China Agri adding capacity to capture rising edible oil prices

PUBLISHED : Thursday, 17 April, 2008, 12:00am
UPDATED : Thursday, 17 April, 2008, 12:00am

China Agri-Industries Holdings, the oilseed processing and biofuel arm of the mainland's largest food importer and exporter, plans to spend HK$2.2 billion this year to expand production capacity, after reporting 46 per cent growth in earnings last year.

The Hong Kong-listed subsidiary of China National Cereals, Oils & Foodstuffs Import & Export Corp (Cofco) said it would use almost 50 per cent of the capital expenditure to increase its oilseed processing capacity 57 per cent to 9.55 million tonnes a year to capitalise on rising prices and robust demand for edible oil.

'We have a very good development opportunity in the oilseed division, so our strategy is to expand production capacity,' said Lu Jun, an executive director and vice-president in charge of the oilseed business. 'We will not rule out acquisitions as a way to expand.'

The company will spend HK$785 million, about 35 per cent of the budget, to boost its non-grain biofuel production capacity by 400,000 tonnes this year.

Last year, it spent HK$1.76 billion - or 86 per cent of its budget - on biofuel projects. But Beijing's ban on using grains to make biofuel to curb rising prices prompted the company to switch to other feedstock such as tapioca.

China Agri said yesterday net profit rose to HK$1.1 billion or 32.2 HK cents last year, from HK$755 million or 27.1 HK cents in 2006.

Revenue, which the firm generated from oilseed processing, biofuel, rice trading, brewing materials and wheat processing, jumped 61.28 per cent to HK$28.87 billion from HK$17.9 billion.

However, its gross margin was squeezed to 6.9 per cent from 7.8 per cent a year earlier, mainly due to an unrealised hedging loss of HK$381 million in oilseed processing.

Shares of China Agri closed 0.38 per cent higher at HK$5.23 yesterday. No dividend was declared.