21 September 2009 - We have invested a total of ¥270.7 million (approximately £24.1 million) in our new facility to date. Investment in the facility for 1H 2009 was ¥19 million (approximately £1.8 million).
Once completed, the facility will add 50,000 tonnes of premium grade soya sauce production capacity. This is an increase of 50% on our existing condiments facility. The technology used combines Japanese shoyu manufacturing techniques with modern fermentation processes to increase fermentation yield and meet more stringent food safety production compliance measures. As a benchmark, for our existing production facility to produce a similar grade of soya sauce (which we do in small amounts), it will take about 180 to 270 days of fermentation as compared to 90-180 days required by the new plant. The quality and taste will also be superior. For this reason, our existing facility produces lower grade soya sauce with an average fermentation period of 30 days where it is most efficient.
With the launch of the new facility, our working capital requirements are expected to increase. This is due to increased production volumes and the longer fermentation cycle. In addition, there will be an increase in sales and marketing expenses and potentially extended trade receivables days as we move more of the premium grade soya sauce products into the supermarkets and larger retail chains.
We have been discussing an increase in our working capital facilities with financial institutions since the end of last year but due to the global conditions have not yet reached a successful conclusion. We remain optimistic of securing an increased facility in the coming months with our low gearing of 25% and our strong operating cashflow.
Due to the uncertainties of the current market and the requirement of increased working capital, the Group took the prudent decision to delay the construction and launch of our new soya sauce facilities which were originally scheduled for completion in summer this year. The Group has instead set a target to launch the facility early next year and hope to secure additional working capital by the 2H 2009 through a capital raising or bank borrowings or a hybrid of both.