China Yurun reports growth amid challenges in 2011

by Meat&Poultry Staff
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HONG KONG – China Yurun Food Group Limited, a vertically-integrated meat product processor and supplier in China, announced turnover of HK$32.3 billion ($41.6 billion) compared to HK$23.4 billion ($30.2 billion) in 2010 its annual results for the year ended Dec. 31, 2011. This represents 50.5 percent growth over the year-ago period, according to the company.

China Yurun's gross profit was HK$2.785 billion ($359.1 million) compared to HK$3.098 billion ($399.5 million) in 2010. The company's profit attributable to shareholders was HK$1.799 billion ($231.9 million) compared to HK$2.728 billion ($351.7 million) in the year-ago period, representing a decrease of 10.1 percent and 34.1 percent respectively as compared to 2010.

The company's overall gross profit margin reached 8.6 percent during 2011. China Yurun attributed the decline in gross profit margin to significant increases in raw material costs, in particular hog prices, together with weakened market confidence in the company's products. The company also said it had problems shifting the company's rising operation costs to its customers. Finally, the company's product promotion activities in the fourth quarter of 2011 aimed at retaining market share also contributed to shrinking gross profit margins.

The company's board of directors recommended against payment of final dividend for 2011.

"In 2011, the pork product and hog slaughtering industries in China faced unprecedented challenges," said Zhu Yicai, chairman of Yurun Food. "It has been a short term turmoil experienced by the highly fragmented hog slaughtering and meat processing industries in China. For Yurun Food, this crisis allowed us to better recognize the challenges and opportunities of the Group's development in all aspects.

"The possible insufficient communication with the market during our development led to misunderstandings on the Group's quality management processes, which triggered a crisis of trust," Zhu said. "Having experienced this setback, Yurun Food will remain committed to the realization of its long-term development strategies, optimize the communication channels between the Company and consumers, so as to rebuild the brand and regain the trust of consumers of the Group, as well as to bring returns to shareholders."

Zhu added the company believes it has reached an end to its challenges. He said company leadership and board members are confident the business will realize a long-term steady growth.

"Looking ahead, the Group will be fully committed to our motto of 'you trust because we care', continue to implement internationally recognized internal quality control measures, strive to realize its nationwide marketing and production capacity development, so as to capture the business opportunities brought by industry consolidation, and to strengthen its leading market position," Zhu added.

The company's slaughtering capacity of was 46.05 million head per year as of Dec. 31, 2011, an increase of 10.45 million head as compared to 35.60 million head at the end of 2010. The company's annual capacity of downstream meat processing was 304,000 tons.

China Yurun said the company and its subsidiaries will continue to expand capacity, and enhance its nationwide production capacity in the future with a goal of reaching a slaughtering capacity of 70 million head per year, as well as a downstream capacity of 600,000 tons per year by 2015.

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