Revenue Increased by 22% to HK$53,492 million
Optimising Strategic Layout and Expanding Production Capacity To Gain Market Share

Hong Kong, 30 March 2011 - China Agri-Industries Holdings Limited (“China Agri” or the “Company”; stock code: 606.HK), a China’s leading agribusiness and food processing company, today announced its annual results for the year ended 31 December 2010.

RESULTS OVERVIEW


In 2010, the Company recorded revenue of HK$53,492 million, representing a 22% increase from 2009. Profit attributable to the owners of the Company was HK$1,702 million, representing a 13% decrease from 2009. Such decrease was mainly due to a year-on-year decline in profits derived from the Company’s oilseeds processing and rice processing businesses.

The Board of Directors recommended a final dividend of HK3.9 cents per share. Together with the interim dividend of HK6.6 cents, the total dividend for 2010 was HK10.5 cents per share, equivalent to a 25% payout ratio.

BUSINESS REVIEW

(1) Oilseeds processing business recorded solid growth through strong sales of edible oil products.
The oilseeds processing business is the largest revenue contributor of the Company, accounting for 62% of the total revenue in 2010. Thanks to rise in product prices and sales volume, the business recorded a 23% year-on-year growth in revenue to HK$32,992 million. As part of the business operation, the Company entered into commodity futures contracts, which sought to manage the inherent risks associated with the price volatility of raw materials and related products. Owing to extreme price fluctuations of agricultural commodities in the second half of 2010, the Company incurred a hedging loss for its futures contracts, where profits arising from physical stocks could only be recognised on a later date when the actual sale of products has been completed. As a result, the gross profit margin decreased by 2.6 percentage points to 1.7% in 2010. The Company pushed ahead its strategic plan and expanded its sales channels to ensure a seamless supply of products to meet customers’ needs, resulting in strong sales of edible oil products. With the new capacity coming on stream one after the other in 2011, the processing capacity will go up substantially, which will help boost sales further.
 
(2) Biofuel and biochemical business reports a substantial increase in biochemical sales
Biofuel and biochemical businesses recorded a 31% year-on-year increase in total revenues to HK$10,131 million. Overall gross profit margin rose 1.6 percentage points to 13.2% from 2009. Biofuel business remained stable. Thanks to rise in product prices, the business recorded a 21% year-on-year growth in revenue to HK$4,528 million. On the other hand, the brisk demand for biochemical products fuelled solid growth in sales and enabled a prompt pass through of cost increments to downstream customers. During the year, biochemical business reported a 40% year-on-year increase in revenue amounting to HK$5,603 million. The Company pursues a customer-driven approach, with a focus to offer more high value-added products. A new corn starch specifically for beer brewery has been launched during the year and gained wide market acceptance. Other products such as syrup for beer and monosodium glutamate (MSG) will also be marketed at an appropriate time. 
 
(3) Rice trading and processing business shifts focus to domestic sales 
The rice trading and processing business generated  a revenue of HK$4,320 million, up 5% year-on-year. The increase was mainly attributable to a rapid growth in domestic sales, which has surpassed export sales in 2010. According to the research report issued by AC Nielsen on consumer-pack rice sold in large stores in 16 major cities in China, the Company’s aggregate market share in 2010 reached 13%, maintaining its competitive edge as the nation’s No.1 rice brand. Nevertheless, rapid expansion into the consumer market to gain market share requires considerable upfront investments. Together with the surge in raw materials, these factors adversely affected the profitability. Gross profit margin dropped from 18.0% to 12.6% in 2010. Going forward, the Company expects to further strengthen its leading position  in the consumer pack market with greater efficiency and expanded capacity.
 
(4) Wheat processing business focuses on development of high value-added products
The wheat processing business posted a 20% increase in revenue amounting to HK$4,394 million. Amidst rising wheat price and increasing cost pressure, the Company exercised stringent cost control and continued to optimise customer base and product mix. Gross profit margin maintained at 9.0%, slightly down 0.3 percentage point from 2009. With an objective to accelerate growth, the Company focuses on development of high value-added customised flour and collaborated with chain  restaurants and food manufacturers holding high growth potential, providing them with all-round services and one-stop olutions. 
(5)  Brewing materials business posted a record high in sales volume
Thanks to buoyant market demand, the brewing materials business achieved a 10% year-on-year growth in revenue amounting to HK$1,655 million. Gross profit margin rose to an industry leading level of 21.3%, representing a jump of 13.7 percentage points from  2009. Capitalising on the sales opportunities arising from vigorous demands led by fallen material prices during the year, the brewing materials business posted a record
high in sales volume.

OUTLOOK
Looking ahead, the food processing industry is expected to enjoy bright prospects, supported by improving living
standards in line with the fast-growing Chinese economy. However, industry consolidation and increasingly stiff
competition will pose challenges to the Company. In particular, the prices of agricultural products are anticipated
to become more volatile in 2011 given greater market liquidity and global climate changes. With established long-
term development objectives in focus, the Company will take steady steps towards its goals progressively. This
will enable the Company to grow all its businesses  in line with the economic growth in China. Upon completion
and operation of a number of major production plants in 2011, regional layout will be further optimised and market
share will be increased. The Company is confident of becoming a world-class integrated oil and grain enterprise
spanning the entire value chain, delivering safe, nutritious, healthy and quality products to its customers.