Oil and grain firm focuses on expansion

China Agri-Industries plots more moves in downstream and upstream businesses

PUBLISHED : Thursday, 29 August, 2013, 12:00am
UPDATED : Thursday, 29 August, 2013, 3:56am

China Agri-Industries, one of the mainland's largest state-owned oil and grain companies, says it will continue to extend its industrial chain, based on its existing processing-focused business model.

"We'd like to further expand into upstream and downstream businesses so our operational model will be more comprehensive," company vice-president Shi Bo said yesterday.

He gave its rice product brand, Wuhu (Five Lakes), as an example. "We may launch other self-owned brands in the downstream industrial chain," he said. "Following rice, our flour product can be turned into a business-to-customer operation as well."

Managing director Lu Jun said the company's peak investment period was over and the task for the next stage was to operate the projects the company had invested in well. Capital expenditure in the first half of the year totalled HK$1.23 billion, down 47 per cent year on year, "following completion of the current strategic expansion", the company said.

Agri-Industries posted a 31.5 per cent year-on-year rise in net profit to HK$660 million in the first half, benefiting from an improved gross profit margin. Revenue during the period fell 3 per cent to HK$40.2 billion as the company reduced its utilisation of oilseeds processing capacity to sustain profit margins.

Overall gross profit margin increased to 6.9 per cent in the first half from 6.3 per cent a year earlier.

The company expects operating pressures to ease in the second half of the year thanks to abundant international grain supply and lower feedstock costs.

Meanwhile, demand in the China market would pick up, fuelled by increases in per capita income and a string of upcoming holidays including the Mid-Autumn Festival next month and National Day in October.

The oilseeds processing business, which contributed 58 per cent of the company's revenue, reported a 10 per cent decrease in revenue to HK$23.3 billion, while gross profit margin grew to 4.2 per cent from 3.5 per cent in the same period last year.

"The crushing industry has not shown any fundamental improvements as imported feedstock prices remained higher than product prices in China," Agri-Industries said in a press release.