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Public company info - China ZhongDi Dairy Holdings Co. Ltd. , 01492.HK

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China ZhongDi Dairy Holdings Co. Ltd., 01492.HK - Company Profile
Chairman Zhang Jianshe
Share Issued (share) 2,607,000,000
Par Currency U.S. Dollar
Par Value 1.0E-5
Industry Dairy Products
Corporate Profile Business Summary: The Group mainly operates two major business lines, dairy farming business and import trading business. Performance for the year: The Group’s revenue for the year ended 31 December 2019 amounted to RMB1,499.4 million as compared to RMB1,425.0 million for the year ended 31 December 2018, representing a year-onyear increase of 5.2%. Business Review: Dairy Farming Business In 2019, the Group strengthened the Company’s dairy farm management in all aspects, took the efficient breeding of dairy cows and provision of calibrated nutrition as the starting point, strived to enhance scientific feeding management, and improved the well-being of dairy cows, so as to increase dairy cows’ production while promoting their health and longevity. Good seed comes first for the development of the dairy industry. ZhongDi Dairy, as one of the first batch of nationwide core breeding farms for dairy cows, cooperates with renown foreign breeding companies and domestic breeding units to establish ZhongDi’s dairy cow breeding index for selecting dairy cows and their breeding methods. Meanwhile, it also applies whole genome testing technology to select quality core herds of dairy cows, and adopts a number of technologies to rapidly improve and expand the breeding of high-yielding and quality dairy cow herds. The improvement of dairy cows’ quality and the expansion of good breeds not only improve the operation efficiency of dairy farms and reduce operation costs, but also conserve natural and social resources to the fullest extent possible and achieve the sustainable development of the industry. In terms of daily feeding and provision of calibrated nutrition, the Group and Dairy One Laboratory of the United States jointly established a feed material testing and analysis laboratory to share feed material database. The Group scientifically adjusts the dairy cows’ nutrition through brand new nutrition concept and conducts overall control of dairy cows’ nutrition through the cloud platform, striving to effectively enhance the conversion efficiency of dairy cows’ feed, improving milk production and quality, and reducing greenhouse gas emissions. In 2019, the average unit selling price of the Group’s raw milk was approximately RMB4,010 per tonne, which was higher than the national average level. In 2019, the Group’s sales of raw milk amounted to 373,713 tonnes while revenue generated from the dairy cow farming business, being the core business of the Group, amounted to RMB1,498.7 million, representing 99.9% of the Group’s total revenue. 1. Scale of dairy farms Focusing on the dairy industry’s status of development and the market demand in various regions of China, the Group strategically situated the bases of its dairy farms in major provinces or regions across the golden milk source belt in Northern China. As at 31 December 2019, the Group operated the following eight modern dairy farms in seven provinces and autonomous regions: Beijing ZhongDi Farm, Inner Mongolia ZhongDi Dairy, Helan ZhongDi Farm, Ningxia ZhongDi Farm, Kuandian ZhongDi Farm, Langfang ZhongDi Farm, Tianzhen ZhongDi Farm and Tianjin ZhongDi Farm. 2. Herd size As at 31 December 2019, the Group’s herd size was 65,429 heads, which increased by 721 heads as compared with that of the previous year. 3. Milk yield and sales In 2019, the average annual milk yield of each lactation cow of the Group amounted to 12.3 tonnes, which increased by 5.1% compared with that of the corresponding period of last year. The Group’s raw milk sales volume amounted to 373,713 tonnes, representing a year-on-year increase of 5.5%. 4. Raw milk quality The Group strives to produce premium raw milk. According to a range of key quality indicators, the Group’s raw milk has stable premium quality and all the indicators outperform the standards in Europe, the US and Japan, which are the reasons why the Group is able to maintain a selling price higher than the market average level. Import Trading Business The Group’s import trading business mainly involves the import of dairy cows, alfalfa hay and other animal husbandry-related products. The import trading business is divided into the import principal trading business and the import agency business. In 2019, revenue generated from the Group’s import trading business amounted to RMB0.7 million, accounting for 0.1% of the Group’s total revenue and representing a decrease of 99.3% as compared to the corresponding period of last year. In particular, revenue from the import principal trading business amounted to RMB0.1 million, accounting for 15.7% of the revenue from the import trading business. Revenue from the import agency business amounted to RMB0.6 million, accounting for 84.3% of the revenue from the import trading