November 27, 2008

China's Yuhe signs lease agreement for feed production facility

China's Yuhe International Inc. has signed a contract to lease a feed production facility to Shandong Nongbiao Purina, a division of Cargill, for a period of 10 years.


On November 11, 2008, Weifang Yuhe Poultry Co, Ltd, a wholly owned subsidiary of Yuhe International, Inc, entered into an equipment leasing and tenancy agreement with Shandong Nongbiao Purina to lease a feed production facility covering an area of 32 mu, or roughly 21,470 square metre.


Pursuant to the agreement, Purina will pay a total of RMB 15 million (US$2.2 million) over the life of the lease with RMB 10 million (US$1.46 million) paid up front and the balance paid in equal semi-annual payments over 10 years.


The capacity of the factory's initial phase will be 90,000 tonnes per year. Construction of the factory and installation of the equipment will be completed in June 2009.


According to the agreement, Purina will invest approximately RMB 10 million (US$1.46 million) for the acquisition and installation of feed production equipment, which will be used in the facility.


In addition, after the facilities are operational, Purina will serve as Yuhe's exclusive source for feed. Feed produced at the facility will meet all of the most stringent safety and health standards which have been implemented by the Chinese government. Yuhe's own feed production will be gradually phased out.


Yuhe is the second largest day-old broiler breeder in China. Headquartered in Weifang, Shandong province, the company's main operations involve breeding, as all broilers are sold within a day of hatching. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., which largely supplies the Company's internal demand for chicken feed.

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