Sunday, April 18, 2021
Martin Hennecke
HKEx Stock Code : 00904 
Corporate Profile
Principally engaged in the growing, processing and sales of agricultural products and consumer food and beverage products.

Business Review - For the year ended April 30, 2013

Branded beverage business

Revenue from the branded beverage business recorded a growth of 21.0%, reaching RMB1,280.3 million (2012: RMB1,058.5 million). Our multi-grain series branded as “Cu Liang Wang” continued to become the key contributor to the beverage business turnover during the year under review. It represented 90.6% of our total beverage sales (2012: 91.3%).

The evolution of beverage market in China evidenced the diversification and more personalized market niche and this gives leeway for multi-grain beverage to get a foothold in this competitive market. In view of the increase in health awareness by beverage consumers in China, the Group allocated more resources in this arena in order to capture this rapid growing market. During the year under review, the Group launched several new products, including but not limited to, the multi-grain tea (“粗糧茶”) and multi-grain da wang (“粗糧大王”) which targets the teenage market.

The gross profit margin of the branded beverage business was 43.7% (2012: 49.2%). The slight decline was due to increase in material, wages and other incidental costs which the Group found it difficult to pass onto the consumer amid the keen competitive and challenging economic and operating environment.

Developing sales channel through distributors continued to be the focus during the year. This is a crucial bridge between the products and the consumer markets coupled with appropriate level of advertisements (as mentioned below). The extensiveness of channel coverage determines the level of awareness of a product and the Group has been allocating more resources in this area. In addition, the Group first tapped the Tibet market during the year and the existing market penetration basically covered all provinces in China (except for Hong Kong, Macau and Taiwan).

Apart from widening the distribution channel, the Group has also put more resources in advertisement and promotional activities during the year. Traditional advertisements which include TV commercials, light board, moving advertisements on public transportation were going in line with sponsoring TV talent show for half a year as shown in Hubei satellite TV. These are effective and useful in gaining wider recognition of the brands “China Green” and “Cu Liang Wang” for consumers in China. The total marketing and advertising expenses accounted for approximately 7.8% (2012: 8.1%) of our branded product revenue during the year.

Branded food business

Branded food products mainly include rice and rice related products and hot-pot ingredients. Revenue from branded food business amounted to RMB243.0 million (2012: RMB289.3 million). There was a decline of 16.0% and was mainly attributable to rice related products.

Revenue derived from rice and rice related products was RMB139.2 million (2012: RMB214.0 million and it accounted for approximately 57.3% (2012: 74.1%) of our branded food revenue during the year under review. The decline in revenue was mainly due to the decline in revenue of rice related products. In order to diversify and for ease of recognizing the various branded food revenue stream, the Group currently launched a line of frozen hot-pot pack called “Cu Liang Dang Dao” (粗糧當道) and frozen food product called “Huang Jia Ma Tou” (皇家碼頭) and they contributed 42.6% in aggregate (2012: 25.9%) of our branded food revenue. Gross profit for branded food business decreased by 43.8% to RMB57.3 million (2012: RMB102.0 million), and the gross profit margin was down to 24.3% (2012: 35.3%) during the year under review. The decline was largely due to increase in material, wages and other incidental costs which the Group found it difficult to pass onto the consumer amid the keen competitive and challenging economic and operating environment.

Processed products business

The processed products segment recorded a revenue of RMB405.1 million (2012: RMB756.8 million) which represented a decline of 46.5% when compared to last year. Such significant decrease was mainly attributable to the poor sales performance of the export market, in particular the Japanese market. Nevertheless, the overseas market still accounted for approximately 73.3% of our total processed product sales (2012: 87.5%).

The gross profit margin was 36.5% (2012: 45.3%) during the year under review. As mentioned above, due to the unfavourable macroeconomic environment, the demand from overseas for our processed products declined, resulting in a fierce price competition among the industry, and subsequently eroded the margin. This was aggravated by the increase in production cost which explained the decline in the overall profit margin.

In view of the unstable global political and economic environment, the Group shifted more focus on lower gross margin domestic sales of its processed products and this was evidenced by the increase in proportion of domestic sales.

At present, the Group's processed products include canned products, frozen products, pickled products as well as water-boiled products. Sweet corn and mushroom continued to be our best-selling products in the processed products segment.

Fresh produce business

The fresh produce business recorded a significant decline in revenue which was RMB260.4 million (2012: RMB443.4 million) during the year under review. The revenue was declined by 41.3%. Such decline was attributable to less crops planted and harvested during the second half of the year. This was driven by the change in business strategy of the Group by re-allocating resources to more sustainable, possibly higher growth potential multi-grain plantation which integrates with the rest of the Group's production.

The domestic market accounted for approximately 87.3% of the total fresh produce revenue (2012: 71.5%). The higher domestic presence was also primarily due to the poor performance of the export market.

Food safety has long been a critical concern among all the consumers and food manufacturers in China. This can be radically resolved by maintaining a high quality of source of raw material and monitoring from its seeding, planting and harvesting to processing and ultimately packaging into the ending branded products. In view of this from a long-vision angle, the Group further strengthened its reputed vertically-integrated business model by further entering into 150,000 mu of multi-grain long-term farmland lease and constructing ancillary facilities in Bai Cheng city of Jilin province during the year under review. With this scarce and non-renewable resources on hand, the Group is confident that it will be able to nurture and protect its brand value in the long run and also to be flexible and competitive in controlling the amount of supply, the production cost and the quality of its raw material for its mid and downstream business segments in the years to come.

Business Outlook - For the year ended April 30, 2013

Looking forward to 2014, the Group will continue to build a nationwide branded multigrain food and beverage network by leveraging on its leading position in the industry, readily available business model, well-developed management system, high standard production facilities and quality customer services.

The Bai Cheng project is expected to commence part of its operation in 2014 and the Group believes this new flagship multi-grain project will demonstrate a good business and operation model for its various multi-grain line of businesses.

The Group will continue to focus its investment in multi-grain beverage markets in China to further strengthen its leading position in the field. This will be envisaged by the expected completion of the Hubei beverage plant by December of 2013 and wider promotion of the brand in the coming year. The Group will take advantage of its strategic position attained in the multi-grain field to endeavor to negotiate and expand its network by establishing partnership with various special channels in China.

With our specialized experience as a leader in the industry, the Group is confident that our strategy and business model will deliver long-term benefits to the shareholders of the Company.

Source: China Green (00904) Annual Results Announcement
Chairman Sun Shao Feng Issued Capital (shares) 884M
Par Value HKD 0.1 Market Capitalisation (HKD) 672M

Amy Lau

Assistant Vice President – Investor Relations

China Green (Holdings) Limited

Tel: 852 2598 9838

Fax:852 2598 9899

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