DaChan Food commits US$93m of IPO funds to expansion drive

PUBLISHED : Friday, 26 October, 2007, 12:00am
UPDATED : Friday, 26 October, 2007, 12:00am

DaChan Food (Asia) said it would use US$93 million of its recent initial public offering proceeds to achieve its goal of becoming the mainland's biggest chicken meat supplier.

The company aims to capture 25 per cent share of the market, up from the current 4 per cent, by expanding its production facilities.

'Tyson, the biggest meat processor in the US, has a 25 per cent market share. It is the benchmark for DaChan's growth.' said chairman Mark Han Jia-hwan. 'Expansion and consolidation will be our focus for the next three years.'

The Dalian-based company spent 100 million yuan to expand two processing plants in Vietnam and Shanghai that will start production this year. Production capacity for the company's plant in Vietnam will rise to 980,000 tonnes from 530,000 tonnes previously. The company did not provide separate production figures for Shanghai.

However, total production capacity for the company's two mainland processing plants - in Shanghai and Dalian - will increase to 38,000 tonnes per year from the current 34,000 tonnes.

'A new processing plant in Tianjin will start working by the middle of next year with an investment of 120 million yuan.' said chief financial officer Jack Chang Chin-pyng. Annual production there will be 30,000 tonnes.

By 2009, DaChan will raise the total production capacity of it processing business on the mainland by 70 per cent. The company raised HK$899 million from the Hong Kong stock market early this month. Before the share sale, the company had 30 facilities concentrated in the country's northeast.

For the first nine months of this year, DaChan posted a net profit of US$22.1 million - US$17.9 million excluding government subsidies - on higher sales after its expansion. That already exceeds the US$13.4 million it earned for all of last year.

Net profit margin was 2.8 per cent, rising from 2.1 per cent last year.