COFCO listed offshoots start to show the benefits of company-wide reforms

Shares in some of the individual listed companies coming under the overall umbrella of China’s biggest foodstuffs conglomerate COFCO rallied strongly on Monday , after the state-owned group booked a 79 per cent surge in profit, helped by the spin-offs of some of its “zombie” firms as part of a company-wide reform programme, as well as generous government subsidies.

The state-owned food processor, trader and manufacturer saw its annual profits for 2016 beat its annual target of 5.05 billion yuan (US$740 million) to hit 6.15 billion yuan, after the completion of what has been a far-reaching overhaul of its portfolio, according to a statement from the State-owned Assets Supervision and Administration Commission.

Government subsidies to the group of 4 billion during the first nine months of last year also boosted its bottom line.

China Agri-Industries, its Hong Kong-listed arm, rallied as much as 4.26 per cent in Monday morning trading, while China Foods added 1.96 per cent. Mainland dairy giant China Mengniu Dairy, of which COFCO is the controlling shareholder, added as much as 1.86 per cent.

The Beijing-based food-to-real estate behemoth had been struggling to streamline its business, but a wide-ranging reorganisation of its assets appears to have handsome paid dividends under the guidance of new chairman Zhao Shuanglian, who took the reins a year ago to orchestrate the efficiency drive and revamp.

“The entire company has managed to significantly bolster its profitability and management proficiency over the past year,” the company said.

“Next, we plan to carry out a structural overhaul

of our grain trading, edible oil, crop feed as well as cotton ventures to make them bigger and stronger.”