Higher Revenues, Lower Net Income for Zhongpin

CHINA - Zhongpin Inc. has reported higher sales revenues and lower net income for the three months ended 31 March 2012 compared with the first quarter of 2011.

10 May 2012

4 minute read

Asia

Some highlights from the first quarter of 2012 include:

Sales revenues increased 31 per cent to $374.1 million in the first quarter 2012 from $285.8 million in the first quarter 2011.
Net income decreased 27.8 per cent to $12.2 million in the first quarter 2012 from $16.9 million in the first quarter 2011.
Basic earnings per share decreased 29.8 per cent to $0.33 in the first quarter 2012 from $0.47 in the first quarter 2011 on average basic shares outstanding that were 4.6 per cent higher than in the first quarter 2011.
Diluted earnings per share decreased 29.8 per cent to $0.33 in the first quarter 2012 from $0.47 in the first quarter 2011 on average diluted shares outstanding that were 3.5 per cent higher than in the first quarter 2011.
Guidance for 2012 is maintained: 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. Assumptions and judgments supporting the guidance are shown below.
As of 31 March 2012, Zhongpin had a total annual capacity of 904,760 metric tons for pork, pork products, and vegetables and fruits.

Xianfu Zhu, Chairman and Chief Executive Officer for Zhongpin, said: "The intense competitive pressure in the pork market to gain market share continued in the first quarter as the pork industry goes through consolidation. As a result, pork prices did not increase, as a percent, as much as hog prices increased, which narrowed the gross profit spread between the cost of hogs and the price of pork. Further, substantial promotion costs were required to be competitive in both keeping and gaining market share. As expected, we incurred higher expenses in promotion, marketing, and operations to build market share and prepare the Company for increasing success in the future.

"Although, pork prices and volumes were generally higher in the first quarter than in the first quarter of 2011, we expect the prices of both hogs and pork to decline approximately 15 per cent to 20 per cent in 2012, so it will continue to be difficult to report higher results in 2012 than in 2011.

"As you know, in 2012 we are slowing the rate of our capacity expansions and focusing on greater use of existing facilities, which we believe should help offset some of the pressure on our financial results.

"Given the challenging competition that is very likely to continue in the marketplace in 2012, we still 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.

"Zhongpin provides outstanding, flavorful, and increasingly convenient pork products with the highest product quality and safety, from farm to fork. Those products are the foundation of our success and our future. We offer more than 410 types of pork products and more than 25 different categories of vegetables and fresh fruits and have more than 90 new products under development as of March 31, 2012, so we believe that our existing products and those in our new product pipeline will continue to be attractive to consumers and help Zhongpin gain market share in the challenging years ahead."