Acquisitions boost production capacity
To further develop China Agri into a volume-driven operation and achieve economies of scale, the company has acquired various production facilities on the mainland in an aggressive drive to boost production capacity.
Total capital expenditure committed to acquisitions for this year was HK$2.14 billion. In the first half of the year, the company had spent HK$514 million.
China Agri acquired COFCO Xinsha Oils & Grains Industrial (Dongguan) and Fei County COFCO Oils & Fats Industrial.
As a result, the company added 780,000 metric tonnes of oilseed crushing capacity to bring the total to 5.58 million metric tonnes. Its refining capacity increased 30.7 per cent to 1.53 million metric tonnes.
In the bio-fuel and biochemical business, China Agri acquired shares of Huanglong Food Industry, one of the mainland's largest corn processing plants, and added an extra 650,000 metric tonnes to its capacity, bringing the total to 1.85 million metric tonnes.
Also, with purchased shares in Jilin Packaging, the company's biochemical product packaging capacity now stands at 6,000 metric tonnes.
Vice-president Andy Li Wai-kwan, said the company was expected to proceed with the acquisition of Shanghai Rong's Technology, which has an annual sweetener production capacity of 150,000 metric tonnes.
Following the acquisition of wheat processor COFCO Industry (Taixing), the wheat processing capacity of China Agri increased 6.6 per cent to 1.69 million metric tonnes.
Managing director, Patrick Yu, said in addition to the volume-driven business model, the company had adopted a vertical business integration model from material processing, to packaging, to marketing and sales of branded products.
'We aim to achieve higher profit margins for products [through this business model],' Yu said.
The company sells its own brand of packaged rice to more than 500 cities in the country.
As part of its downstream marketing strategy, the company established a joint-venture company with Toyota Tsusho last year which produces Chinese and Western-style bread and cakes.
In the first half of this year, China Agri entered into co-operation agreements with high-end bread suppliers, including Multiple Unit High-Speed Railway and the Great Hall of the People. The company sold a total of 277 metric tonnes of bread, an increase of 166 metric tonnes compared with 2008.
