China Minzhong yearly net profit rose 11.1% to RMB755m

Fourth consecutive year of record profit.

SGX-listed China Minzhong Food Corporation Limited (China Minzhong) announced a record net profit of RMB755.1 million for the financial year ended 30 June 2013. Compared to the previous financial year, net profit grew 11.1% and this is the Group's 4th consecutive year of record profit since its listing in 2010, the company said in a release of its official results.

Group’s FY13 revenue increased by 26.4% to RMB3.2 billion, underpinned by better performances in both the Processed (comprising of processed vegetables, beverages and other processed products) and Cultivation (comprising of fresh vegetables produce and mushroom spores) business segments.

In the Processed business segment, revenue from processed vegetables rose 24.3% to RMB1.8 billion, attributable to higher sales for air-dried and fresh-packed products from both existing and new customers in the export markets. On the domestic front, revenue from beverages products increased 280.4% to RMB195.9 million, on the back of an increase in sales volume arising from growing consumer demand in the PRC market. Sales from other processed products increased moderately by 6.3% compared to the previous financial year.

In the Cultivation business segment, revenue from fresh vegetables produce grew by 23.1% to RMB1.1 billion, mainly attributed to an increase in cultivation volume from new productive farmland. Gross profit for the period grew 13.2% to RMB1.1 billion while gross margin slipped 4.0 ppt to 34.4% due to rising labour costs, higher raw material costs and lower yields from new productive farmland. In general, it takes approximately three years for new farmland to reach optimum yield and the bulk of the new farmland is in the 2nd year. The Group expects continuing margin pressure for the Cultivation segment due to higher labour costs and average selling prices not rising fast enough to offset higher costs, and will seek to mitigate this pressure through the continued shift towards higher value products, better economy of scale on new farmland as well as more efficient use of resources and increased mechanization (industrialized farming) to reduce labour needs.

Selling and distribution expenses remained relatively flat while administrative expenses rose 26.1% in line with higher revenue. Finance expenses also grew 33.6% on the back of increased bank borrowings to fund the Group's higher working capital requirements. Overall net profit for the financial year increased 11.1% to RMB755.1 million while earnings before interest, tax, depreciation and amortization ("EBITDA") increased 15.4% to RMB1.1 billion.

Net operating cash flow jumped 164.4% to RMB949.4 million, while overall cash and cash equivalents increased from RMB66.2 million as at 30 June 2012 to RMB826.4 million as at 30 June 2013.

Group’s Executive Chairman Mr. Lin Guo Rong said, “The past financial year was filled with corporate milestones for the Group, in many areas including financial performance, business expansion plans and corporate development. We are pleased to deliver our 4th consecutive year of record profit despite heightened cost pressures in our business operations. Our increased focus on industrialized farming has led to expansion into new cities and also extended the cultivation methodology to more crops, which will improve our raw material self-sufficiency and cost efficiency in the future. On the corporate front, we are also pleased to welcome PT Indofood as our new major shareholder in our next phase of growth. In line with our efforts to reward our shareholders, we are pleased to propose our first dividend payout after listing, which amounts to S$0.01 per ordinary share."