March 4, 2004

China's Prairie Xingfa In Talks With KFC, McDonalds On Poultry Supply

Inner Mongolia Prairie Xingfa Co Ltd looking to supply poultry to US fast food giants KFC and McDonalds, a Prairie Xingfa official said. 

"We are currently working on framework agreements, and will start get into the details after the agreements are approved by KFC and McDonald's headquarters," said Sun Kai with the company's board office.

The ongoing proposals have nothing to do with the bird flu outbreak which has severely affected the firm's poultry sales, he added, as contacts between the parties began last October.

Since the first bird flu outbreak was detected in a small mainland chicken farm in January, around 40 countries and regions worldwide stopped buying poultry from China.

Like other local poultry suppliers, Prairie Xingfa was also badly bruised by the avian influenza. Its poultry exports, which account for half of its overall poultry sales each year, were halted completely, while domestic sales also plummeted over consumer worries about the H5N1 virus.

The firm issued a statement on February 25, warning investors of trading risks, as its 2004 performance could be affected significantly if the outbreak remains unchecked.

Prairie Xingfa recorded RMB966.6 million in poultry sales for 2002, accounting for 59.74% of its core revenues, with the contribution rising to 63.1% in the first three quarters of 2003.

Its net profit dropped 10.71% in 2002, with the slump widening to 45.05% in the first three quarters of 2003 due to adjustments to product structure, Sun said.

He forecast continued falls in net profit for 2003, but declined to disclose detailed figures ahead of the release of the company's financial report, scheduled for March 25.