During the first half of 2012, under the background of the aggravating European debt crisis and a minimal rebound of the US economy, China’s economy remained weak and faced a considerable challenge. The GDP growth rate for the first half of the year was 7.7%, which was the lowest record for the last three years. Nevertheless, Dachan Food still responded with positive attitude with stable expansion. Turnover for the first half of the year amounted to RMB5,478 million, representing a year-on-year increase of 8.3%.
Under the challenging economic environment, price of pork significantly fluctuated due to unbalanced demand and supply and the imperfect development structure in the industry, as a result, the price of chicken meat was also affected. Turnover from chicken meat business segment was affected as the price of raw materials such as corn and soybean remained high. Therefore, the general gross profit of Dachan Food for the first half of the year amounted to RMB346 million, representing a year-on-year decrease of 13.2%, together with a year-on-year decrease in gross profit margin from 7.9% for the first half of the year to 6.3%, reflecting a reduction in profitability.
As for feed business, by virtue of its leading feed formula and production technology, Dachan Food maintained a stable increasing market share in existing market with increasing popularity and turnover. The Company planned to set up more and more factories for feed business segment within the coming 2-3 years to improve the profitability and growing potential of this segment.
Furthermore, the comprehensive food operation the Group cultivated in recent years has been stably progressing. We achieved a satisfactory result in promotion and product development on the brand, “Sisters’ Kitchen” while the turnover from processed food for the first year amounted to RMB782 million, representing a year-on-year increase of 21%. There will be more and more related products to be launched during the year and we hope that consumers will give us a positive feedback. The export of processed foods maintained a stable growth in spite of the economic downturn, reflecting that Dachan Food was well recognized by foreign markets.
In the long-term, PRC consumption food industry keeps growing in general. Food safety gradually becomes the most concerned issue for the public. Given the fact that more and more problems about food safety arise, the future development of food corporations carries an important mission and will have a long way to go. Although the Company was encumbered by the depressed market, Dachan Food always gives top priority to food safety. By comprehensively implementing tracing system to monitor food safety and strictly controlling each procedure on the food supply chain, the Company Food ensures the consumers with the provision of safe food. Dachan Food is well recognized by society with regard to food safety. During the first half of 2012, the Group was again awarded “Outstanding Animal Agriculture Corporation in China” and “2012 Top 100 Green Companies of China”, which creates a positive corporate image and directly promotes the sales of products.
Looking forward into the second half of 2012, under the support of policies with an aim to achieve stable growth, it is expected that the PRC economy will turn stable from its downward trend. Although the overall business environment still pessimistic, Dachan Food will keep optimizing internal control and enhancing food safety measures to further consolidate and improve its leading position in breeding and rearing industry and food industry as well as its public image in order to strive for a higher growth.
On behalf of the Group, I would like to express my great gratitude and sincere appreciation to each shareholder, business partner and farmer for their support and persistent concern. Also, I would like to thank our creative and loyal staff for their professionalism as well as their efforts which contributed to the Group’s development. The Group will try to fulfill the expectation and realize a sustainable and efficient operation to contribute back to shareholders and society.
Hong Kong, 29 August 2012