Singapore, 14 August 2008 – China Essence Group Ltd., one of the
largest, leading integrated potato-processing producers in the People's Republic of China (“PRC”), today announced its first quarter results for the financial year ending 31 March 2009.
Group revenue increased 59% to RMB143.2 million in 1Q FY2009, over the same period last financial year. Sales of potato starch in 1Q FY2009 increased 382% to RMB64.5 million compared to 1Q FY2008, accounting for about 45% of
the Group’s revenue, compared to 14.8% in the same quarter last financial year. The demand and average selling price for potato starch-based products and modified potato starch products remained steady during 1Q FY2009.
Mr Zhao Libin, Chairman and CEO of the Group, said, “We are pleased to begin our financial year with a set of outstanding results. This is a reflection of our successful position in the market as a key supplier of quality potato starch and potato starch-based products. Overall market opportunities are immense and we continue to expand our production capacities to take advantage of the growth in demand for these products.”
Key drivers of the increase in potato starch were higher sales volume and average selling prices because of more demand for potato starch from existing and new sales distributors. The commencement of new potato starch production facilities with an additional capacity of 80,000 tonnes per annum (“t.p.a.”) in Suiling and Ahlihe during August to November 2007 allowed the Group to sell more potato starch to meet the demand from the market, contributing to revenue increase for 4Q FY2008 onwards. The implementation of anti-dumping regulations by the Ministry of Commerce on potato starch producers from the European Union, which had been in effect since February 2007, also had the effect of directing demand to locally produced potato starch, such as China Essence’s. As a result of the improved demand, the average selling price of potato starch increased by about 22.7% in 1Q FY2009, compared to the same quarter last financial year.
The Group increased its overall gross profit by 33% to RMB63.1 million in 1Q FY2009, over 1Q FY2008. Overall gross profit margin however declined slightly, from 52.4% in 1Q FY2008 to 44.1% in 1Q FY2009, because of a change in product mix to lower margin potato starch and increased cost of potatoes. The Group had decided to increase the potato purchase price paid to farmers from an average of RMB320 per tonne last harvest season (August to November 2006) to an average of RMB450 per tonne this harvest season (August to November 2007). Therefore, the gross profit margin for potato starch dipped to 42.4% in 1Q FY2009, from 49.3% in 1Q FY2008.