Thursday, March 28, 2024
 
Columnist
Martin Hennecke
 
GAPACK
HKEx Stock Code : 00468 
 
Corporate Profile
Principally engaged in the business of manufacturing, distribution and selling of paper packaging for soft drinks and beverages, and filling machines, principally in the People's Republic of China (the ˇ§PRCˇ¨).

Business Review - For the year ended December 31, 2012

Products

We sold a total of 8.6 billion packs during the year ended 31 December 2012, with GA Brick aseptic 250ml Base remained as the top selling product, followed by GA Brick aseptic 250ml Slim as the second most popular selling product of our Group.

Driven by the increasing consumers' concern with health, fitness and well-being, the demand for dairy and NCSD products remained as the key driver of our sales volume growth. Sales volume grew about 10.9% during the year ended 31 December 2012, compared with the year of 2011. The growth rate was relatively lower than the corresponding period in 2011, because our Group focused more on maintaining its sales margin level and its average selling price of products. The slowdown of the dairy industry in the PRC has also impacted the sales volume. Although the industry was slack in 2012, our growth rate in sales volume retained above the market average in 2012.

We believe the commencement of the second production line of the Helingeer factory, the implementation of our European plant production together with the expansion project, which introduced the third production line in Gaotang, will help us meet the growing market demand, strengthen our position in key markets, and capture additional market opportunities around the world.

Meanwhile, we have made an effort to ensure the products from our European Plant are of high quality in order to strengthen our brand name and reputation in the international market. Consequently, we have started internal quality examination procedures for our products in our European Plant during the first half of 2012. Externally, we have engaged independent laboratories that are well recognised by the industry players in Europe to carry out quality certification. We believe that our emphasis on quality will help us earn customer confidence and provide a strong selling point for our products. Besides, we have made significant effort to enhance our production process and volume by improving the operation management structure and setting up the systematic training scheme for our local employees.

Production Capacity and Utilisation

The annual production capacity of our Group was 17.4 billion packs at the end of 2012. The commencement of production of our European Plant in December 2012 has facilitated the growth of our Group's annual production capacity by 4 billion packs for the year of 2012. Furthermore, the third production line in Gaotang is expected to bring an additional annual production capacity of 4 billion packs to the Group in 2013.

Our Group produced approximately 8.6 billion packs during the year ended 31 December 2012. The utilisation rate for the year ended 31 December 2012 was lower than the corresponding period in 2011, which was mainly due to the seasonal effect of the industry. The slowdown of the worldwide economic growth and in particular, the domestic market has also contributed to the decline in the utilisation rate.

Suppliers and Raw Materials

During the year ended 31 December 2012, prices of some raw materials, including liquid paper board, increased due to the inflationary pressure. However, the increase in the cost of raw materials was slower than the increase of the revenue for the year of 2012 compared with the year of 2011. This was mainly contributed by the economy of scale and changes in product mix.

As a significant portion of our raw materials are customised, their prices are generally less volatile than their commodity counterparts. As a result, we managed to contain the increase in these raw materials prices within a reasonable range. Furthermore, we are continuously expanding our supplier base to manage and control the raw materials prices more efficiently.

Sales and Marketing

We sell our aseptic packs and services to leading dairy and NCSD producers across the world, with a primary focus on the PRC and European markets. For the year ended 31 December 2012, we have put more resources to intensify our brand, continuously expanded our customer base in the PRC and continued to grow volume with our key dairy customers.

During the year ended 31 December 2012, our sales and marketing teams have continued international development and new market penetration with success in Oman, Bahrain, Kuwait, Algeria and Tunisia. The geographical expansion is to a large extent as a result of continuous investment in a dedicated sales force as well as in experienced technical service resources.

Our Group has devoted efforts to actively promote tailor-made marketing activities for our customers, and also geared towards supporting the activities of our sales team in the year of 2012. This will ensure our sales team to keep abreast of the industry trends, strengthen interaction with existing customers, cultivate new relationships and build brand awareness.

During the year ended 31 December 2012, we participated in the Anuga FoodTec exhibition in Germany, an international trade fair for food and beverage technology, where we took the opportunity to launch some of our products. Our participation has not only highlighted our corporate image, but also created favourable sales impact in the marketing aspects. Attending the Anuga FoodTec exhibition was a good opportunity for us to present ourselves on the global stage as a first rate supplier of food and beverages packaging material and an alternative aseptic packaging choice

Business Outlook - For the year ended December 31, 2012

The Company has already established its footprint as a leading alternative supplier in the PRC, the world's largest single national and fast growing market for aseptic packaging. Following its international growth strategy in Europe, the world's largest regional market for the aseptic packaging industry, and the expansion of factories to support this growth, our Group is expected to continue to:

ˇE grow our market share with our key customers while broadening customer mix in the PRC market;

ˇE further expand and penetrate international markets;

ˇE strengthen the centralisation of our Group's management functions in order to achieve a more efficient ˇ§plug & playˇ¨ system for future capacity expansion projects in the markets outside the PRC;

ˇE broaden our products mix; and

ˇE continue to optimise products and production processes and accelerate research and development in roll-fed filing machine business.

With respect to our expansion plan, in view of a strong demand for aseptic packs and in order to strengthen our Company's position in the PRC market, we plan to construct new production lines in our Helingeer factory.

In February 2013, we entered into an investment agreement with the local government of Helingeer, Inner Mongolia, the PRC in relation to the expansion of the production capacity of our Helingeer factory. Under the investment agreement, the local government of Helingeer will assist the Company in obtaining additional land for the construction of the expansion, provide assistance in obtaining all regulatory approvals and any other forms of support that the government department could provide, to ensure the smooth and successful expansion of the factory. This investment shall be carried out in multiple phases that include, but not limited to, the construction of aseptic packaging material production line(s) that will systematically adding additional billion(s) packs of capacity. Our Company targets to produce new products in the aseptic area with the production line of phase one, which will enable us to enter a new area of the industry. However, we may possibly adjust the investment plan and project schedule according to the market trend and customer demand which we will constantly monitor closely. Further disclosure of the aforesaid investment will be made in accordance with the Listing Rules as and when appropriate.

We believe that Helingeer is a strategic location for our business because it is situated in the heart of the PRC's largest dairy belt, only few kilometres away from two leading PRC dairy companies.

Source: Gapack (00468) Annual Results Announcement
Chairman HONG Gang Issued Capital (shares) 1,337M
Par Value HKD 0.01 Market Capitalisation (HKD) 6,299M
 
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