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Public company info - China Yurun Food Group Ltd. , 01068.HK

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China Yurun Food Group Ltd., 01068.HK - Company Profile
Chairman Yu Zhangli
Share Issued (share) 1,823,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Packaged Foods
Corporate Profile Business Summary: The principal activities of the Company comprise provision of a wide range of meat (chilled and frozen) and processed meat (low temperature meat products and high temperature meat products) with a particular focus on pork products, primarily marketed under its key brand names, “Yurun”, “Furun”,“Wangrun” and “Popular Meat Packing”. Performance for the year: The Group recorded revenue of HK$16.702 billion in 2016, representing a decrease of 17.2% from HK$20.165 billion of the previous year. Loss arising from principal business, being loss attributable to equity holders excluding government subsidies, gains or losses on disposal of non-current assets, net foreign exchange gain/loss, impairment losses and provision for an one-off loss on litigation of the Group, recorded a loss of HK$956 million (2015: HK$1.368 billion), representing a reduction in loss of approximately 30.1% from the previous year. Basic and diluted loss per share was HK$1.285, representing a reduction in loss of 21.3% from HK$1.633 of the previous year. Business Review: During the Review Year, hog prices fluctuated significantly. First slowly rose to reach their record high, and experienced a slow decline followed by an accelerated decline. In mid-October, hog prices reached their record low of the year, and subsequently picked up slightly. Facing the challenges posed by the instabilities, the Group used its best endeavours in taking all practical and prudent measures to reduce its capital expenditure, optimize the existing asset structure, strengthen its brand image and market positioning, and expand sales channels and networks, in order to maintain business stability. Product Quality and Research and Development During the Review Year, Yurun Food adhered to its operation philosophy of “you trust because the Group care” and led the industry with technical research and development, and at the same time ensured product quality by adopting advanced production processes and technologies. To strengthen product quality management, Yurun Food implemented a product traceability system, in order to achieve the “traceable sources, trackable destinations, and accountable responsibilities” philosophy and to assure the product quality. Yurun Food ranked top in terms of combined market shares of low temperature meat products (“LTMP”) and chilled pork in China, successively topping the LTMP market 18 years in a row and the chilled pork market four years in a row in the Annual Conference of the Development of Consumer Markets and the Press Conference of Product Sales Statistics of the PRC Market (中國消費市場發展年會暨商品銷售統計新 聞發佈會) held in March 2016. “Yurun” brand was also awarded “Contribution Award of the China National Food Industry” (全國食品工業品牌強國貢獻獎) by the 25th Chinese Food Expo Committee (第二十五屆中國食品博覽會組織委員會) in December 2016. The Group will continue to ensure product quality and focus on the research and development of products which are well received by the market, thereby maintaining its competitive advantages. Sales and Distribution Chilled pork and LTMP, which are the Group’s products with higher added value, remained one of the key drivers to the overall business development of the Group during the Review Year. In 2016, the sales of chilled pork of the Group was HK$13.669 billion (2015: HK$16.134 billion), representing a decrease of 15.3% over the previous year, accounting for approximately 81% (2015: 78%) of the total revenue of the Group prior to inter-segment eliminations and approximately 93% (2015: 89%) of the total revenue of the upstream slaughtering segment. Sales of LTMP was HK$1.886 billion (2015: HK$2.231 billion), representing a decrease of 15.5% over the previous year, accounting for approximately 11% (2015: 11%) of the total revenue of the Group prior to inter-segment eliminations and approximately 90% (2015: 91%) of the total revenue of the downstream processed meat segment. Production Facilities and Production Capacity The Group expanded rapidly in the previous years but failed to align with the macro environment. This led to an increase in capital expenditure and borrowing costs and intensified operating pressure. In light of this, the Group adjusted its expansion pace based on market changes and the business conditions of the Group. The Group reviewed the functional positioning of its factories and optimized the existing resource structure, for example by integrating certain outlets further away from the raw materials markets and the consumer markets, in order to fully utilize the factories while cutting unnecessary costs. A long-term increase in the capacity utilization rate was thus expected. During the Review Year, the Group’s upstream slaughtering capacity was 55.75 million heads per year as at 31 December 2016, which was 0.6 million heads less than that as at 31 December 2015, owing to the disposal of one of the Group’s subsidiaries. As at 31 December 2016, the production capacity of the downstream processed meat segment of the Group was approximately 312,000 tons per year, being the same as that as at 31 December 2015. Prospects: According to the data published by the National Bureau of Statistics of China, Gross Domestic Product grew by 6.7% year-on-year during the Review Year, which indicated a reduced growth rate. Against the overall decrease in consumption desire, the entire catering market underwent turbulence. Hog prices experienced a substantial increase in the first half of the Review Year, followed by a plunge in the second half. Business operations in the pork industry were affected by instabilities in both the economic environment and the pork market. In addition, according to the statistics of slaughtering volume of national-scale hog slaughtering businesses at designated locations released in December 2016 by the Ministry of Agriculture of China, the slaughtering volume of national-scale hog slaughtering businesses at designated locations decreased by approximately 2.4% during the Review Year compared with that of 2015. During the Review year, the Chinese government continued its efforts to manage the livestock and poultry slaughtering industries. On the other hand, in order to further improve the governance capacity and the protection level with regard to food safety, the Commission on Food Safety of the State Council issued on 27 April 2016 the Circular on Issuing the Key Work Arrangements on Food Safety in 2016, which introduced measures and regulations to address illegal behavior, such as the use of “Clenbuterol” in livestock production, the use of antibiotics in livestock, poultry and aquatic production, and the acquisition and slaughter of livestock and poultry died of disease, in an attempt to regulate production and operations. The Board believes that, benefited from the Chinese government’s immense effort in promoting relevant policies, for example on food safety and against substandard slaughterhouses, the Group will continue to leverage its core competitive edge in resources, strategies and branding, and seize the opportunities arising from various challenges to facilitate smooth development of business.

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