional brand recognition and that produce prepared pork products using high-quality facilities. These additional operations would likely help us to build Zhongpin into an even stronger national brand; increase our market share, revenues, and net income; and strengthen our ability to take advantage of consolidation opportunities in China's meat industry."

"We remain on track to deliver a very good year in 2011," said Xianfu Zhu.

Capacity and market expansions

Zhongpin put its new facility in Tianjin into operation in January 2010. The new plant has a production capacity of about 100,000 metric tons for chilled and frozen pork. The construction of phase two of the facility, with a production capacity of about 36,000 metric tons for prepared pork products started in October 2010 and should begin operating in the third quarter 2011.

Zhongpin is investing about $61.5 million to build a slaughtering and processing plant, low temperature prepared pork plant, logistics centre, and research and development centre in Nong'an county, Changchun, in the Jilin province of China. This facility will have a production capacity of about 70,000 metric tons for chilled pork, 25,000 metric tons for frozen pork and 30,000 metric tons for prepared pork products. Construction started in September 2010. The company expects to put the chilled and frozen pork facility into operation in the fourth quarter of 2011 and the prepared pork products facility into operation in the third quarter of 2012.

Zhongpin is also investing about $63.0 million to build a production facility, warehouse and distribution centre in Taizhou, Jiangsu province. This facility will have a production capacity of about 100,000 metric tons for chilled and frozen pork, of which 80 per cent will be for chilled pork including easy-to-cook products, 20 per cent for frozen pork, plus 30,000 metric tons for prepared pork products. Construction started in October 2010. The company expects to put the chilled and frozen pork facility into operation in the fourth quarter of 2011 and the new facility for prepared pork products into operation in the first quarter of 2012.

Zhongpin is investing about $58.5 million to build a new production, research and development, and training complex in Changge, Henan province, excluding the cost of land use rights that it has already obtained. When completed, this new facility will have a production capacity of about 100,000 metric tons for prepared pork products. Adjacent to this new facility, the company expects to develop a centre for research and development, training, and quality assurance and control. Construction for the first phase with an annual production capacity of about 50,000 metric tons for prepared pork products started in the first quarter of 2011 and should be completed by the fourth quarter of 2011. The second phase, with a production capacity of about 50,000 metric tons for prepared pork products, should be completed by the fourth quarter of 2012. Zhongpin plans to open the research and development and training center by the fourth quarter of 2012.

The company is establishing a joint venture company with Henan Xinda Animal Husbandry Company Limited, and it is expected the new joint venture will provide 20,000 sire boars annually, which will be used to breed with farmers' sows to provide high-quality hogs for food. As part of the joint venture, Zhongpin is currently building the infrastructure for sire boar breeding and plan to start the joint venture's breeding operations in fourth quarter of 2011.

As of 30 June 2011, Zhongpin had an annual capacity of 563,760 metric tons for chilled and frozen pork, 90,000 tons for prepared pork products, 20,000 tons for pork oil, and 30,000 tons for vegetables and fruits, for a total annual capacity of 703,760 metric tons.

Further Reading

- You can view the full report by clicking here.