March 9, 2004



China's New Hope Group Ready To Bounce Back From Bird Flu


The feed production unit of one of China's leading enterprises, the New Hope Group, suffered during the bird flu outbreak. However it now expects to make a comeback as the threat from the virus recedes.


Sales at Sichuan New Hope Agribusiness Co., one of China's largest livestock feed producers, fell marginally in February from a year earlier, after sliding more significantly in January, Peng Fumin, director in the general manager's office, said.


Sales in December also declined on year, he said, but he gave no figures.


"After the fear of the bird flu disperses, pent-up demand for poultry feed will be released to push our sales up again," Peng said.


The executive said he doesn't expect bird flu to last long, pointing out that China has been lifting quarantines over areas where the virus had been detected.


Half of China's 31 regions have been afflicted with bird flu as the epidemic raged across Asia, killing 22 people and forcing the slaughter of millions of chickens.


China killed tens of thousands of birds suspected of carrying the H5N1 bird virus after confirming its first case of infection in January in dead ducks.


Sales at New Hope's two plants in Vietnam, the worst hit by the avian flu, fell by roughly a quarter in January, said Peng.


"Our sales at the two feed plants (in Vietnam) dropped by more than 1,000 tons in January from 4,000-5,000 tons in the same period of previous years," he said. But Peng added that those two plants mostly make aquatic feed and have been recovering since February.


He said New Hope's losses are limited as well partly because the feed business accounts for just 20% of total revenue.


In the first nine months of last year, New Hope Agribusiness recorded a 22% on-year rise in its net profit to RMB108.9 million ($1= RMB8.28), as core revenue rose to RMB1.42 billion, up 86% from a year earlier.


For all of 2002, New Hope's net profit and revenue were RMB121.3 million and RMB1.14 billion, respectively.


The company, based in China's central Sichuan province, is slated to announce its 2003 financial results March 12.


Peng said his company also has been raising its pig feed output to make up for the drop-off in poultry feed demand. Pig feed now makes up around 60% of the feed business at New Hope, he said.


New Hope's bottom line is supported by more than the feed business.


About 50%-60% of New Hope's net profit is derived from business related to financial investment, said Peng, namely its holding in Shanghai-listed China Minsheng Banking, considered one of the nation's more reputable banks, which has plans to list shares in Hong Kong this year.


The company has an indirect 7.4% stake in China Minsheng Banking, whose biggest shareholder is the investment arm of the New Hope Group. New Hope Agribusiness controls that investment arm.


The chairman of New Hope Agribusiness, Liu Yonghao, also is a board director at Minsheng and president of the entire New Hope Group. Liu was named the sixth richest individual in China in the 2003 Chinamoney 100.


Minsheng Banking's net profit soared 60% last year to CNY1.39 billion as its loans and deposits grew rapidly.


"Given the rapid growth in Minsheng's profit in 2003, you can imagine that New Hope Agribusiness's performance last year was also not very bad despite changes in other businesses," Peng said.