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Fufeng Group Limited (HKG:0546) Announces 2014 Interim Results with Net Profit Up 33.2%

August 18, 2014

Hong Kong, China, Aug 19, 2014 - (ABN Newswire) - The world's largest monosodium glutamate ("MSG") and xanthan gum producer, Fufeng Group Limited (HKG:0546) ("Fufeng" or the "Company", together with its subsidiaries, the "Group"; HKEx stock code: 546) today announces its unaudited interim results for the six months ended 30 June 2014 ("Period under review"). Despite ongoing challenges in the operating environment, the Group was able to achieve satisfactory growth in its overall gross profit and net profit in the period under review. Overall revenue of the Group remained stable. However, the Group was able to rely on the growing sales of new products, such as high-end amino acid, and implement effective cost controls to increase the overall profitability.

----------------------------------------------------- Financial Highlights ----------------------------------------------------- Six months 2014 2013 Change ended June 30 (RMB Million) (RMB Million) ----------------------------------------------------- Revenue 5,707.6 5,741.6 -0.6% ----------------------------------------------------- Gross Profit 1,027.7 926.2 +11.0% ----------------------------------------------------- Gross Profit Margin 18.0% 16.1% +1.9 ppts. ----------------------------------------------------- Profit Attributable to Shareholders 274.7 206.3 +33.2% -----------------------------------------------------

