May 12, 2009

 

Zhongpin Inc., a leading meat and food processing company in China, on Monday (May 11) reported financial results for the first quarter ended March 31, 2009.

 

Revenues for the first quarter of 2009 increased 41.5 percent, to a record US$153.8 million from US$108.7 million in the first quarter of 2008.

 

Zhongpin's revenue growth during the first quarter was driven by increased demand for high quality pork products, increased production capacity contributed by the company's newly added facilities in 2008.

 

For the quarter, prepared meat products experienced the strongest growth, up 83.3 percent to US$22.0 million from US$12.0 million in the first quarter of 2008.

 

Prepared meat products contributed 14.3 percent of the total revenue during the quarter, up from 11.0 percent a year ago, while chilled pork and frozen pork represented 56.1 percent and 28.6 percent of total revenue, compared to 50.6 percent and 37.0 percent in the first quarter of 2008, respectively.

 

Revenue from chilled pork increased 56.9 percent to US$86.3 million from US$55.0 million in the first quarter of 2008. Revenue from frozen pork was US$44.0 million, up 9.5 percent from US$40.2 million in the first quarter of 2008.

 

Gross profit for the first quarter of 2009 was US$19.1 million, up 34.9 percent from US$14.2 million in the first quarter of 2008, while gross margin was 12.4 percen in the first quarter of 2009 compared to 13.1 percent in the first quarter of 2008.

 

The decline was due to increase in sales of low margin products to capture increased market share and increase capacity utilisation level, of new facilities.

 

Income from operations in the first quarter of 2009 was US$11.7 million, up 49.9 percent from US$7.8 million in the first quarter of 2008, while operating margin was 7.6 percent in the first quarter of 2009, compared to 7.2 percent in the first quarter of 2008.

 

Net income for the first quarter of 2009 was US$9.7 million, or US$0.33 per fully diluted share, compared to US$7.3 million, or US$0.24 per fully diluted share, for the first quarter of 2008.

 

On April 28, 2009, Zhongpin announced its construction of its new pork products facility located in the Jinghai Economic Technical Development Area in Tianjin City, which will add 100,000 tonnes in its annual chilled and frozen pork capacity and 36,000 tonnes in annual low temperature prepared meat production capacity.

 

Zhongpin's capacity expansion plans for 2009 include the new pork products facility in Tianjin City, as well as construction of a new prepared meat facility in Changge City - which will add its annual prepared meat production capacity of 36,000 tonnes by the end of the fourth quarter of 2009, and it is expected to achieve its target utilisation level by the end of the second quarter of 2010.

 

The company also reaffirmed its full year 2009 guidance for revenues to be in the range of US$780 million to US$810 million with a gross margin of approximately 12.0 percent, net profit margin of at least 6.0 percent and fully-diluted earnings per share in the range of US$1.50 to US$1.63, assuming a fully-diluted share count of 30.7 million shares outstanding.

 

Zhongpin chief executive officer Zhu Xianfu said while the pork industry experienced a negative impact in April due to the recent AH1N1 flu virus outbreak in North America, he believes it would be short-lived, and is not expecting further negative impact on the company's second quarter.

 

Zhu also believes that China's live hog prices and pork prices are close to their bottom and is expecting an upward trend in the second half of the year as the Chinese economy begins to recover.