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Public company info - SCE Intelligent Commercial Management Holdings Limited , 00606.HK
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SCE Intelligent Commercial Management Holdings Limited, 00606.HK - Company Profile
Chairman LUAN Richeng
Share Issued (share) 5,261,000,000
Par Currency
Par Value 0.0
Industry Agricultural, Poultry & Fishing Production
Corporate Profile Business Summary: The principal activities of the Group comprise production, processing and distribution of agricultural products and related businesses. The Group’s principal activities are oilseeds processing, rice processing and trading, wheat processing and brewing materials. Performance for the year: Revenue from continuing operations increased 23.9% year-on-year to HK$108,821.2 million. The Company’s profit attributable to equity holders from continuing operations for 2018 was HK$1,346.1 million, versus HK$1,297.7 million in 2017. The Company’s profit attributable to equity holders for 2018 declined as compared to HK$3,042.3 million in 2017, due to the completion of the disposal of the biochemical and biofuel business on 27 December 2017. Business Review In 2018, the overall agri-food processing industry was relatively volatile due to the significant fluctuations in commodity supply, demand and market prices caused by changes in the domestic and international business environment. The business operations also faced increasing uncertainties. Profit margins started to trend downwards during the second half of the year. Leveraging the Company’s integrated value chain, China Agri cautiously adjusted the pace of business to respond to market fluctuations and integrated its resources to promote market development and strategy optimisation. As a result, China Agri continued to expand the scale of its business and further strengthen its leading position in the industry. During the year under review, the total sales volume of major products, including vegetable oil, rice and flour, increased significantly year-on-year to 23.228 million metric tons, while the sales volume of branded products also rose on a year-on-year basis, further increasing the Company’s capacity utilisation rate. Revenue from continuing operations increased 23.9% year-on-year to HK$108,821.2 million, hitting a new record high. The gross profit of core oilseeds, rice and wheat businesses increased due to greater economies of scale with improved operational efficiency, which helped offset the impact of more investments for market expansion and higher asset impairment losses on property, plant and equipment. The Company’s profit attributable to equity holders from continuing operations for 2018 was HK$1,346.1 million, versus HK$1,297.7 million in 2017. The Company’s profit attributable to equity holders for 2018 declined as compared to HK$3,042.3 million in 2017, due to the completion of the disposal of the biochemical and biofuel business on 27 December 2017. Oilseeds Processing Business In 2018, the international soybean market fluctuated greatly mainly due to changes in Sino-US trade policies while prices rose in the first half of the year followed by the weak market in the second half. As the growth in domestic demand for major products slowed, the oilseed processing industry faced increasing challenges. This posed a higher competent standard on completeness of business portfolio and professionalism, which promoted the concentration of production capacity and market share towards large-scale enterprises. As an industry-leading player in China, China Agri has built a vertically integrated supply chain which adds value to our entire business operations, from raw material procurement to the operation of consumer brands. With a nationwide business and established international information network, China Agri is well positioned and constantly collects market intelligence for the oilseeds processing business, including information on crop planting, growth progress, raw material sales, product demand and distribution. By making good use of professional and informed market analysis based on such valuable data, China Agri’s business teams, where deemed commercially appropriate, exercise judicious discretion to execute the procurement and sourcing decisions with the view to safeguard raw material supply at competitive costs, meeting the Company’s production and sales needs. With our robust risk management system, we strive to conduct business to achieve appropriate timing and pace, and to effectively stabilise profit margins, which has helped to deliver a year-on-year improvement in operating results. During the course of 2018, China Agri also partially exercised the purchase option on certain oilseed processing assets of COFCO International to further expand and improve the nationwide layout of its production facilities. Operational efficiency and profitability were also improved by internal costs benchmarking and cooperation between factories. The branded edible oil business has become a major growth driver of the Company. After years of development, the market has been relatively mature and brand value is becoming increasingly important. During the year, the Company increased its investments in branding for the oilseeds processing business and established a strategic product line with one core and five priority products (一超級、五重點). The Company also increased brand awareness for its premium “Fortune (福臨門)” brand