Cofco aims to list all units in 5 years

PUBLISHED : Monday, 26 March, 2007, 12:00am
UPDATED : Monday, 26 March, 2007, 12:00am

China National Cereals, Oils & Foodstuffs Import & Export Corp (Cofco Group), the mainland's largest grain trader and processor, expects to list all its businesses within 5 years after a systematic segregation of its various activities.

Chairman Frank Ning Gaoning said Cofco, whose China Agri-Industries Holdings raised HK$3.2 billion in an initial public offering earlier this month, would keep injecting assets into its two Hong Kong-listed vehicles for the next 3 to 5 years until units of the group are all listed.

More spin-offs from Cofco were also possible in the near future, Mr Ning said.

Shares of China Agri-Industries surged 48.66 per cent on their debut last Wednesday.

Cofco International, the group's other Hong Kong-listed firm, is a leading food processor aside from other businesses.

Mr Ning, who gained experience in consolidating state-backed firms when he was chairman of China Resources Enterprise, said Cofco's various businesses should be clearly categorised into separate branches to increase their appeal to investors.

'Many investors are concerned about whether big-scale conglomerates in China can have a focused business,' he said.

Mr Ning said the next step would be consolidation of the group's property business.

China Agri-Industries is in oilseed and rice trading, brewing and wheat processing, and plans to focus on biofuel and biochemical businesses as it seeks to benefit from government efforts to expand the use of alternative energy products.

Beijing has so far issued only 5 licences to produce ethanol, an alcohol made from sugar in grains such as corn, rice, sorghum and sugarcane that was introduced in the mainland in 2002 as a fuel blend to cut carbon-dioxide emissions.

'It is the government's policy to develop alternative energy,' managing director Patrick Yu Xubo said. 'By 2010, the government plans to attain a production target of 5 million tonnes of ethanol, of which we hope 50 per cent to 60 per cent will come from China Agri-Industries.

'As more companies look into the biofuel business, we're creating demand for ethanol in the country.'

China Agri-Industries wholly or partially owns 2 of the 4 licensed operating ethanol fuel plants in the mainland. According to its prospectus, the company's biofuel and biochemical division generated 30.2 per cent of profits and 6.7 per cent of total revenue in the first 9 months of last year.

China Agri-Industries more than doubled its 9-month profit last year to 506.7 million yuan from 224.5 million yuan in the first 3 quarters of 2005 as sales rose to 13.84 billion yuan from 12.08 billion yuan.

The company has a capacity to make 180,000 tonnes of ethanol fuel annually. It plans to expand this to 1.08 million tonnes by the end of next year as part of capital spending of 2.8 billion yuan for the period.