Corn-based biochemical product manufacturer Fufeng Group recorded a total annual revenue of 3.59 billion yuan (HK$4.08 billion) last year, a sharp increase of 46.6 per cent compared with the previous year. Gross profit soared 158.1 per cent to 644.3 million yuan from 249.7 million yuan in 2007. The gross-profit margin went up by 7.8 percentage points to 18 per cent. Fufeng chairman Li Xuechun attributed the impressive performance to the consolidation of the glutamic acid and monosodium glutamate (MSG) industry on the mainland, coupled with significant growth in the average selling prices of these products driven by continued strong market demand. 'Our overall production capacity and sales shot up with the strategic opening of a plant in Inner Mongolia last year,' Mr Li said. The new plant enabled Fufeng to expand production capacity substantially and helped the company take advantage of the lower costs of raw materials and fuel compared with those available in Shandong and Shaanxi where Fufeng's main production facilities are. 'Meanwhile, we have accelerated the development of our xanthan gum business and total sales volume jumped to 20,000 tonnes last year from 6,200 tonnes in 2007,' Mr Li said. Glutamic acid is used as an MSG intermediate and xanthan gum is used as a salt/acid-resistant thickener and filling agent for food and beverages. Profit attributable to shareholders saw a 553.9 per cent jump to 294.7 million yuan. Earnings per share is 18 fen and final dividend per share is 10 HK cents. Henley Gong Qingli, the group's chief financial officer and executive director, said the global financial crisis had little impact on the robust growth in food consumption and manufacturing on the mainland. Revenue of Fufeng's MSG business segment, including sales of MSG, glutamic acid and other corn-refined products, rose 36.5 per cent to 3.13 billion yuan and accounted for 87.5 per cent of the group's total revenue. Sales of xanthan gum increased by 202.2 per cent and reached 451.74 million yuan, which accounted for 12.5 per cent of Fufeng's overall revenue. The group's main market for glutamic acid and MSG is the mainland. Its share of the mainland's glutamic acid market is 25 per cent and that of the MSG market is 20 per cent. Fufeng is the world's third-largest manufacturer of xanthan gum. Most of its xanthan gum is exported to Hong Kong, the United States and South Korea. Sales on the mainland rose 34.72 per cent to 3.02 billion yuan, accounting for 85 per cent of Fufeng's total revenue. Sales in Hong Kong and overseas jumped by 177.2 per cent to 565.44 million yuan. These markets account for 15 per cent of the group's overall revenue. Mr Li said the glutamic acid and MSG industry on the mainland completed its consolidation early last year as oversupply forced some medium and small-sized manufacturers to close. 'It helped to balance the demand and supply. We have been able to enlarge our market share,' he said. Leveraging on its leading market position, Fufeng was able to raise the average selling prices of its glutamic acid and MSG products to offset the costs of corn and fuel which remained high for most of last year, Mr Li said. The average selling prices of the group's glutamic acid products rose by 10.3 per cent and MSG products, 14.5 per cent. Mr Gong said although the prices of raw materials and coal began softening in October last year, Fufeng was able to hold firm the average selling prices of its main products and increased the gross profit margin of products in the MSG segment by 6.7 per cent to 15.6 per cent. Fufeng increased annual sales of xanthan gum to 20,000 tonnes, completely absorbing the 12,000 tonnes of additional production capacity created last year, Mr Gong said. 'Although the average selling price of xanthan gum decreased 10.2 per cent from 24,049 yuan a tonne in 2007 to 21,594 yuan a tonne [last year] due to the increased supply, gross profit margin improved by 3.5 percentage points to 34.4 per cent thanks to the strong cost advantage of xanthan gum production in the Inner Mongolia plant,' Mr Gong said. The group restructured its production capacity for products in the MSG segment and xanthan gum last year. It increased the annual MSG production capacity by 128.9 per cent to 171,667 tonnes. 'Production capacity of xanthan gum at the Inner Mongolia factory has increased to 24,000 tonnes and is expected to reach 32,000 tonnes in 2009 following the consolidation with the Shandong plant,' Mr Gong said. Fufeng has diversified its product mix by producing corn oil and chicken powder. 'We do not expect sales of these products to have any significant impact on our overall revenue. The main objective is to further sharpen our competitive edge,' Mr Gong said.