Zhongpin first-quarter net income up 33.7%

by Bryan Salvage
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CHANGGE CITY, CHINA – Zhongpin Inc., a leading meat and food processing company in the People's Republic of China, stated net income for the first quarter ended March 31 increased 33.7% year-over-year to $9.7 million, or $0.33 per diluted share, gross profit increased 34.9% to $19.1 million with gross margin of 12.4% and revenues increased 41.5% year-over-year to $153.8 million.

Operations recently began at the company’s new chilled and frozen-pork facility in Yongcheng City with an annual production capacity of 80,000 metric tons.

"We are very pleased to begin 2009 with solid financial results," said Xianfu Zhu, chief executive officer of Zhongpin. "Consumers historically increase their consumption of pork products during the Chinese New Year holidays resulting in a strong seasonal demand for pork in the first quarter. Our ability to quickly ramp up capacity utilization at our newly added facilities enabled us to achieve double-digit growth in revenue and improved profitability, both on a year-over-year and sequential basis."

Prepared meat products increased 83.3% to $22 million from $12 million in the first quarter of 2008. Prepared-meat products contributed 14.3% of the total revenue during the quarter, up from 11.0% a year ago. Chilled pork and frozen pork represented 56.1% and 28.6% of total revenue, compared to 50.6% and 37% in the first quarter of 2008, respectively.

Chilled-pork sales increased 56.9% to $86.3 million from $55.0 million in the first quarter of 2008. Revenue from frozen pork was $44 million, up 9.5% from $40.2 million in the first quarter of 2008.

Exports, which represented 0.3% of total revenues, decreased 78.3% to $0.5 million from $2.3 million in the comparable period in 2008. The decline in revenue from exports is attributable to the company's decision to reduce export sales as the domestic market presents an attractive growth opportunity in addition to higher gross margins.

Capacity expansion plans for 2009 include a new pork-products facility in Tianjin City, as well as construction of a new prepared meat facility in Changge City, which will add annual prepared meat production capacity of 36,000 metric tons by the end of the fourth quarter of 2009. The new facility is expected to achieve its target utilization level by the end of the second quarter of 2010.

For the next 12 months, capital spending is expected to be $93.5 million.

Zhongpin reaffirms its full year 2009 guidance for revenues to be in the range of $780 million to $810 million with a gross margin of approximately 12%, net profit margin of at least 6% and fully-diluted earnings per share in the range of $1.50 to $1.63, assuming a fully-diluted share count of 30.7 million shares outstanding.

"While the pork industry experienced a negative impact in April due to the recent H1N1 virus outbreak in North America, we believe this impact will be short-lived," Mr. Zhu said.

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