“In 2017, the domestic wheat price was relatively strong with even higher price for high quality wheat material,” China Agri-Industries said. “Industry consolidation and upgrade speeded up due to the fierce competition and low profitability. To secure the competitive advantage during industry consolidation, variety of approaches including acquisition, new plant establishment and operation lease may be used by the company to strengthen the geographic footprint in quality material production region and major market areas, enhancing the supply ability of high value-added products.
“The lean value chain management and differentiated market expansion strategy helped maintain the traditional advantage of special flour products, stabilizing the business scale and profitability. Wheat processing business used the established rice sales channels for cross-selling of branded flour and noodle products to promote transformation towards branded sector. Marketing measures like online promotions, TV commercials and offline roadshows in residential complexes are undertaken to increase visibility and brand recognition of packaged flour products.”
Profit attributable to China Agri-Industries in the year ended Dec. 31, 2017, totaled HK3.042 billion ($387.6 million), up 114% from HK1.419 billion in 2016. Revenue, meanwhile, increased 11% to HK99.181 billion ($12.637 billion) from HK89.163 billion.
During the year China Agri-Industries completed the acquisition of the consumer-pack edible oil business, obtaining the rights to use the “Fortune” brand of consumer-pack edible oil in China.
Sales volume of flour products increased by 14.8% in 2017 to 2.513 million tonnes. Total revenue was HK10.564 billion, an increase of 18.1% year-on-year, while operating profit totaled HK158 million.
Total sales volume of rice increased 40% in 2017 to 2.614 million tonnes. Total revenue increased 36% to HK12.465 million, while operating profit rose to HK509 million.
“Looking ahead to 2018, China’s economy will be driven toward the stage of high-quality development by consumption upgrade and supply-side structural reform, creating better business climate and new opportunities for agricultural products processing sector,” China Agri-Industries said. “Consumption ratio of packaged products of grains, edible oils, and foodstuffs will remain growth. Market-oriented reform of the grains pricing mechanism will keep progressing. These two trends will jointly reinforce the competitive advantages of brand-based, large-scale enterprises, and will accelerate industry consolidation, leading to a new era of development for industry leaders.
“In terms of business operation, pressure on domestic grain costs are likely to ease with further progress of market-oriented reform, as well as an abundant supply of global oilseeds. But the company will still face the challenges of intensifying competition and inherent market price volatility. China Agri will continue ensuring stable operation and use our competitive advantage in the integrated value chain to mitigate the impact of market volatility risk. By transitioning towards branded business and increasing the sales proportion of high value-added products, we will keep striving for sustainable profitability under the new business structure.”