April 23 - Xiwang Sugar Holdings has announced it full year results for 2008.
2008 Results Highlights
• The Group reported satisfactory performance in the first half of 2008.
• But the melamine scandal and the global financial crisis posted significant challenges to the sales performance in the second half of 2008.
• Corn price reached and stayed at an ever high level for most times in 2008.
• Resulted in a drop of 82.3% in net profit for the full year.
• However, the Group was still able to generate a positive cash flow from operating activities of approximately RMB 268 million in 2008 (2007: net cash outflow of approximately RMB 124 million).
• 2008 net profit: RMB 64 million (2007: RMB 361 million).
• 2008 earnings per share: RMB 0.077 (2007: RMB 0.435).
• The Board proposes a final dividend of RMB 0.027 per share (approximately HK$0.03), representing a payout ratio of approximately 35%. Final dividend is proposed to be satisfied wholly by the allotment and issue of new shares of the Company.
Review of operating and financial results
The Group reported a net profit of RMB 64 million for the Year, representing a decline of about 82.3% compared to the corresponding period in 2007, in spite of a revenue growth of 23.4% to RMB 2.54 billion. It was due to a combination of factors, among them, the adverse impact brought by the melamine scandal and the global financial crisis which happened in the second half of 2008 were the most significant.
The detection of melamine in milk and eggs in China has, indirectly, dragged down the consumption of various dairy products and eggs and other related products and accordingly the sales performance of the Group’s crystalline glucose, corn gluten meal and corn gluten feed was adversely affected. The global financial crisis has a negative effect on the export business, which further reduced the Group’s profitability.
On the other hand, the production cost of the Group rose substantially in the Year which was caused by higher cost of raw materials. Due to the inflationary environment in China in 2008, domestic corn price stayed at a record high level during the first three quarters of 2008 and only started to come down by the end of the Year.
In addition, the Group has made a one-time provision of approximately RMB 19 million in the Year, with reference to the valuation report prepared by a qualified valuer in the PRC, to write down the book value of certain idle production facility in our fermentation plant (2007: Nil). That facility was previously used for the production of glutamic acid. Our research and development team will continue to focus on product development and the Group may re-utilise that idle facility in future if it is economically feasible.
The Group considered it was appropriate to make such a provision in the Year in view of the significant fall of petroleum and general commodity prices under the prevailing global financial crisis, which made it more difficult to develop profitable products from the fermentation technology.