Chinese beef firm seeks RMB180m for overseas expansion, despite turmoil

By Mark Godfrey

- Last updated on GMT

China's intervention in the stock market was "boneheaded" says economist
China's intervention in the stock market was "boneheaded" says economist

Related tags: Stock market, Beef

A leading Chinese beef firm is seeking to raise significant funds to help it expand overseas. 

With operations in breeding and slaughtering, Henan Yisai Beef (Stock) Co will issue 30 million new shares at RMB6 each through a private offering, which it hopes will raise RMB180 million and drive the firm’s expansion overseas and continued building of its branded products portfolio at home.

We will accelerate the restructuring of our company, build our brands and seek to enter the international market,​” said Yisai general manager Mai Yingpang at a recent announcement of the company’s 2016 strategy.

Yisai is keen to acquire beef-producing assets overseas, as well as markets for its halal produce, according to Mai. Henan Yisai Beef (Australia) was incorporated in March 2014 as a private company with an office in Melbourne. Mai Yingpang has also been keen to build out the brand’s presence in catering, as well as halal exports. Meanwhile, Henan Yisai Beef (HK) Co was incorporated in 2014 to spearhead the company’s sales efforts in Hong Kong.

China's innovative Muslim meat company 

Founded in 2002, Yisai reported revenues rose from RMB397.4m in 2013 to RMB630.1m in 2014 – an impressive 63% increase – while revenues for the first half of 2015 totalled RMB407.5m. Many Chinese are familiar with the company’s logo – featuring a cow’s horns against a green background – from its many restaurants, which serve snacks such as beef noodles. Yisai also operates its own stores selling beef products, particularly in its home base of central China. In advertising taglines the company styles itself as ‘China’s innovative Muslim meat company​’.

However, Yisai is coming to the market at a bad time, given a collapse in sentiment among investors, who have also been put off by Chinese government efforts to prop up the market through limiting sales of stocks. Many Chinese corporations, including leading meat companies, have been seeking to raise cash to pay for overseas expansion as margins and profits tighten in its core businesses at home in China amid slower economic growth. Chinese corporations are carrying considerable debt loads, having borrowed to fuel expansion of distribution chains and processing capacity.

Last year Yisai launched a range of convenience-themed packaged beef products, including cooked fillets dressed with black pepper in 200g packs and other Chinese-style flavours. It also hired Taiwan-based Fusheng Refrigeration and Shanghai Yuneng to build a 5,000sq m cattle slaughtering and processing plant.

'Boneheaded' government

Investors’ confidence in Chinese stocks has been severely damaged by “boneheaded​” intervention by government in the stock market, said respected China economy watcher Bill Bishop. He claimed China’s policy-makers “have dug themselves such a deep credibility hole, domestically and overseas…​” and hence “even in as populous a country as China, there may be a shortage of suckers for stocks​”.

Nevertheless, Yisai is telling investors to take a bet on the growing appeal of beef in China. A company note to investors stated that “income growth is driving growth in consumption of beef and mutton… future growth in China’s national per capita GDP means people’s consumption of beef will surge to stimulate beef prices and promote the rapid and healthy development of the beef industry...​” The company claimed it was “mature​” and had proven its “base (farming)-plant (processing)-stores (sales) business model​”.

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