China Minzhong profit up 77.9%

Revenue grew 36.8% to RMB361.4 million, driven by better performance in both the Group’s cultivation and processed business segments. The cultivation business segment (comprising of both fresh vegetables produce and mushroom spores) contributed 57.3% of total revenue in 1Q FY2012, while the processed business segment (comprising of processed vegetables and other products) accounted for the remaining 42.7%.

Revenue from fresh vegetables produce increased by 94.0% to RMB156.6 million, on the back of contributions from new farmland and improved better product mix. Aligned with the Group’s shift towards higher value products, average selling price for fresh vegetables produce recorded a 37% increase y-o-y. On the other hand, sales from mushroom spores declined 29.2% to RMB50.7 million, as most of the mushroom spores distribution will only be done in the 2nd quarter for this financial year.

Revenue from processed vegetables rose 25.9% to RMB132.8 million, as the Group capitalized on more opportunities in the export markets. Average selling price for processed vegetables also increased 53.5% y-o-y, in line with the Group’s shift towards a higher value product mix. On a similar note, revenue from other processed products grew 240.8% to RMB21.3 million as the Group’s branded products, such as vegetables and fruit beverages, gained further traction in the domestic market.

In line with the higher revenue, gross profit increased by 68.5% to RMB147.0 million. Overall gross margin improved by 7.7ppt to 40.7%, driven by better product mix, improved yield from maturing farmland and higher operating efficiency arising from economy of scale. Earnings before interest, tax, depreciation and amortization (“EBITDA”) increased 89.9% to RMB148.1 million, with a 11.5ppt improvement in EBITDA margin to 41.0%.

The Group continued to generate healthy operating cash flow of RMB122.2 million in 1Q FY2012 (1Q FY2011: RMB107.4 million). Net cash used in investing activities amounted to RMB164.0 million, mainly for (i) new purchases and prepayments for property, plant and equipment and (ii) incurring land improvement costs on new farmland, which is expected to contribute revenue by the 3rd quarter for this financial year.