DaChan’s Food Business Grows 16%, While Overall Results Remain Stable

Hong Kong, 22 March 2013 – As the leading chicken meat products supplier in China, DaChan Food (Asia) Limited (“DaChan Food” or the “Company”, stock code: 3999) announced its 2012 annual results on 22 March. Amidst the challenging business environment during the year, DaChan Food implemented a series of measures to maintain the growth of its overall results. The processed food segment saw strong performance, growing its revenue by 16.2% as compared to the corresponding period of 2011, while gross profit rose more notably by 39.1%, making the food business the most important source of revenue growth.

During the period under review, DaChan’s sales increased 2% to RMB 11.44 billion as compared to the corresponding period of 2011. Affected by the sluggish market environment and meat price, gross profit decreased 15.3%, from RMB 856 million in 2011 to RMB 728 million, and profit attributable to equity shareholders of the Company decreased to RMB 72 million.

The processed food segment enjoyed the most outstanding performance among all business segments. During the year, the Company continued its established growth strategy in the processed and branded food business, and strengthened risk control over breeding and rearing. In 2012, the processed food segment recorded revenue of approximately RMB 1.74 billion with an increase in gross profit of 39.1% to RMB 246 million. During the period, DaChan Group consolidated its resources in streamlining distribution channels, developing new products, and improving production technology. The Company enriched its product mix by introducing sausage products under the “Sisters’ Kitchen” brand, including meat sausage, cartilage sausage, Taixu pork sausage and rice sausage, as well as high-end native chicken (Fei Xue Tu Ji) products in the retail market. The Company also enhanced communication with the retail market through multiple channels, such as the Internet, Weibo, online stores and distributor conferences.

With the increasing domestic concern over food safety, DaChan Food further optimized its food traceability system for the “Sisters’ Kitchen” brand and related products. During the year, the Group launched a campaign named ”Mobilize for 100% Safe Food” ( “安心 100 總動員” ) to reinforce the internal management of food safety, and form a culture of quality assurance against three fundamental risks: drug residue, foreign objects, and degradation.  The pre- and post- slaughter dual testing system resulted in increased control of meat quality, and guaranteed that 100% of our products passed the randomized institutional tests during the “Fast Grown Chicken” incident.

In 2012, raw material prices rose more rapidly than meat prices, which affected the performance of the meat business. Revenue of the poultry meat segment of DaChan Food was RMB 5 billion, 2.7% lower than the corresponding period of 2011, with a 74.7% decline in gross profit. The feed segment was also affected by the price of raw materials and increasingly fierce competition, resulting in lower than expected business growth. Revenue increased 2.5% to RMB 4.69 billion while gross profit margin was squeezed to 9.2% from 10.7% the previous year.

“In 2012, DaChan Food actively responded to the market downturn,” said Mr. Han Jia-Hwan, Chairman of the Board of DaChan Food, “In the future, economic recovery in China, urbanization and rural economic reform will present new development opportunities for quality food companies participating in the breeding and rearing industry. The Group will use these opportunities to reinforce our brand’s traits of high quality and safety, improve operational profitability and further cultivate our brand awareness. Also, by bolstering the performance of the meat segment, we can better guard the Group against industry risk. Meanwhile, the research and development achievements on feeds in 2012 will be reflected in the results for this year.”