Rising health food sales boost China Green income 46.8pc

PUBLISHED : Thursday, 24 January, 2008, 12:00am
UPDATED : Thursday, 24 January, 2008, 12:00am

China Green (Holdings), a mainland grower, processor and supplier of agricultural products, saw net profit for the six months to October jump 46.82 per cent year on year, thanks to increasing demand for health foods.

Net profit rose to 207.78 million yuan from 141.52 million yuan a year earlier, while turnover jumped 38 per cent to 533.7 million yuan.

Gross margin improved to 51.6 per cent from 50.9 per cent as the firm sold more high-margin drinks.

'Consumers around the world are becoming increasingly health-conscious and demand for healthy food products overseas is increasing,' the company said.

'The group has successfully captured opportunities in both domestic and overseas markets.'

Shares of China Green surged as much as 31 per cent yesterday morning after the announcement and closed 13.54 per cent higher at HK$8.30. The board declared an interim dividend of 6.3 fen per share.

Domestic sales jumped 40 per cent to 293.39 million yuan for the half-year, accounting for 55 per cent of turnover.

Exports grew 36 per cent, with Japan being the firm's largest market, making up 72 per cent of overseas sales.

Executive director and financial controller Eddie Kung said China Green, which grows vegetables, processes grain-related products and makes instant noodles, plans to spend between 1.8 billion yuan and two billion yuan to expand production capacity and buy farmland.

He expected its farmland to expand to between 5,000 and 5,300 hectares from about 4,400 by April next year, bringing China Green's annual cultivation capacity to 327,840 tonnes.

Annual processing capacity would also be enhanced to 550,000 tonnes by then, Mr Kung said.

China Green, founded in Fujian province 1998 and listed in Hong Kong six years later, is a key player in the country's merging but still fragmented produce industry.

It competes with another Fujian firm, Chaoda Modern Agriculture (Holdings), the mainland's biggest vegetable producer, but lags behind in the scale of farmland expansion.

Chaoda plans to expand its present farmland acreage by 26,680 hectares from 2009 to 2013 - or by an average of 5,336 hectares per year. The company had 24,255 hectares last year.

In contrast with Chaoda, which derives 99 per cent of turnover from vegetables and fruits, China Green aims to be a diversified platform for green food production on the mainland, with activities ranging from agricultural production, processing, brand promotion and delivery.

Its 150 million yuan green food logistics and distribution centre in Shanghai will come on stream in two months.

All nine analysts polled by Bloomberg recommend a 'buy' rating on China Green's stock.