Wednesday, February 28, 2024
Martin Hennecke
HKEx Stock Code : 01089 
Corporate Profile
The principal activities are trading and manufacturing of chicken meat products, animal feeds and chicken breeds.

Business Review - For the year ended December 31, 2012

We are one of the well-known chicken meat products suppliers in the Fujian Province of the PRC and principally engaged in the trading and manufacturing of chicken meat products, animal feeds and chicken breeds. Our chicken meat products are selling under the ¡§ ´ËÄ_ (Sumpo)¡¨ brand.

In 2012, the Group accelerated its pace in business development and achieved a comprehensive and balanced development. Below are some of the Group's significant business achievements and development in 2012:

1. Recognized as State-Certified Enterprise Technology Center

The corporate team undertook the huge task of applying for the assessment and review of the Group as a State-Certified Enterprise Technology Center. Our thorough planning was well rewarded. In 2012, the Group was recognized by five ministries and commissions (i.e. the National Development and Reform Commission (NDRC), Ministry of Science and Technology, Ministry of Finance, General Administration of Customs and State Administration of Taxation) as a State- Certified Enterprise Technology Center, making us the only state-certified technologically advanced enterprise in Fujian Province in 2012, as well as the first agricultural enterprise to be recognized as a State-Certified Enterprise Technology Center. The recognition as a State-Certified Enterprise Technology Center is considered to be the highest level of honor in technological advancement of an enterprise. It represents the core strength of an enterprise's innovation system, signifies the actual core competitiveness of an enterprise in various aspects including technology, products and brand position, and drives the transformation of an enterprise's mode of development. By earning this recognition, the Group is recognised to have possessed a comprehensive technological innovation system, and our scientific developments and innovation capabilities are highly regarded by the relevant departments of the state. This is an anticipated result cumulating the Group's years of continued persistence on technological innovation and also an honor and a symbol of concrete strength. Most importantly, this exemplifies the wide recognition from various levels of government and the general community with respect to the Group's scale, operation strategy and social image. Mainstream and authoritative media channels have made comprehensive coverage on our achievement.

2. Commencement of production of new processing facilities has boosted steady growth in production and salesm

(1) Through tight and orderly planning at the beginning of the year 2012, relocation of the new broiler processing facility was successfully completed. The slaughtering volume of broilers has increased from 55,000 to 80,000 per day.

(2) We organized the construction of a new hatching facility and a new breeder farm. The hatching facility was modified to overcome the difficulties in personnel recruitment due to remote location of the breeder farms. The new hatching facility and breeder farm have commenced operation in March and April of 2012 respectively, and a new batch of chicken breeds was hatched therefrom.

(3) Through modification of selected equipment in existing feeds factories, loading of finished products was changed from manual labor to conveying belt loading. In the meantime, coordination of more rational manpower allocation was emphasized to enhance communication and connection between different production processes to achieve higher productivity. These efforts helped satisfying the demands derived from the Company's increasing breeding volume, setting new monthly production records and laying a good foundation in securing the ordinary provision of feeds.

(4) Building on our existing customer base, we procured new customers and achieved satisfactory developments in terms of customer volume, product portfolio, area coverage and total sales volume. We completed the distributor networks in Shantou, Guangzhou, Shenzhen and Wenzhou, and extended the presence of our fresh products business from Southern Fujian delta region to Shantou and Wenzhou. In addition, we developed modified atmosphere packaging and researched on flavoring and deep processing of products to enhance the added values of our products. We worked together with customers to develop small-packed products for exclusive sale in supermarkets, and expanded the business of simple-packed products such as large size packing to lessen the pressure on our processing business. The proportion of high-priced products was also increased to build a foundation for the sales volume growth of the Company.

Business Outlook - For the year ended December 31, 2012

1. Focus on technological advancement and strive to initiate more projects

a) The recognition of the Group as a State-Certified Enterprise Technology Center provides us with the opportunity to leverage on our postdoctoral research work station and to introduce more postdoctoral research and development projects, which will help strengthen our level of technological innovation and technology content, and enable our self-initiated innovations in feed processing, breeding management, disease control and new product development. This is expected to enhance our core competitiveness and facilitate our rapid development.

b) After receiving the state's certification as an Enterprise Technology Center, the state will provide focused support and subsidies through various means, including project initiation, tax relief and construction of technology center, to equip the enterprise with the conditions and capabilities to undertake the nation's industry upgrade and technology innovation projects, and become the technological leader and product standard setter for the new products of its respective area. In the meantime, in order to drive the technological advancement of the whole industry, we would fully utilize the existing platforms of the State-Certified Enterprise Technology Center and provincial engineering and technology research center to seek more policy project grants. We would also actively prepare for the filing to become a ¡§new and high technology enterprise¡¨ and draw up concrete planning in basic filing work to apply for the State Engineering Research Center certification. These are the important and effective means of driving the healthy growth of the Group, and also a naturally-chosen path to enhance our competitiveness as an industry leader.

c) We explored methods in adjusting the nutrition indicators of broiler feeds for use in summer, in order to lower the consumption of high-priced ingredients and lower the feed costs without compromising breeding results. Different rigidity, diameter and powder content standards suitable for different seasons will be formulated to ensure stable feed quality.

d) As drug residues has increasingly been placed under public spotlight, the Group will regulate drug use and enforce strict gate-keeping on drug intake, drug withdrawal period and meat quality testing to avoid market risks. For the broiler business department, emphasis will be placed on guidance and training of broilers breeding to improve breeding results, while for the service business department, additional guidance will be given on the operation of a modern chicken farm to ensure satisfactory results from the use of modern chicken farms.

