Public company info - Pan Sino International Holdings Ltd. , 00502.HK
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Pan Sino International Holdings Ltd., 00502.HK - Company Profile
Chairman -
Share Issued (share) 960,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Agricultural, Poultry & Fishing Production
Corporate Profile Business Summary: The Group has established itself as a major exporter of cocoa beans in terms of trading volume in Indonesia. Indonesia is currently the third largest producer of cocoa beans in the world. The Group's products are one of the major raw materials used for the manufacture of a variety of food products including chocolate beverages and cakes and various pharmaceutical and cosmetic products such as soaps and moisturising creams. Business Review: Source and sell cocoa beans at competitive prices Cocoa growing regions are found in Africa, Asia, Central America and South America, all within 20 degrees of the equator. There are between 5–6 million farmers who depend on farming cocoa for their income and about 80 million people rely on cocoa or some part of the cocoa industry for their livelihoods. Annual cocoa production worldwide is estimated at 3 million tons and the global market value of the annual cocoa crop was estimated at more than US$5.1 billion. Annual increase in demand for cocoa has averaged approximately 3 percent per year for the past 100 years. Notably, 70 per cent of total cocoa beans come from West Africa (source: World Cocoa Foundation). Most of the production growth in Asia has come from Indonesia, the world's third largest cocoa beans producer after Côte d'Ivoire and Ghana. Côte d'Ivoire and Ghana continues to produce more than 85 percent of all cocoa grown in the world. Cocoa cultivation in Indonesia is spread over approximately 1.05 million hectares of land mostly owned by small farmers. Production in Indonesia is projected to grow by 3.5 percent annually to 574 000 tonnes in 2010 and account for 6 percent of the global production by 2010, compared to 14 percent between 1998 till 2000. The Indonesian Government's policies have encouraged expansion of production and most of the increases during the last two decades were bulk cocoa coming from hybrid trees. The Group is still one of the few purchasers in Indonesia who provide farmers with 50 per cent advance payments for the purchase of cocoa beans. This continues to be an important strategy of the Group in dealing with the farmers since the Directors believe that farmers will sell the better quality cocoa beans from their harvest at a more competitive price to purchasers who provides them with meaningful advance payment. In addition, the Directors believe that the Group's ability to place large orders with farmers also enables the Group to obtain more competitive prices from the farmers. This way, the Group continues to offer its export customers quality cocoa beans at attractive prices. For each of the three years ended 31 st December, 2004, 2005 and 2006 the Group sourced from over 1,778, 2,244 and 2,467 farmers respectively. Having direct access to such a diversified base of farmers allows the Group: (i) to better control the quality and price of its purchases; (ii) to maintain a stable and reliable supply; and (iii) to improve its efficiency and cost effectiveness without going through intermediaries. There are many farmers in Indonesia that can supply the Group with the cocoa beans that meet the Group's requirements. The Group has maintained good relationships with farmers and selects its suppliers mainly based on the availability of the cocoa beans that meet the Group's quality requirements. Cocoa beans prices quoted on The Coffee, Sugar and Cocoa Exchange of New York ("NYCSCE"), has been stable on an average of approximately US$1,506 per tonne compared to US$,504 on average from the previous year. Relationship with Customers The Group has maintained good and stable relationships with its overseas customers as evidenced by the renewal of Sales Agreements with three of its five existing customers, namely, Unicom, ICBT and Westermann. Such customers agreed to purchase an annual aggregate minimum amount of 34,000 tonnes of cocoa beans for a further term of another three years from October 2005 to October 2008. Orebi and Theobroma have continued to maintain a strict internal policy that does not allow them to sign any long-term purchase agreements with any external parties. The Directors believe that these customers are important as they are well established cocoa product suppliers who source cocoa beans all over the world. Stringent quality control systems The Group maintains a high standard of quality control by performing on-site quality control inspections of the cocoa beans purchased at the farmers' warehouses. The Group's quality control staff also undertake regular quality control inspections at the Group's warehouse and before shipment to customers. The adoption of these stringent quality control procedures ensures that the quality of the cocoa beans sourced from the farmers meets the Group's customers' requirements. Sales and Marketing The Indonesian Government's determination to make Indonesia the world's largest cocoa producer and exporter has seen help extended to the farmers in Sulawesi where 70 per cent of the cocoa plantations are located in Indonesia. This assistance from the Indonesian Government helps the farmers to expand and modernize their farms as part of the revitalization program that the Indonesian Government introduced. The expansion of cocoa plantations in Indonesia should result in an increase in the crop production available to the Group and this will help the Group to increase its sales to the export market. The Group hopes to become an essential trading partner with the international trading cocoa companies. The Group's sales and marketing team maintains close contact with its customers, from whom they collect the latest market information and provide it to the farmers through the purchasing department of the Group. The Directors believe this assists the Group in enabling it to source from farmers the products that satisfy customers' requirements. Currently the Group sells its products to five established importers based in Europe who resell the products to other cocoa beans trading companies and cocoa processing and or manufacturing companies in the United States of America. Pursuant to the Group's sales agreements with its customers, the price of each purchase shall be determined by mutual agreement between the Group and the respective customer with reference to, amongst other things, the prices of the cocoa beans quoted on the NYCSCE. Each customer is required to purchase the minimum amount stated in its respective sales agreement insofar as the Group can reasonably supply such amount. The Directors do not believe the Group will have any problems sourcing cocoa beans to meet the minimum purchase amounts under