Friday, November 27, 2020
Martin Hennecke
HKEx Stock Code : 01699 
Corporate Profile
The Group is a vertically integrated pork supplier principally engaged in hog farming, hog slaughtering and sale of pork. Fujian Tianyi is one of the largest pork suppliers in Putian City, Fujian Province.

Business Review - For the year ended December 31, 2012

The Group is one of the largest vertically integrated pork suppliers in Fujian Province, the PRC. With its core business being the sale of pork products of ˇ§Putianˇ¨ brand, the operations of the Group follows a vertically integrated business model with a complete coverage on the production chain comprising hog farming, hog slaughtering, pork processing, and sales and distribution of pork.

For the year ended 31 December 2012 (the ˇ§Reporting Periodˇ¨), it was encouraging that the Group's overall business performance was significantly enhanced. During the Reporting Period, the Group was committed to exploring its distribution channels and sales network to expand its market share, thereby increasing the revenue sources of its pork products and enhancing its market acceptability.

During the Reporting Period, the Group recorded a revenue of approximately RMB580,158,000 (2011: approximately RMB519,339,000), representing a growth of approximately 11.7% over that for the corresponding period of last year. During the Reporting Period, the Group recorded a gross profit of approximately RMB149,949,000 (2011: approximately RMB122,015,000), representing an increase of approximately 22.9% as compared with that for the corresponding period of last year. The gross profit margin increased to 25.8% (2011: 23.5%), which was mainly attributable to the farming of smaller piglets by the Group's contract farmers, thereby lowering the farming costs and in turn improving the Group's overall profitability. Profit for the Reporting Period was approximately RMB105,105,000 (2011: approximately RMB90,013,000), representing an increase of 16.8% over the corresponding period of last year. Earnings per share were RMB15.04 cents (2011: RMB15 cents).

During the Reporting Period, the Group shifted the focus of its sales policy to the retail business. Revenue from retail of pork increased to approximately RMB301,812,000, accounting for 52% of the Group's total revenue. The wholesale of pork business accounted for 48% of the Group's total revenue, amounting to RMB278,346,000 and representing a decrease of 1.6% as compared with that for the corresponding period of last year.

With the continuous expansion of the Group's distribution channels and sales network, the pork products marketed under the Group's owned ˇ§Putianˇ¨ brand have become more popular and more widely recognized among customers, and have brought contribution to the revenue of the Group during the Reporting Period. The points of retail sales of the Group expanded from 67 as at 31 December 2011 to 86 as at 31 December 2012, dispersedly located across Ningde City, Fuzhou City, Putian City, Quanzhou City and Zhangzhou City of Fujian Province. As of 31 December 2012, the Group operates 23 direct sales outlets in Putian City, Zhangzhou City and Fuzhou City. During the Reporting Period, sales from the direct sales outlets were RMB36,185,000, accounted for 6.2% of the Group's total revenue. During the Reporting Period, the Group has opened 11 new concession counters at supermarkets in aggregate, thereby increasing the number of domestic concession counters at supermarket to 63. During the Reporting Period, sales generated from concession counters at supermarkets amounted to RMB88,781,000, accounting for 15.3% of the Group's total revenue.

The Group upholds the corporate vision of ˇ§offering high-quality pork productsˇ¨ to provide customers with premium, safe and hygienic pork products. By means of continuously implementing a stringent epidemic prevention system in respective hog farms and executing safety control in every production stage, there was no outbreak of severe epidemics during the Reporting Period.

As advised by the PRC legal advisers, there are no rules and regulations in the PRC which set prices or price ranges on the Group's products.

Business Outlook - For the year ended December 31, 2012

(1) Further extension of sales network and distribution channels to foster market share

As at 31 December 2012, 86 points of sales established by the Group dispersedly located across Ningde City, Fuzhou City, Putian City, Quanzhou City and Zhangzhou City of Fujian Province. During the Reporting Period, the Group's points of sales in the PRC have grown by 19 to 86. The total number of points of sales is anticipated to increase to 116 by the end of 2013. To capture the growth opportunities in the PRC, the Group will ramp up its efforts on the development of its retail of pork operation, and enlarge the proportion of retail of pork in revenue amount. The Group will increase the number of operating concession counters at local and international supermarket chains for the retail sale of its pork products to cater for the changing shopping behaviors of local Chinese families. By expanding the sales network and distribution channels for its products, the Group's market share in various sales regions would be increased.

(2) Construction of hog farms for expansion of production capacity

The first hog farm has commenced construction during the first quarter of 2013, which is expected to be completed in June 2013. The second to the sixth hog farms will be constructed subsequently by the Group in an orderly manner and are expected to start operations by the first half of 2014. We anticipate that upon the completion of these six new farms, the Group's production capacity will be increased.

(3) Introduction of pork chilling facilities to develop the market of value-added products

Benefiting from the support given to agricultural and slaughtering industries by China's 12th Five-Year Plan, the Group will put more concern in and carry out more in-depth analysis on social and economic developments in China as well as the trend and change in the pork consumption market. In response to the changing market demands, the Group has actively introduced a series of advanced chilled pork production techniques and facilities. Additionally, the Group will define the new market segments and new products based on the actual market needs. Riding on the competitive edge of its multi-regional sales network, the Group will reduce its product sale differentiation to increase the value of its products and generate higher returns for the Group and its shareholders.

(4) Strengthening the collaboration and communication with contract farmers

During the year, the Group continued to engage the five existing large-scale contract farmers to provide hog farming services. The Group will continue to refine the farming management regulations of contract farming and strengthen the close communications with the contract farmers, with a view to uplift the breeding standard and production efficiency of contract farming. In addition, the Group will step up technical farming trainings and enhance standardized management of contract farming, aiming to solve the difficulties and problems which might arise during the farming process. The directors of the Company believe that more farmers will be drawn to become the Group's contract farmers on the basis of mutual development, which in turn will benefit the farming business of the Group.

(5) Reinforcement of product quality control

The Group will strengthen the quality control on every production stage by executing stringent quality controlling measures, which will then guarantee the stable supply of quality pork. The Group's business model of breeding, slaughter and sales of hogs by itself enables it to monitor every production process from hog farming, production of pork products to final sale more attentively. The Group is committed to enhancing product safety awareness among its staff, increasing the efforts on quality assessment and giving incentives, enforcing a strict acceptance test on raw materials warehousing, regularly assessing suppliers and contract farmers to assure breeding is performed in compliance with pollution-free agricultural product regulations as well as examining the products of the Group with authoritative standards on a regular basis relentlessly, so as to provide customers with high quality, healthy and safe pork products.

Source: Putian Food Hold (01699) Annual Results Announcement
Chairman Cai Chenyang Issued Capital (shares) 800M
Par Value HKD 0.1 Market Capitalisation (HKD) 688M
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