China Agri to boost oilseed capacity

PUBLISHED : Friday, 19 September, 2008, 12:00am
UPDATED : Friday, 19 September, 2008, 12:00am

China Agri-Industries Holdings, a Hong Kong-listed unit of the mainland's largest food importer and exporter, aims to double its oilseed processing capability in the next two or three years after reporting a 174 per cent jump in first-half net profit.

'The management of the company has done a good job in cost control and lifting profit margin, so the next step is to boost our scale,' said managing director Patrick Yu Xubo.

China Agri is expanding in the oilseed industry to take advantage of rising prices and demand.

The company had set a few acquisition targets and would not give up any acquisition opportunity in oilseed processing to expand capacity, Mr Yu said.

The National Development and Reform Commission issued a new rule on the soybean crushing industry recently restricting any existing oilseed processing companies which have more than a 15 per cent market share to set up new plants to expand capacity.

Mr Yu said China Agri's market share was below the threshold, so it still had room to expand. Goldman Sachs estimated the company had a 12 per cent soybean crushing market share last year.

China Agri currently has an oilseed crushing capacity of 4.86 million tonnes and refining capacity of 1.17 million tonnes. Its oilseed processing business accounted for 64 per cent of total revenue.

Mr Yu said the company would not invest heavily in the biofuel segment before the government issued a clear industry development policy. The company had already shifted to investing in non-grain biofuels after the mainland banned making grain-based biofuels last year.

China Agri's net income for the six months to June rose to HK$1.69 billion from HK$615.17 million a year earlier, thanks to stronger sales of its edible oil and gains from disposal of by-products and foreign exchange.

Revenue jumped 74.7 per cent to HK$20.27 billion from HK$11.6 billion. Gross profit margin improved to 12.3 per cent from 8.6 per cent.