Zhongpin has revealed record first quarter revenues climb 41.5% year-over-year to $153.8 million, according to reports. First quarter net income rose 33.7% year-over-year to $9.7 million. Zhongpin reported financial results for the first quarter ended March 31, 2009.
"We are very pleased to begin 2009 with solid financial results. Historically, consumers increase their consumption of pork products during the Chinese New Year holidays resulting in a strong seasonal demand for pork in the first quarter.
Our ability to quickly ramp up capacity utilisation at our newly added facilities enabled us to achieve double-digit growth in revenue and improved profitability, both on a year-over-year and sequential basis," commented Mr. Xianfu Zhu, CEO of Zhongpin.
"Since the second half of 2008, our newly added production capacities have been running efficiently and we have achieved significant progress in upgrading our product line and distribution structure, therefore adding increased value at every stage of the supply chain."
Q1 2009 Highlights
• Revenues grew 41.5% year-over-year to $153.8 million
• Gross profit increased 34.9% to $19.1 million with gross margin of 12.4%.
• Net income increased 33.7% year-over-year to $9.7 million, or $0.33 per diluted share
• Added 36 new retail outlets, bringing the total number of retail outlets to 3,097
• Commenced operations at new chilled and frozen pork facility in Yongcheng City with an annual production capacity of 80,000 metric tonnes
Demand for pork
Revenues for the first quarter of 2009 increased 41.5%, to a record $153.8 million from $108.7 million in the first quarter of 2008. Zhongpin's strong revenue growth during the first quarter was driven by increased demand for high quality pork products, increased production capacity contributed by the Company's newly added facilities in 2008, and the Company's growing distribution network.
For the quarter, prepared meat products experienced the strongest growth, up 83.3% to $22.0 million from $12.0 million in the first quarter of 2008. Prepared meat products contributed 14.3% of the total revenue during the quarter, up from 11.0% a year ago. Chilled pork and frozen pork represented 56.1% and 28.6% of total revenue, compared to 50.6% and 37.0% in the first quarter of 2008, respectively. Revenue from chilled pork increased 56.9% to $86.3 million from $55.0 million in the first quarter of 2008. Revenue from frozen pork was $44.0 million, up 9.5% from $40.2 million in the first quarter of 2008.
On April 28, 2009, Zhongpin announced that it began construction of its new pork products facility located in the Jinghai Economic Technical Development Area in Tianjin City. The new facility will add 100,000 metric tonnes in annual chilled and frozen pork capacity and 36,000 metric tonnes in annual low temperature prepared meat production capacity. The production lines for chilled and frozen pork products will come on line towards the end of the first quarter of 2010 and will achieve target utilisation level by the end of the third quarter of 2010. The prepared meat production line will come on line in the third quarter of 2010 and is expected to reach target utilisation level by the end of the fourth quarter of 2010. The facility will also include a new warehouse and distribution centre, and a R&D centre.
Zhongpin's capacity expansion plans for 2009 include the new pork products facility in Tianjin City, as well as construction of a new prepared meat facility in Changge City. This new facility will add annual prepared meat production capacity of 36,000 metric tonnes by the end of the fourth quarter of 2009. The new facility is expected to achieve its target utilisation level by the end of the second quarter of 2010.
"While the pork industry experienced a negative impact in April due to the recent H1N1 virus outbreak in North America, we believe this impact will be short-lived. In fact, as fears surrounding the virus have subsided and consumers are educated that the virus can not be contracted by consuming pork products, we have observed an increase in demand for pork and some firming of pork prices. As a result, we do not expect further negative impact from this issue on our revenue for the second quarter. More importantly, the increased consumer focus on food safety underscore the importance of high quality products and stringent testing procedures which form the basis of our modernized, safe, and hygienic processing facilities," commented Mr. Zhu.
"We believe that China's live hog prices and pork prices are close to their bottom and expect an upward trend in the second half of the year as the Chinese economy begins to recover. Our outlook for the long-term potential of China's meat processing industry remains very positive and we plan to continue to expand our distribution and processing plan to serve this market opportunity and build a leading brand position in the pork category," announced Mr. Zhu.