Yurun Food Group reports positive first half results

by Bryan Salvage
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CHINA – Yurun Food Group, a vertically integrated meat-product processor and supplier in China, announced for the six months ended June 30 net profit of HK$1,609 million (US$206.5 million) (1H2010: HK$1,309 million/US$169 million), up 22.9 percent. Turnover of HK$16,456 million (US$2,112 million) (1H2010: HK$8,693 million/US$1115.7 million)) was up 89.3 percent versus the same period last year.

The turnover increase is primarily due to the group's leading production capacity allocation and branding, success in capturing the market demand for quality meat products, as well as the market-oriented sales strategy in its upstream business, which allowed its product prices to increase correspondingly amid increase in hog prices during the period, the company said.

"In the first half of 2011, domestic consumption in China continued to be promising, which provided a favorable business environment for the Chinese meat product market,” said Zhu Yicai, chairman. “However, the significant increase in raw material, labor and transportation costs during the period brought tremendous challenges to the industry.

Meanwhile, the central government has implemented a series of policies, which provides favorable conditions for the long-term steady development of the hog slaughtering and production industry to ensure the orderly development of the Chinese hog slaughtering industry and to give support to hog production, he added. “The growing concerns of the government and consumers on food safety has lead to a favorable policy and business environment for the steady development of the group and brings business opportunities from industry consolidation, which we believe will facilitate sales and profit growth in the group's upstream chilled pork products and downstream LTMP business segments,” he said.

The group's business is divided into downstream processed meat products and upstream chilled and frozen meat segments. As of June 30, the upstream slaughtering capacity was 41.0 million head per year, an increase of 5.4 million head versus 35.60 million head at the end of 2010. The group's annual capacity of downstream meat processing was 304,000 tons.

Yurun Food said it continued to strengthen its existing quality-control system so as to conform to the highest international food hygiene and safety standards, as well as further enhance the level of management in its system, mechanical maintenance, internal staff and external service providers, so as to provide quality meat products for consumers.

The company will continue expanding its research and development team, focusing on the R&D of mid-to-high-end products, developing competitive products in order to maintain its advantage and reinforce its leading position in the industry.

Following the steady and relatively rapid growth of the Chinese economy and expanding urbanization in China, the change in consumption pattern of the urban middle class from purchasing meat products in traditional wet markets to modern supermarkets for better-quality meat products, as well as the growing market demand for mid-to-high end meat products, will continue to propel the steady development of the group's overall business.
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