the Sales Agreements since the Group has never experienced any problems sourcing cocoa beans and there is an abundant supply of farmers, which can supply such cocoa beans that meet the Group's requirements. The Group will continue to expand its sales to its existing customers and to diversify its customer base in overseas markets. The Directors are confident that the Group will be able to increase sales to its existing customers, acquire new customers and achieve a larger share of cocoa beans purchases in the future. All of the Group's shipments of cocoa beans are made on a "free-on-board" basis to the shipping point. Under this arrangement, the Group's customers are responsible for the costs of the shipment and insurance in connection with the transportation of cocoa beans from the shipping point in Sulawesi, Indonesia to the destination designated by the customers. In addition, the customers also bear the risk of loss and damage to the cocoa beans during transportation from the shipping port in Indonesia to its destination. This arrangement allows the Group to minimize its transportation and insurance costs. All of the Group's sales are denominated in US dollars. Customers normally expect shipment to take place within two months after the order is placed. Customers are normally required to pay the Group by telegraphic transfer within one to two months following the shipment of the goods. For each of the three years ended 31 st December, 2004, 2005 and 2006, the average debtors' turnover period of the Group was approximately 49.1 , 43.7 and 40.6 days respectively. There has not been, and the Group has not made any provisions for, any bad and doubtful debts during the year. Prospects: In 2010, it is expected that world grindings of cocoa beans will amount to 3.6 million tonnes, reflecting an average annual increase of 2.1 percent from 2.8 million tonnes during 1998-2000 to 2010 (the base period). Consumption is expected continue to be concentrated in developed counties, which are expected to account for 64 percent of world cocoa consumption in 2010. Consumption in these countries is projected to increase at an annual rate of 2.2 percent from .8 million tonnes during the base period to 2.3 million tonnes in 2010. Consumption in Europe is projected to grow by 1.7 percent per annum and reach 1.4 million tonnes. Europe is expected to continue to be the world's largest cocoa consuming area, accounting for 40 percent of global cocoa consumption in 2010. In North America, the world's second largest cocoa consuming area, growth is expected to increase by 3.6 percent per annum and reach 703 000 tonnes. In the former Soviet Union/ the Commonwealth of Independent States (CIS), consumption is expected to grow by 0.8 percent per annum from 65 000 tonnes to 71 000 tonnes, reflecting expected increase in income in these countries. In Japan, consumption is expected to increase from 48 000 tonnes during the base period to 56 000 tonnes in 2010. Consumption in developing countries as a group is expected to amount to 1.3 million tonnes by 2010, an annual growth rate of 1.8 percent. Africa, where capital formation for grindings has grown rapidly over the past decade, is expected to remain the largest consuming region in this group, accounting for 35 percent of the consumption of developing countries. The share of consumption in Latin America and Caribbean, where the relative cost for grindings are higher compared to Africa, is expected to decrease from 32 percent to 28 percent by 2010. In the Far East, where per capita consumption is still small, the share in consumption is projected to increase from 31 percent during the same period to 34 percent by 2010. By 2010 beans are expected to continue to form the majority of cocoa exports, despite some increase of processing capacity in producing countries, especially those in Africa. Global cocoa beans exports are projected to reach 3.0 million tonnes by 2010, an average annual growth rate of 2.8 percent. Total exports from Africa are expected to grow by 2.8 percent annually from 1.7 million tonnes during the base period to 2.3 million tonnes in 2010, with Côte d'Ivoire, Ghana and Nigeria achieving an annual average growth rate of about 3 percent. Exports from Côte d'Ivoire are projected to increase to .5 million tonnes by 2010, or 51 percent of the projected global cocoa exports. Exports from Ghana are expect to reach 469 000 tonnes or 6 percent of the world total. The share of African exports in the world market are expected to remain stable, about 78 percent of the global exports. Exports from the Far East, which increased rapidly during the 1980s and continued to grow at a slower rate during the 1990s, are expected to grow further and reach 529 000 tonnes by 2010. The increase in the exports from the Far East during the 980s resulted mainly from rapidly growing shipments from Malaysia that accounted for 54 percent of the exports from the region. However, exports fell dramatically during the 990s when farmers switched production. The increase in exports during the current decade is likely to result mostly from the increase in yields, and the share of the Malaysian exports in the region should increase only slightly, from 4.6 percent during the base period to 5.3 percent in 2010. On the other hand, exports from Indonesia grew rapidly during the 980s and 990s and are projected to continue to grow at 4.3 percent per year over the next decade and account for 98 percent of cocoa beans exports from the Far East by 2010, compared to 30 percent during the 1980s and 84 percent during the 1990s. In Latin America and the Caribbean, cocoa exports are projected to increase from 97 000 tonnes during the base period to 30 000 tonnes reflecting expected increasing exports from Brazil where production is expected to recover from the loss caused by the witches' broom disease. Global cocoa imports are expected to increase by 2.2 percent annually between 1998 - 2000 and 2010, compared with 3.1 percent during the previous decade. Imports in developed counties as a group are expected to grow at an annual rate of 2.5 percent to 2.6 million tonnes. Europe should continue to be the main consumer of cocoa, accounting for 65 percent of global cocoa imports in 201 0. In North America, imports are projected to grow by 0.3 percent per year, to reach 505 000 tonnes by 2010. Shipments to the countries of the former Soviet Union/ the Commonwealth of Independent States (CIS) are likely to decrease slightly by 1.1 percent per annum. In Japan, imports are expected to increase by 1.4 percent per year from 48 000 tonnes in 1998 - 2000 to 56 000 tonnes in 2010. Imports in developing countries as a group are projected to remain unchanged and would account for 11.3 percent of world cocoa imports, compared with the 14 percent during the previous decade. (Source: Food and Agriculture Organisation of the United Nations).

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