Zhongpin increases net income, sales for quarter, year

by Bryan Salvage
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CHANGGE CITY, HENAN, CHINA – Zhongpin Inc., a leading meat and food processing company in the People's Republic of China, stated for the fourth quarter ended Dec. 31, net income increased 9% to $5.5 million, or $0.18 per fully-diluted share, gross profit increased 48% to $17.7 million with gross margin of 12.6% while sales increased 39% year-over-year to $139.8 million.

For the year, net income increased 69% to a record $31.4 million, or $1.05 per fully-diluted share, gross profit increased 83% to $68.6 million with gross margin of 12.7%, non-GAAP net income increased 69% to $35.1 million or $1.18 per fully-diluted share and sales increased 85% year-over-year to a record $539.8 million.

"During the year, we successfully executed our capacity-expansion strategy and added 126,000 metric tons of annual production capacity of chilled and frozen pork and more than doubled our annual production capacity of our high-margin, processed meat products," said Xianfu Zhu, chief executive officer of Zhongpin.

For the quarter, revenue from chilled pork reached $76.3 million, or 55% of net sales during the quarter, up 45% from $52.7 million, or 52% of net sales a year ago. Revenue from frozen pork was $46.9 million, up 33% from $35.3 million in the fourth quarter of 2007. Prepared pork product sales increased 39% to $14.7 million from $10.6 million in the same period a year ago.

In January 2009, Zhongpin began production at its new chilled and frozen pork facility in Yongcheng City. This new facility has a total annual production capacity of 80,000 metric tons, approximately 75% of which is dedicated to the production of chilled pork and 25% to the production of frozen pork. Zhongpin expects to quickly ramp up production at this facility to achieve an over 60% utilization rate by the second quarter of 2009.

Construction for Zhongpin’s new pork production facility in Tianjin will begin in April 2009. The new facility will add 100,000 metric tons of chilled and frozen pork products annually and 36,000 metric tons of prepared-meat products.

The prepared meat production line and the new warehouse and distribution center are expected to come on line by the end of the second quarter of 2010 and achieve their target unitization rate at the end of the fourth quarter of 2010. The Tianjin City facility will facilitate Zhongpin's penetration into Northern China, which is one of the company's primary target markets.

Zhongpin will begin construction of its new prepared-meat facility in Changge City, Henan Province in April 2009. Management expects that this new facility will add annual prepared meat production capacity of 36,000 metric tons by the end of the fourth quarter of 2009.

Capital expenditures for the next 12 months are expected to be $78.3 million.

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