Rise in Revenue and Income for Zhongpin

14 March 2012, at 11:06am

CHINA - Chinese meat and food processing company, Zhongpin, has reported higher revenues, net income, and diluted earnings per share for 2011.

Revenues increased 54 per cent to $1,456.2 million in 2011 from $946.7 million in 2010, while net income increased by 10 per cent to $64.2 million in 2011 from $58.3 million in 2010.

Basic earnings per share decreased 0.6 per cent to $1.66 in 2011 from $1.67 in 2010 on average basic shares outstanding that were 10.5 per cent higher than 2010, but diluted earnings per share increased 0.6 per cent to $1.66 in 2011 from $1.65 in 2010 on average diluted shares outstanding that were 9.3 per cent higher than 2010.

Over the coming year, Zhongpin expects that sales revenues should be within a range of US$1.55 billion to $1.72 billion for 2012.

Gross profit margin is expected to be within the range of 8.6 per cent to 10.2 per cent. Net profit margin is expected to be within the range of 3.3 per cent to 4.2 per cent.

The resulting diluted earnings per share for the year 2012 is expected to be within the range of $1.36 to $1.92 per share, assuming average diluted common shares outstanding of about 37.5 million shares in 2012.

Zhongpin added 201,000 metric tons of annual capacity for pork and pork products during 2011 to bring total capacity at year-end 2011 to 904,760 metric tons.

Zhongpin said it will be investing about $10.5 million in a by-product processing plant in Changge, Henan province, to product sausage casings and the raw material used to make heparin sodium.

Annual production capacity will be 100 million metres of casings and 300 billion units of the raw material for heparin sodium. The construction is scheduled to start in the first quarter of 2012 and operations should begin in fourth quarter of 2012.

Xianfu Zhu, Chairman and Chief Executive Officer for Zhongpin, said: "We continued to deepen our penetration in our current markets and aggressively increase our geographic markets, sales locations, customers, and operations in 2011 to support higher sales, profits, and operating cash flow in the years ahead, so the year was good in operations.

"Our financial results in 2011 reflected new aggressive price competition in the markets and our higher expenses in operations, promotion, marketing, and sales to build our market share in 2011 and prepare the Company for increasing success in the future.

"Most of our 54 per cent increase in sales revenues in 2011 came from our pork products prices for which rose an average of 44 per cent for the year, on tonnage that was up 7 per cent. With the prices of both hogs and pork expected to decline from 15 per cent to 20 per cent in 2012, it will be difficult to report higher results in 2012 compared with 2011.

"In 2012, we will slow the rate of our capacity expansions and focus on greater use of existing facilities, which we believe should help our financial results.

"As of today, China expects its economy to grow at a good rate in 2012, with its gross domestic product continuing to increase but perhaps at a slower rate of growth.

"Despite challenging competition that is likely to continue in the marketplace in 2012, and given the good outlook for the China's economy, we expect to report somewhat higher revenues in 2012 than 2011, a somewhat lower gross profit margin and a somewhat lower net profit margin than in 2011, and diluted earnings per share within the range of $1.36 to $1.92 per share in 2012. The lower margins are expected because we are facing tough competition in the markets and must simultaneously prepare the Company for improved operating and financial performance that we expect will create substantial additional value for shareholders in the years ahead.

"As you know, we believe that the number one reason for our continuing success is that Zhongpin provides outstanding, flavorful, and increasingly convenient pork products with the highest product quality and safely, from farm to fork.

"We developed and launched 79 new products in 2011, most of which focus on regional flavors and convenient preparation methods that should be very attractive in China. As of December 31, 2011, we offered more than 410 types of pork products and more than 25 different categories of vegetables and fresh fruits. In addition, we had more than 90 new products under development at yearend 2011.

"Our fundamental strategy has proven its effectiveness in the past several years, including 2011. Our major objectives, which are designed to create additional long-term value for our shareholders, include increasing our brand recognition and sales, expanding our market presence, increasing our production capacity, expanding and optimizing our product lines, and maintaining our technological superiority.

"We plan to continue building a leading national brand by gaining higher market share and prudently increasing our markets, processing plants, and cold-chain distribution networks to satisfy the increasing demand for our high quality products. The result should be growing value created over the years to benefit our shareholders."