November 10, 2010

 

Zhongpin's revenues and net income rise in Q3

Zhongpin Inc, China's leading meat and food processing company, reported higher revenues and net income for the third quarter 2010 on-year.

 

Net sales revenues increased 24% in the three months ended September 30, 2010 to US$241.1 million from US$194.9 million in the third quarter 2009. The company also reported an 11% rise in net income to US$14.7 million in the third quarter 2010 from US$13.2 million in the third quarter 2009.

 

Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin Inc, said "We have two primary goals. Our operating goal is to become a major consolidator of the Chinese meat industry and our financial goal is to increase value for our shareholders.

 

"Our strategy and actions to achieve that goal can be summarised in six points.

 

"First, we determine our new growth markets for pork based on several factors that include China's meat industry development policies, market size, potential growth, hog production, and the supporting infrastructure needed for success.

 

"Second, we develop all the critical success factors, including good relationships with hog farmers; our proven production and logistics systems; marketing and promotion to create brand recognition and market demand; our own stores; and sales contracts with retailers, wholesalers, local and chain restaurants, government organisations, and others.

 

"Third, in our current markets, we further optimise our product structure - working to increase the sales of our most profitable products and further expand our retail outlets and sales channels to gain more market share and higher sales.

 

"Fourth, we actively continue to apply advanced technology to our business.
 

"Fifth, we maximise the yield from our raw materials, maximise our energy efficiency, and minimise our waste.

 

"And sixth, given that our primary product is pork, we look for every logical extension of our primary business. For example, this year we started a new product line by opening our new premium pork oil facility.

 

"We also have been expanding our cold-chain logistics system into a new commercial service."

 

Since the end of the second quarter of 2010 through late October, hog prices have increased about 30%, primarily due to government purchases to stabilise hog prices and protect the interests of hog farmers in the first half of 2010; droughts and floods in several sections of China that increased agricultural prices; higher costs of raising hogs; and hog supplies that have been better balanced with hog demand.

 

During the same months, pork prices in the market were not able to match the sustained rise in hog prices. As a result, Zhongpin's gross profit margin was lower than normal in the third quarter 2010 and lower than in the third quarter 2009.

 

In early November, the spread between pork prices and hog prices has started to return to a more normal relationship.

 

Due to the approaching seasonal and holiday peak demand for pork, Zhongpin believes hog prices will continue to increase by about 10% from September 30, 2010 through December 31, 2010 and will remain at a higher level during 2011. Pork prices are expected to rise to rebalance the traditional relationship between hog prices and pork prices and more normal gross profit margins are expected.

 

Zhu continued, "Through 2015, we expect to expand our production capacity within the government's selected markets and further increase our market share across China, while continuing to expand our leadership in the meat industry.

 

"Given our good performance during the first nine months this year, we believe the outlook for the remainder of 2010 continues to be good," he added.