China Food expands capacity, despite mixed results

Related tags Food industry People's republic of china Livestock

China Food Industries has announced plans to triple the size of its
cold room facilities, despite announcing a fall in sales for the
full year ending in December.

The Singapore-based company, which supplies food products in China and throughout the Asia Pacific region reported that sales were SGD 85.94 million (€40.13m) in 2004, a fall of 11 per cent from SGD 96.75 million in 2003.

This meant that net profits fell by 7.9 per cent in the 12 month period, to stand at SGD 6.02 million.

The company said that the decrease in sales was mainly due to a decline in external sales for its meat processing and pig farming sales. However, it also said that this decline was partly offset by an increase in external sales for its food distribution segment.

Similarly, the company's operating costs also reflected mixed fortunes. Although gross profits rose 2.2 per cent during 2004 to reach SGD 14.2 million, net profits were hit by an increase in income tax expense, as well as financial and administrative costs.

On a regional basis, the company reported that its mainstay market, the People's Republic of China showed a slight decrease in sales, SGD 38. 49 million for the full year 2004, compared to SGD 39.28 million in 2003.

However, more compensating for the slack sales in China, the Singapore market showed a strong increase, rising from SGD 29.99 million in 2003, to reach SGD 32.32 million in 2004.

However, the biggest shift occurred in the North Asia region, where sales fell from SGD 24.41 million in 2003, to reach just SGD 10.44 million in 2004. The company said that the drop occurred because it had channeled its processed meat products to the PRC market, where better margins were available.

On the same day as the company published its financial results, it has also confirmed that it is going ahead with plans to expand its warehousing facilities in Singapore. This plan coincides with the expansion of its food distribution business.

Currently the company's existing warehouse facilities includes an aggregate storage capacity of 3,500 metric tonnes. In order to expand this the company has acquired 4,677 square metres of building land at a cost of SGD $9 million.

China Food Industries​ says that new facility will be constructed by the first quarter in 2006, increasing storage capacity to 8,500 metric tonnes. This will make it one of the largest frozen food cold storage facilities in the island state and will enable it to greatly increase its food distribution business for the local market.

"With increased cold room storage, we are able to bring a greater variety of quality frozen food products to the local markets that suit the Asian taste buds,"​ said Dr Lim Seck Yeow, the company's chairman and managing director. "The group will also be able to increase sales revenue and product mix of frozen products as a result.

"We have identified food distribution to be one of our key growth drivers,"​ Lim added. "The vertical integration of the other three business segments, namely Animal Feed, Pig Farming and Meat Processing, will continue to be the focus of the group's strategy."

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