COFCO listed offshoots start to show the benefits of company-wide reforms
Under new chairman Zhao Shuanglia’s strewardship, 36 ‘zombie firms’ have been offloaded through restructuring, asset sales, or bankruptcy
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.
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.”
The entire company has managed to significantly bolster its profitability and management proficiency over the past year. 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
COFCO is among a handful of companies Beijing is using to showcase its SOE reform, and Zhao Shuanglian was considered a little-known former head of a grain storage company before taking the reins of its long-serving, iconic chairman Ning Gaoning in January last year.
Ning, who now heads state-owned chemical group Sinochem, had led an aggressive overseas expansion of the food trader, powered by acquisitions that had eventually seen half of the company’s revenues contributed from overseas operations in Australia, the Netherlands and other countries.
But his successor Zhao immediately he rolled out a plan to downsize the food empire, as he launched its plan to transform the company into what refers to call “a state-asset manager”.
Since his arrival COFCO has offloaded a long list of money-losing units, including its beleaguered instant noodle, cashmere, chocolate, timber and shipping operations.
Under his strewardship, “We have exit from 36 ‘zombie firms’ through restructuring, asset sales, or bankruptcy applications,” the company said.
In July, it swallowed up state-owned textile trader Chinatex in a mega merger as part of the central government’s efforts to consolidate resources.
That deal particularly has been credited with boosting COFCO’s edible oil processing capacity, the statement said, and its cotton arm now commands a tenth of the global market following the merger.
Shares in China Agri-Industries closed Monday at HK$3.67, up 4.26 per cent, while China Foods retreated in the afternoon to settle down 0.56 per cent at HK$3.55. Mengniu advanced 1.29 per cent to HK$14.18 at the close.