For the period ended 30 June 2014, the Group recorded a slight decrease of 0.6% in revenue to approximately RMB5,707.6 million. The decrease in revenue was primarily caused by decreases in the average selling price ("ASP") of MSG and xanthan gum products. However, the Group increased the production capacity and sales volume of xanthan gum due to the commencement of xanthan gum production at the Xinjiang Plant, in the second half of 2013. The Group's gross profit increased by 11.0% to approximately RMB1,027.7 million in the first half of 2014. The increase was primarily due to 1) an increase of raw material cost tax relief (a new tax relief policy for the agricultural products processing industries in Inner Mongolia was launched at the end of 2013); 2) an increase in the sales of high-end amino acid products, which have a higher profit margin, as well as an increase in revenue of starch sweeteners; and 3) implementation of effective cost controls. Overall gross profit margin increased to 18.0%. Profit attributable to the shareholders increased by 33.2% to approximately RMB274.7 million. Basic earnings per share were HK 16.58 cents. The Board of Directors has recommended an interim dividend of HK 3 cents (2013: HK 2 cents). MSG Segment Revenue of the MSG segment (includes MSG, fertilisers, threonine, high-end amino acid products, starch sweeteners and other related products) increased by 0.6% to RMB5,030.4 million, which was mainly attributed to the increase in the revenue of high-end amino acid products and starch sweeteners. However, revenue of MSG decreased, which was primarily due to the slight decrease in sales volume. The sales volume of MSG was 497,989 tonnes in the first half of 2014, representing a decrease of 2.0% as compared with that in the corresponding period of 2013. ASP of MSG dropped by 0.1% to RMB6,181 per tonne in the period under review. During the period from January to May in 2014, the overall market demand of MSG was flattened due to an unfavourable consumption environment. MSG revenue decrease was compensated by the increase in revenue contribution from the high-end amino acid products, which have a higher profit margin, and the increase in raw material tax relief. As a result, the overall gross profit and gross profit margin of the MSG segment increased. Gross profit increased to RMB650.9 million and gross profit margin increased 3.1 percentage points to 12.9%. After continued market consolidation in 2013, the oversupply situation for MSG has been improved. The market demand of MSG remained relatively stable during the period under review even though ASP of MSG still remained at a relatively low level. Since the oversupply situation has been improved, the ASP of MSG has started to increase gradually since June of 2014. The MSG market in China has become increasingly concentrated after a long period of industry shuffling. The Group actively led the benign competition in the industry by leveraging on its cost advantage and scale of production capacity and continues to be the leading MSG producer in the world. In addition, the Group plans to relocate the Baoji Plant to the Caijiapo Economic and Technological Development Zone of Shaanxi Province. CAPEX related to the construction and relocation of Baoji Plant will be approximately RMB 300 million in 2014, which will be funded by internal resources of the Group. High-end Amino Acid Business The high-end amino acid business becomes the Group's new growth driver. The products include valine, leucine, isoleucine, glutamine and hyaluronic acid etc. During the period, the total sales volume of high-end amino acid products reached 1,824 tonnes. Revenue reached RMB146.2 million, with a significant increase of 55.5%. The Group's high-end amino acid products generally enjoy higher profitability and focus on healthcare and pharmaceutical materials industries. Due to the new production line in Xinjiang Plant commenced operation at the end of 2013, the annual production capacity of high-end amino acid further increased to 5,000 tonnes in the first half of 2014. Xanthan Gum Segment The global market demand for xanthan gum has increased continuously. The Group has increased its production capacity and has continued to increase its market share since 2009. The top three xanthan gum producers, led by the Group, continue to dominate the supply of the global market. The Group's sales volume of xanthan gum continued to increase in order to meet market demand. Production and sales volume of xanthan gum increased by 34.9% and 9.9%, respectively, as compared to 1H2013. The sales volume increase was mainly due to the annual production capacity of xanthan gum increased to 30,000 tonnes at the Xinjiang Plant since the end of 2013. Due to the increase of overall supply in the industry, ASP of xanthan gum has retreated to a lower level, after significant increase in recent years. In the period under review, the Group's ASP of xanthan gum dropped by 17.0% as compared to 1H2013. Revenue of xanthan gum decreased by 8.9% to RMB677.2 million. In 1H2014, 90.7% of total sales of xanthan gum of the Group came from the overseas markets. Regarding future prospects and development strategies, Mr. Li Xuechun, chairman of Fufeng said, "Looking ahead to the second half of the year, we expect the operating environment will continue to improve. The MSG market in China is on a track of sustainable long-term development after recent three years of industry consolidation and elimination of production capacities. The Group is in a good position to benefit from such potential upturn in market situation. We will seize the opportunities and increase the MSG price in due course in order to enhance the efficiency of the MSG business as well as consolidate and expand the Group's leading position and competitive strength in the industry." Mr. Li added, "The high-end amino acid business is the Group's new growth driver. In the second half of the year, we will focus on strengthening the sales teams and enhancing the marketing and development efforts while optimising the product mix and increasing the type of products, including hyaluronic acid and gellan gum. For the xanthan gum business, price of xanthan gum dropped in 1H2014. We expect that the price of xanthan gum will slightly decrease in the second half of the year compared with that of the first half. The Group has significant competitive advantages in the xanthan gum market with a lower production cost as compared with our competitors. We maintain a higher selling price in the North America market compared with that of our competitors due to the favorable anti-dumping ruling in the U.S.. We will fully capitalise on our strengths to increase the market share in North America as well as further enhance the efficiency of the xanthan gum business and continue to make it a growth driver of the Group." To view the release, please visit:

http://media.abnnewswire.net/media/en/docs/77873-Fufeng_2014_interim_en.pdf

About Fufeng Group Limited: Fufeng Group (HKG:0546), the world's largest MSG and xanthan gum producer and supplier, uses fermentation technology to produce biochemical products. Its major products include MSG and xanthan gum products. Fufeng also produces fertilisers, corn refined products, starch sweeteners and amino acid products. For further information, please visit the Company website:

www.fufeng-group.com Contact:

Investors and media enquiries Mr. Eric Yip / Ms. Wingie TangVision Asia Consulting Group Limited Mobile: 852-96215918 / 852-63391004 T: +852-23756669 F: +852-35851606 E: eric.yip@visionasia.com.hk E: wingie.tang@visionasia.com.hk


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Source: ABN Newswire


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