Fufeng Announces its Record High Annual Results - Profit Attributable to Shareholders increased 2.15 times to RMB 928.3 million
Hong Kong, Mar 25, 2010 AEST (ABN Newswire) - Fufeng Group Limited ("Fufeng" or "the Company", together with its subsidiaries collectively known as "the Group"; 
HKG:0546), a leading vertically integrated manufacturer of corn-based biochemical products in China, today announces its record high annual results for the year ended 31 December 2009.
2009 was indeed a fruitful year for the Group. During the year, the Group achieved outstanding performance in many aspects. Both sales in MSG business segment and Xanthan gum business segment achieved record high results, leading to a historical increase in net profit and a stronger development trend. The Group has further strengthened its market leading position in the MSG and xanthan gum markets in China as well as laid a solid foundation for future development.
During the period under review, the Group's gross profit increased substantially from approximately RMB644.3 million in 2008 to approximately RMB[1,399.6] million in 2009. Profit attributable to the Shareholders in 2009 was approximately RMB928.3 million, representing an increase of approximately RMB633.6 million or 215.0% as compared with that of 2008. Earnings per share for the year ended 31 December 2009 amounted to RMB 55.92 cents. The Board has recommended the payments of final dividend of HK 15 cents per share for the year ended 31 December 2009. The sum of declared interim dividend and proposed final dividend for the year ended 31 December 2009 is HK [25] cents per share.
After industry consolidation in 2007, the MSG and glutamic acid market has been gradually returning to a balanced supply and demand situation with prices becoming more stabilised. During the year under review, ASP of the Group's MSG and glutamic acid increased by 11.9% and 10.2% to RMB 7,680 and RMB 7,135 respectively as compared to 2008. Meanwhile, the Chinese government actively encouraged a change of the structure of economic growth drivers, gradually shifting from a infrastructure investment driven to a more consumption driven economic growth. This resulted in strong domestic demand which warranted a powerful growth in the demand for MSG products in the China market.
Commenting on the results, Mr. Li Xuechun, Chairman of Fufeng said, "The MSG and glutamic acid market in the PRC became increasingly concentrated and is now dominated by a few major players.
The Group has become one of the world's leaders in the MSG industry as it played a significant role in the industry consolidation process to further expand its market share. The industry also benefited from favorable macro environment with national policy shifted to boost domestic consumption in the year."
The Group's MSG segment includes MSG and glutamic acid business. During the period under review, Total production capacity of the Group's MSG increased from 171,667 tonnes in 2008 to 305,000 tonnes in 2009. Total production capacity of the Group's glutamic acid increased from [275,000] tonnes to [350,000] tonnes in 2009. Sales volume of glutamic acid decreased from [162,708] tonnes to [100,993] while sales volume of MSG nearly doubled, increased from 146,185 tonnes in 2008 to 292,369 tonnes in 2009. It is the strategy of the Group to expand its product offerings along the value chain towards the end-user market by migrating from a glutamic acid-focused to a more MSG-focused product portfolio. As a result, the Group significantly reduced external sales of glutamic acid while boosted the domestic consumption of glutamic acid to produce MSG in 2009.
During 2009, the xanthan gum market was adversely affected by the poor global oil market, as a result of, among other things, the global economic downturn. Despite this, during the 2009, the Group was able to mitigate the negative impact of the drop in ASP of the xanthan gum by maintaining its sales volume while the Group continued to enjoy the reduced average cost of production as the production capacity of the IM Plant continued to increase. Revenue generated from the sales of xanthan gum decreased by 9.7% to RMB[408] million in 2009, as well as the ASP of xanthan gum decreased from RMB21,547 per tonne in the first half of 2008 to about RMB20,328 per tonne in the second half of 2009, representing a 5.7% drop. Due to the aforementioned cost reduction and benefited from economies of scale as a result of the increased production capacity, the Group managed to improve the gross profit margin of xanthan gum from 34.4% in 2008 to 36.5% in 2009, or an increase of 2.1 percentage points.
In order to fully grasp the golden opportunity as the domestic support from the Government has given rise to the strong growth in demand for MSG, the Group continued to pursue its strategy of extending glutamic acid production to downstream MSG production thereby operating its MSG and glutamic acid production at their fullest capacity. The Group expects that the internal consumption of glutamic acid will be further increased in year 2010, which is in line with the Group's strategy. During the year, the Group completed the construction of a 150,000 tonnes of MSG production line in IM Plant and also finished expanding the production capacities of a 70,000 tonnes of glutamic acid and 100,000 tonnes of fertilisers in Baoji Plant. All of these production lines started operation at the end of 2009. In addition, the re-engineering of the production process in Baoji Plant and IM Plant also increased the production capacity of MSG and glutamic acid by 110,000 tonnes and 40,000 tonnes respectively. As a result, the total production capacity of MSG and glutamic acid increased to 540,000 tonnes and 460,000 tonnes at the end of 2009. The Group's market leading position gives us the dominance in pricing and immense bargaining power that enabled us to transfer the increase in cost of corn to our customers and the Group's overall gross profit remained stable.
Looking forward, Mr. Li said," The outstanding achievements in 2009 are the cornerstone to the Group's on-going development. The Group has planned to establish new production lines in the north-east of China and a new manufacturing base is to be built in the transition of Inner Mongolia Autonomous Region and Heilongjiang Province. The project comprises production lines with a production capacity of 200,000 tonnes of highly vertical integration of MSG production chain. Considering the project is well equipped to take advantage of the abundant corn supplies, the rich coal mines and chemical materials supply systems and maturity logistic system, the production costs will be significantly decreased. In addition, the IM Plant will be equipped with a new capacity of 80,000 tonnes of synthetic ammonia and 5,000 tonnes of fructose, a newly-built railway and an expanded thermal power plant that enjoys the benefit of low-cost coal supply. It is believed that this comprehensive revamp and the establishment of ancillary facilities will further lower the production and transportation costs of the IM Plant, continuing expand the market share."
Financial Highlights-----------------------------------------------------For the year ended 2009 2008 Changes31 December 2009 (RMB Mil.)(RMB Mil.)-----------------------------------------------------Turnover 4,632.9 3,585.3 +29.2%-----------------------------------------------------Gross Profit 1,399.6 644.3 +117.2%-----------------------------------------------------Gross Profit Margin 30.2% 18.0% +12.2ppts.-----------------------------------------------------Profit Attributable to Shareholders 928.3 294.7 +215.0%-----------------------------------------------------Earnings per Share (RMB cents) 55.92 17.75 +215.0%-----------------------------------------------------Annual Dividend (RMB cents)(included interim and proposed final dividend) 25 10 +150%-----------------------------------------------------
About Fufeng Group Limited
Fufeng Group (
HKG:0546) is the world's largest producer of MSG, xanthan gum and a major supplier for a series of bio-fermentation products. The main products of the Group are food additives, animal nutrition, colloid and high-end amino acids. In fiscal 2016, Fufeng generated sales of approximately RMB11.2 billion and profit attributable to shareholders of about RMB1.09 billion. For more information, please visit our website www.fufeng-group.com
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