through advertising, ongoing public relations work and event marketing. “Fortune Nutritious Cooking Oil (福臨門營養家食用調和油)” and “Hometown Flavor Peanut Oil (家香味土榨花生油)” were honored by being designated products for the 18th Meeting of the Council of Heads of Member States of the Shanghai Cooperation Organization. This recognition strengthened the image of premium “Fortune (福臨門)” brand and reliable products quality. During the 2019 Spring Festival, four sets of high-speed trains named after “China Agri-Fortune (中糧福臨門號)” took thousands of travelers back to their hometown, helping to foster feelings of “happiness” and “home” to the brand image of “Fortune (福臨門)”. Online advertising and offline marketing for the consumer-packaged edible oil business were carried out at over 200 roadshows and approximately 130,000 promotional activities in 65 cities nationwide, all of which helped to increase brand exposure and sales conversion. With the support from optimisation of the Company’s distributor network and effective resource allocation, total sales volume of consumer-packaged edible oil products in 2018 was 1,189,000 metric tons, an increase of 18.3%1 year-on-year. Mid-packaged edible oil business also developed well with the growth of catering and restaurant market. In 2018, sales of oilseed meal and vegetable oils were 9,652,000 metric tons and 5,653,000 metric tons, an increase of 15.8% and 30.8% year-on-year, respectively, which helped lead to a higher capacity utilisation rate. Revenue rose by 38.6% from the prior year to HK$77,946.3 million. Gross profit margin increased by 1.1 percentage points compared with last year. Operating profit rose by 22.5% year-on-year. Rice Processing and Trading Business In 2018, the market-based reforms of the grain pricing mechanism in China continued to be implemented. The minimum purchase price for paddy was adjusted downward to allow for a more favourable environment for the processing industry, which eased raw material cost pressure and helped to support an improvement in profitability. The overall scale of the domestic rice market remained fairly stable. The trend of consumption upgrade continued, and the speedy growth in demand of packaged rice, especially for medium and high-priced products, helped to deliver an improvement in overall profitability for the rice processing industry. As consumers continue to upgrade to higher-end products, high-quality raw paddy is becoming a scarce resource, which is helping to accelerate industry consolidation and give a competitive advantage to large-scale integrated conglomerates. As a domestic leader in the consumer-packaged rice market, the Company increased its investments in 2018 to improve its brand influence, enhance product innovation and increase premium pricing. For the “Fortune (福臨門)” brand, the Company communicated the core brand message of “rice from the best growing regions (優質產區的大米)”, and marketed the brand under the slogan “choose Fortune for your rice and flour (買米買麵認準福臨門)”. In addition, the Company conducted a number of PR activities such as ploughing day and harvest day to show off the quality paddy fields where the rice is grown and foster a premium image. The Company also created a variety of customised products for e-commerce, with product in cooperation with famous IPs such as “The Palace Museum (故宮)” and “Journey Frog (旅行青蛙)”, to improve brand awareness among the younger generation of consumers. A new high-end series “Jintian Rice (金田米)” was also launched in Shanghai, Beijing, Nanjing and Ningbo for the first time to lead product upgrade. At the same time, the Company promoted its cooperation with partners such as China Post, China National Petroleum Corporation, Sinopec Group and Meicai, penetrated more in smaller cities and catering customers, all in an effort to improve market reach. The branded business continued to develop healthily with constant volume growth. Market share increased to 13.4%2, maintaining its leadership in the industry. For the export business, the Company continued to adhere to a sales model of “go abroad and bring home (走出去，請進來)”. In particular, China Agri invited global traders and end customers to come to China and visit farms, factories, ports to demonstrate the strengths of our integrated value chain and competitiveness. To meet the needs of various overseas markets, the Company increased its product categories according to the results of market research and competition assessment. New markets and new customers were also developed to cope with challenges of weakened purchasing power in certain target markets, both helped to achieve a year-on-year increase in sales volume. During the year under review, the total sales volume of major products for the Company’s rice trading and processing business increased 29.7% year-on-year to 3,389,000 metric tons, and revenue rose by 21.9% year-on-year to HK$15,191.3 million. Within this, the further increased of export sales volume offset the impact of declined domestic sales of non-branded products. The gross profit margin increased by 1.3 percentage points, mainly due to higher capacity utilisation rate and improved operational efficiency. Profitability maintained steady improvement with 7.1% increase in operating profit. Wheat Processing Business In 2018, the domestic supply of wheat was sufficient, and prices declined as the minimum purchase price dropped lower than a year ago. The consumption of wheat for food producers declined