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Stockwatch- Synear Food Hldgs: Interim Net Profit rises 46%

NEWLY-LISTED SYNEAR FOOD’S INTERIM NET PROFIT RISES 46.0% TO
RMB214.8 MILLION

-Interim Net profit rises 46.0% to RMB214.8 million on the back of a 15.0% improvement in Group revenue to RMB1.0 billion
Strong sales for the Group’s glutinous sweet dumpling products and other quick freeze food products
Distributors increase from 454 in 1HFY2005 to 486 in 1HFY2006

-Profit margins improved due to launch of new products and higher sales for other quick freeze food products

1HFY2006 Performance
Group Results (RMB’ million) 1HFY2006 1HFY2005 % Change
Revenue 1,002.0 871.1 +15.0
Gross Profit 329.7 276.0 +19.5
Gross Profit Margin (%) 32.9 31.7 +1.2 % point
Profit Before Tax 269.4 223.0 +20.8
Net Profit 214.8 147.2 +46.0
2QFY2006 Performance
Group Results (RMB’ million) 2QFY2006 2QFY2005 % Change
Revenue 412.6 343.8 +20.0
Gross Profit 136.5 112.5 +21.3
Gross Profit Margin (%) 33.1 32.7 +0.4 % point
Profit Before Tax 107.0 88.9 +20.3
Net Profit 106.9 58.5 +82.7

Singapore, September 22, 2006 – Synear Food Holdings Limited, one of the PRC’s leading quick freeze foods producers, today announced a double-digit growth in its top and bottom lines for the six months ended June 30, 2006 (“1HFY2006”).

The Group registered a 46.0% increase in its net profit to RMB214.8 million for 1HFY2006 on the back of a 15.0% improvement in Group revenue to RMB1.0 billion.

For the three months ended June 30, 2006 (“2QFY2006”), Group revenue rose 20.0% from RMB343.8 million in 2QFY2005 to RMB412.6 million in 2QFY2006. Net profit surged 82.7% from RMB58.5 million in 2QFY2005 to RMB106.9 million in 2QFY2006.

Commenting on the Group’s interim results, Mr Li Wei, Executive Chairman of Synear, said: “We are delighted to deliver a sterling set of financials for our maiden results announcement after the Group’s listing. Our continuous efforts to launch new products and increase the number of distributors have paid off. We are currently on track to expand our production capacity to meet the increased demand for our products. Going forward, we will continue to strengthen our capabilities and focus on growing our business to yield better results that will ultimately enhance shareholders’ value.”

Newly-listed Synear made its debut on the Main Board of the SGX-ST on August 18, 2006. It launched its Initial Public Offer (“IPO”) of 375.0 million shares at an issue price of S$0.54 per share.

Performance Review
The Group’s strong 1HFY2006 topline performance was driven by higher sales for all its three main product segments. These increases are attributable mainly to the increase in the number of distributors as well as an increase in demand for the Group’s new products.

Sales of savoury dumpling products increased by 4.5% to RMB393.3 million in 1HFY2006, while sales of glutinous sweet dumpling products rose 12.6% to RMB388.8 million. The Group’s quick freeze food products posted a strong growth in sales, surging 47.2% to RMB219.9 million during the period under review. This was mainly due to the Dragon Boat Festival which took place in 2QFY2006, which boosted the Group’s sales of its glutinous rice dumpling products.

The Group has recently launched new products, which include pan-fried dumpling series) and Shoudatianxia series of savoury dumpling products; Shoudatianxia series of sweet dumplings products; vacuumed-packed glutinous rice dumpling series steamed milk buns, pickled vegetable pork bun and onion flavoured crispy pancake of other quick freeze food products.

Mr Li elaborated: “Our new products are targeted at the mid-to-higher end markets. Demand for these new products in the half-year under review has been encouraging and we plan to focus our marketing efforts on promoting these new products for the rest of the year.”

The Group also expanded its presence in the PRC with the appointment of 32 new distributors, bringing the total number of distributors to 486 as at June 30, 2006. New distributors were appointed to deepen the Group’s market penetration in second tier cities and rural areas in the Hunan Province, Shaanxi Province and Guangxi Province within the PRC.

“We continued to appoint new distributors to expand our distribution channels and strengthen our presence in the second tier and smaller cities in the PRC. This strategy will enable us to broaden our customer base as our products are now available in more geographical areas,” added Mr Li.

Synear’s higher gross profit margin of 32.9% in 1HFY2006 was due to the launch of new products and its change in sales mix leading to higher sales of the Group’s other quick freeze food products, which generally command higher margins. In line with the higher revenue, both selling and distribution expenses as well as administrative expenses have increased 21.5% to RMB49.4 million and 32.4% to RMB10.2 million respectively for the same period.

The Group reported a 46.0% surge in its net profit to RMB214.8 million in 1HFY2006, which was mainly due to lower tax expenses.

Outlook
The Group recently completed the first phase of its production capacity expansion programme. New freezing machinery was installed to increase capacity by 28,800 tons per annum, raising the Group’s total annual production capacity to 316,000 tons as at August 31, 2006. The Group is currently on track for the second phase of its capacity expansion, which is due for completion in October 2006. When completed, its total annual production capacity for its existing plant is expected to increase to 360,000 tons.

In addition, the Group announced in early September 2006 that Synear has been selected by the Beijing Organising Committee for the Games of the XXIX Olympiad (BOCOG) to be the exclusive supplier of quick freeze food products to the Beijing 2008 Olympic Games. The total cost of the sponsorship program is RMB41 million.

Stated Mr Li: “This unique marketing platform will enable us to strengthen our brand visibility and strengthen Synear’s position as a leading brand name in the quick freeze food industry. We are planning to unveil a new marketing and advertising campaign which will incorporate the Olympics logos in our new TV commercials and frozen food packaging materials.”

To penetrate into new markets and reach out to more customers, the Group is also exploring the possibility of setting up production facilities outside Henan Province, which will increase the Group’s annual production capacity by an additional 300,000 metric tonnes. The Group will also continue to expand its distribution network and focus on its product development efforts to broaden its product range.

posted by gsg @ 7:20 PM