business. Prospects: The year 2019 saw growing downward pressure on China’s economy amid headwinds such as Sino-US trade friction and weak demand in the real economy under a complex internal and external environment. In 2020, the risks and challenges facing the Chinese economy will further increase. In particular, the novel coronavirus pneumonia epidemic that has swept the country since the beginning of the Lunar New Year may have a significant negative impact on the overall economic situation. In this context, steady growth, especially maintaining a GDP growth of 6%, may become the focus of macroeconomic control policies. The change in per capita consumption of dairy products is somewhat mild as they are semi-essential products under consumption upgrading. Once consumers develop the habit to eat dairy products, they are not likely to reduce consumption demand due to small fluctuations in the economy and their household income. Moreover, the changes in dairy consumption often spirals upward thanks to structural recovery opportunities and the outbreak of demand for certain product categories. As the growth of domestic liquid milk output in China is slowing down, the trend of industry development will be to adjust dairy consumption structure, vigorously develop low-temperature milk markets such as pasteurized milk, encourage and stimulate the consumption of dry dairy products such as cheese in the future. The orientation towards high-end, differentiated and personalized development of dairy products structure will further boost the demand for high-quality raw milk. However, as dairy farming’s returns increase, dairy farming enterprises will become more motivated to add and breed more cows, leading to a growth in the herd size of sizable farms and the number of newly-built farms. As such, the stock of dairy cows is expected to gradually recover with growing supply of raw milk, so the market supply and demand will be more balanced and the room for milk prices to rise will be limited in the future. In response to the novel coronavirus pneumonia outbreak in early 2020, the Group promptly introduced a series of countermeasures in the daily management of dairy farms, including requiring drivers of fresh milk-transport vehicles to wear masks and take their temperature when entering and leaving dairy farms, subjecting vehicles in and out of farms to disinfection, and adding disinfection procedures at entry and exit checkpoints. The Group also performs closed management of dairy farms, have all personnel, cattle, equipment and environment disinfected, and take protective measures for employees during the epidemic period to ensure the safety of personnel and the normal production and operation of dairy farms. In order to ensure the health and safety of raw milk products, the Group strictly implements the epidemic prevention measures and the hygiene requirements for dairy production stipulated by the state in all aspects of raw milk production. Nevertheless, as the prevention and control of the novel coronavirus pneumonia enter a critical stage, the intensifying control measures will indirectly have a negative impact on the day-to-day operation and management of dairy farming companies, the input of raw materials such as forage grass, and the transportation of raw milk. Meanwhile, given the nationwide restrictions on logistics and travel, the sales of dairy products will certainly be affected, leading to overstocking of products, which in turn will deal a blow to the dairy farming industry. Opportunities are reserved for those who are well prepared. The development of China’s dairy farming industry has gone through much hardship. After its painstaking early development, the Group has been well prepared for years for the opportunities from the transformation and upgrade of China’s dairy industry. Upholding the mission to “build tech-driven ecological dairy farms and create high-quality and healthy dairy products” and the vision to “become a leading enterprise to provide nutritious and healthy food”, the Group has always implemented a strict and comprehensive disease control system in the operation and management of dairy farms to protect the overall health of employees and cattle. During the Reporting Period, there was no outbreak of major diseases in the Group’s dairy farms. As of the date of this announcement, none of the Company’s employees had been found to contract the novel coronavirus pneumonia since its outbreak in Mainland China in early 2020. Looking forward, the Group will continue to strengthen the fine management of dairy farms, enhance the unit yield and milk quality of dairy cows by improving the quality of dairy cows, and constantly enhance its ability to resist market fluctuation risks and adapt to market changes. Furthermore, it will steadily promote dairy processing business and actively explore downstream industry to develop new business lines and profit growth drivers through industry chain expansion, so as to diversify its business revenue, optimise revenue structure and explore new development paths.

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