2. Enhancing internal control to consolidate foundation for development

(1) Reduce energy consumption and lower costs and step up production quality As production scale expands, the Group experiences challenges from various aspects, including mounting raw material, fuel, ingredient and labor costs, as well as the sustained low price of frozen products and gradual aging of equipment. All production units will strive to reduce energy consumption to lower costs, starting from the smallest details in operations. At the same time, more efforts will be made to reinforce on-site supervision, to ensure strict control and to lower maintenance costs and accessory costs.

(2) Strict control on procurement costs to ensure quality of purchased items By improving the procurement management system which enables quality and price comparison, and imposing strict control on distribution timing and acceptance standards of broilers, the Group will conduct better sourcing and assessment on suppliers and will manage the procurement costs for raw materials, supplementary materials, labor protection items, packaging materials, machinery and equipment more stringently. Through widening procurement channels, the number of intermediaries will be reduced, so that materials can be sourced directly from grain-producing regions.

(3) Ensuring tight grasp on safety and pursuing better environmental protection

a) The Group will enhance on-site safety management by providing better safety and fire prevention trainings for employees, completing the qualification filing and reviewing the safety production standard classification of the Group, and launching works which focused on ¡§hidden defect inspection and correction¡¨. The Group would carry out integrated correction and treatment on highlighted issues and weak links of key areas, key equipment and key positions, in order to utilize the establishment of safety standardization and implementation of four aspects of fire safety as the basis of safety management standardization.

b) Improvements will be made to the operational management of sewage treatment in the processing facility to ensure the smooth operation of environmental facilitates in all plants and sites and to ensure they are up to the required environmental protection requirements.

For new construction projects, the relevant feasibility studies, approvals and preliminary work for constructing environmental protection-related elements will be completed.

3. Accurate market positioning and adopting differential marketing strategies

To overcome market fluctuations, the Group will increase its input in advertising to enhance brand awareness, through which we will seek accurate market positioning to formulate practicable strategies that focus on differential marketing. Leveraging on the Group's brand advantages and product qualities, we will seek to tap into new markets in the southwestern region and expand our presence in Guangzhou and Shenzhen. Through accelerating our industry layout development and enhancing utilization rate of chicken supply resources, we will increase the sales proportion of products with high added value, develop niche in fast-food markets and consolidate our development in wholesale markets. We will strengthen our marketing efforts in supermarkets, modified atmosphere packaging, flavorings and fresh products. Cross-region sale of products will be tackled and loan risks will be properly managed. Logistics and distribution will be enhanced through sales team building. All business staff shall work honestly and diligently with endurance in order to combine our rich market experience with accurate scientific findings to achieve market gains through the continued development of the Company.

4. Focusing on staff education to develop an echelon of talents

(1) We will focus on staff education to develop a talent mechanism to recruit talented professionals, stimulate their energy and utilize their expertise for the best development of the the Group, and consistently carry out the concept of ¡§emphasizing the use of quality talent in task completion and work completion¡¨ in order to always place talent nurturing as the top priority. By adopting the strategy of ¡§recruiting and retaining talents¡¨, dedicated schemes will be set up to focus on nurturing talents internally and ensuring sufficient back-up and core talents are maintained, while professionals are sourced externally depending on the actual development needs of the the Group. As a result, an echelon of talents will be formed to provide staff with comprehensive career prospects. The nurturing and consolidation of core members that embrace Sumpo culture will provide a source of powerful reserve for the establishment and development of new initiatives.

(2) The heads of all levels of departments will take the lead in organizing training for their respective departments, by launching various types of trainings, including: interactive training, textbook-based training, recorded training, sharing of experience, and on-the-job training. These learning models emphasize on feedback and sharing of information. At the same time, problemsolving trainings based on actual cases are organized to tackle new problems arising over the course of work, which are solution-oriented workshops that encourages feedback and opinion to summarize experiences and knowledge. This type of training solves actual problems in work while providing education to the employees. Meanwhile, the establishment of corporate culture will be emphasized to enhance the cohesion and sense of belonging of corporate staff. Our corporate mission in motivating our staff will help achieving meeting production and operation targets. By mobilizing the positive and active attitude and creativity of the staff, the Group will establish a working environment built upon a coherent, spirited and determined workforce.

Source: Sumpo Food (01089) Annual Results Announcement
Chairman Lin Qinglin Issued Capital (shares) 1,660M
Par Value HKD 0.1 Market Capitalisation (HKD) 515M
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