slightly, resulting in a lower capacity utilisation rate and fierce competition in the processing industry. Leading enterprises accelerated expansion in production capacity and increased their investments in brands and distribution channels in an attempt to offset the pressure. Medium-sized enterprises leveraged grain resources advantage in their local production regions and focused on niche markets in an effort to survive. These two types of development strategies accelerated consolidation within the industry, causing the overall market share of the top ten companies to reach nearly 40%. In order to attain a more dominant position during the industry consolidation, the Company continued to improve the layout of its wheat processing business’ supply chain in both high-quality production and sales regions, and increased its production capacity through acquisitions, construction and leasing. The Company also continued to put efforts on enhancing its supply chain to better respond to key customers, expanding its market share in key segments, and maintaining rapid growth in sales volume of special-purpose flour and capacity utilisation rate. Based on the continued expansion of the business, the Company took advantage of the growth in the consumer-packaged flour and noodle product markets and continued to promote its branded products with more marketing resources invested. The Company enhanced the service it provided to key premium customers according to their specific needs by optimising the supply chain and providing information system support. It also helped distributors grow bigger and stronger to raise the number of kiloton-level flour distributors. To expand the distribution channels, the Company increased its cooperation with new retail partners through content marketing, advertorials and fun games to drive new consumption. The Company also continued to optimise its product portfolio and adjusted its ways to interact with customers according to market feedback. As a result, the Company achieved a satisfactory level of growth in sales volume of consumer-packaged flour and noodle products. During the year under review, the sales volume of flour products in the Company’s wheat processing business increased by 13.8% year-on-year to 2,860,000 metric tons. The sales volume of noodle products increased by 18.2% year-on-year to 144,000 metric tons. Total revenue was HK$12,855.9 million, an increase of 21.7% year-on-year. The Company’s operating efficiency continued to improve as the scale of the business grew. Gross profit margin increased by 1.3 percentage points year-on-year. Operating profit declined 27.9% compared to the year before, mainly due to a substantial increase in marketing expenses for the branded business as the Company was working to generate growth over the long-term. Brewing Materials Business In 2018, droughts in the world’s main production regions globally led to decreased output of barley and pushed up raw material costs. China’s beer consumption remained stable while the malt market was difficult to expand. Higher costs pressure could not be fully passed through to product prices, which resulted in a squeeze in profit margins. The Company’s brewing materials business continued to benefit from the cost controls strategy and effective raw material procurement capability to ensure profitability. The sales volume of high-end malts continued to increase and reached a record high as a result of the consumption upgrade in the beer market. With mature supply chain management, the Company was able to maintain a high production utilisation rate and steady comprehensive operation. In 2018, the sales volume of malt for the Company’s brewing materials business decreased by 6.0% year-on-year to 637,000 metric tons. Revenue decreased by 5.5% to HK$2,243.6 million. Gross profit margin remained at a high level. The brewing materials business reported a 63.7% decrease in operating profit after recognition of impairment losses on property, plant and equipment of HK$126.0 million during the year due to cease operation of an under-performing plant in Inner Mongolia. Prospects: Looking ahead to 2019, the global macro economy will remain complex. Commodity market risk will remain since international trading may face policy changes. The continuing adjustments in monetary policy in developed economies will likely cause exchange rate fluctuations and higher financing costs, which could hinder economic growth and market demand. Even if some business opportunities, such as low material costs and consumption upgrades still exist, the agri-food processing sector will be challenged as the industry consolidation has not been completed. Against a backdrop of such risks and uncertainties, the Company will continue to leverage its well established business system and rely on its scale and mature integrated operations to respond to market fluctuations, manage major risks and stabilise its business performance. In the meantime, the Company will further develop its branded and high value-added products, improve its sales portfolio, expand revenue streams and increase its profit margins. With the progress of projects such as the review of the option to purchase the oilseed processing assets of Chinatex, the Company’s comprehensive processing capacity is expected to continue to grow, boosting market share and enhancing its industry leading position and competitiveness.

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