Zhongxin Fruit & Juice enter into contract manufacturing agreements

To manufacturing concentrated apple juice.

In a disclosure to the Singapore Exchange, the Board of Directors of Zhongxin Fruit & Juice Company Limited has announced that its wholly owned subsidiary, Xuzhou Zhongxin Fruit & Juice Company Limited (Xuzhou Zhongxin) has entered into separate and independent contract manufacturing arrangement with three production plants in Shaanxi province where the Contract Manufacturers will manufacture concentrated apple juice for Xuzhou Zhongxin. The rationale for the arrangement is to allow the Group to gain access apple producing areas in Shaanxi province where its current facilities are not able to support.

Under the contract manufacturing arrangement, Xuzhou Zhongxin will pay for the cost of raw materials (subject to the benchmark pre-determined from time to time) and a fixed production cost per tonne to the Contract Manufacturers. The Contract Manufacturers does not share the revenue from the sale of the products but is liable for wastage and failure to meet the quality set by Xuzhou Zhongxin.There is no commitment as to the minimum quantity which Xuzhou Zhongxin is required to order from any of the Contract Manufacturers. The Group expects pilot production to begin in this month.

Executive Chairman, Mr Zhang Jian said, “Since the Group’s successful restructuring, the Group has been working towards increasing the Group’s revenue and strengthening the Group’s position in the industry. The contract manufacturing arrangement offers an exciting opportunity for the Group to explore the potential of apple producing areas in Shaanxi province without capital investment. If successful, the model may be replicated to other apple producing areas.”

None of the Directors or substantial shareholders has an interest in any of the Contract Manufacturers or the contract manufacturing arrangement other than through their respective shareholdings in the Company.