Zhongpin 2Q net income falls, sales rise

by Meat&Poultry Staff
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CHANGGE, China – Zhongpin Inc. reports for 2Q 2012 vs. the second quarter 2011, net income decreased 43 percent to $11.0 million from $19.3 million, primarily due to a lower gross profit margin, the cost of more employees to support expansion, higher salaries, rising labor and utility costs and higher interest expenses and income taxes. Total sales revenues increased 11.4 percent to $408.2 million from $366.5 million in 2Q 201, due to higher sales volume for pork products sold at lower average selling prices.

"We achieved good sales growth in the second quarter on higher tonnage at lower average prices, compared with last year's second quarter,” said Xianfu Zhu, Zhongpin chairman and CEO. "The continuing intense competitive pressure due to the ongoing pork industry consolidation in China, and higher costs generally in China, have reduced our gross profit margin and increased our operating costs for this quarter and this year.

"We continued to expand our operations in the second quarter, but at a slower rate, to help secure our long-term growth and achieve a much stronger market position in the years ahead,” he added.

Zhongpin plans to invest $58.5 million to build a new production, research and development and training complex in Changge, Henan province. Once built, this facility should have an annual production capacity of about 100,000 metric tons for prepared pork products. It also plans to develop a center for research and development, training and quality assurance and control adjacent to this new facility.

The company is also investing approximately $18 million in a cold-chain logistics distribution center in Anyang, Henan province, which will have processing capacity, a temperature adjustable warehouse with a floor area of approximately 27,000 sq. m.; a distribution center; and a quality-control center.

Plans are also in the works to invest $87.5 million in a chilled and frozen food processing and distribution center in Kunshan, Jiangsu province near Shanghai. The center will be built in three phases. The first phase will include a processing center, cold-chain logistics center, and business complex. Zhongpin expects to invest about $35.0 million on the first phase that should be put into operation in the fourth quarter of 2012.

Approximately $10.5 million will be invested in a by-product processing plant in Changge, Henan province that will have a production capacity for 100 million meters of casings and 300 billion units of raw material to make heparin sodium. The construction started in March 2012, and the new facility is expected to begin operations in the fourth quarter of 2012.

Zhongpin also plans to invest approximately $49 million to build a slaughtering and processing plant, low-temperature prepared pork plant and logistics center in Tangshan, Hebei province. This facility will have an annual production capacity of about 60,000 metric tons for chilled pork, 20,000 metric tons for frozen pork, and 22,000 metric tons for prepared pork products. Construction is scheduled to start in the third quarter of 2012, and the new facility for chilled and frozen pork is expected to begin operations in the second quarter of 2013.

Zhongpin Inc. is a leading meat and food processing company specializing in pork and pork products, vegetables and fruits in China. Its export markets include Europe, Hong Kong and other countries in Asia.

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