China Yurun Food Group Limited Announces Its Annual Results Ended 31 December 2012

- Actively Optimized the Sales Structure to Resume Business Step by Step

- In 2012, the Group recorded turnover of HK$26,782 million.

- The Group's gross profit was HK$398 million.

HONG KONG, March 22, 2013 /PRNewswire/ -- China Yurun Food Group Limited ("Yurun Food" or the "Company", and together with its subsidiaries, the "Group") (SEHK: 1068), a leading vertically-integrated meat-product processor and supplier in China, announced today its annual results for the 12 months ended 31 December 2012 (the "Year").

In 2012, global economy faced severe challenges. Slowdown in China's overall economic growth, hog price fluctuation as well as slower-than-expected recovery in consumer demand all resulted in a challenging operating environment for hog slaughtering and meat processing industry in China. Facing all these challenges, Yurun Food shall continue its strategies of proactively optimising its market and sales network, operating business with persistent commitment and implementing flexible marketing strategies. During the Year, the Group recorded turnover of HK$26,782 million. The Group's gross profit was HK$398 million and overall gross profit margin was 1.5%.

To allow root striking of the "Yurun" brand and to build up a stronger relationship with the public, Yurun Food has endeavored to strengthen brand building and maintenance, at the same time implemented radical measures and efforts to promote food safety. During the Year, the Group has been awarded several industry awards, including: "The Most Influential Consumption Brand" at Consumer Markets 20th Anniversary Huacai Awards Presentation Ceremony. At the same time, Yurun Food was the only meat and food processing enterprise in China featured by CCTV in its special programme, "2012, Our Brand". These showed that the Company's brand products are well received and acknowledged by the community in China.

Mr. Li Shibao, CEO of the Group, said, "Our advantages accumulated over the years in allocation, technical advances, quality, production and network will continue to support the long-term development of the company. We have confidence in facing obstacles with courage and fully implementing the solution. Despite the current challenges, we all realize the great responsibilities on us and the obstacles ahead of us. We will do our best to overcome the short term difficulties and ultimately rebuild the public recognition and trust while resuming our business and operation quality, promoting the group's business steadily."

Business Review

The Group's business is divided into upstream chilled and frozen meat and downstream processed meat products segments

In 2012, under severe business environment, as high-added-value products, chilled meat and low temperature meat products continued to be the main source of income. In the second half of 2012, the slaughtering volume and gross profit margin of downstream products are recorded increase as compared to the same period last year and first half of 2012.

Faced with a difficult operating environment, exploration of new sales distribution channels plays an active role in recovery, among which, restaurant chain channels is going to be a new growth driver in our business development. In 2012, upstream segment revenue contribution from restaurant chains increased as compared to 2011. The food and beverage industry in the PRC is currently in its early stage of development. It is heading towards a rapid development of brand consolidation, with an annual growth rate of 20% or above. Yurun Food believes the current expansion will enable the Company to seize early business opportunities and may provide room for further development of Yurun Food's products in the future.

Production Capacity

To fully capitalize business opportunities arising from industry consolidation, the Group made forward looking deployment in regions with ample hog production capacity to satisfy market demand for quality meat products. Under the principle of strict control over investment, the Group prudently adjusted its expansion rate in accordance with market changes and continued to implement the development in an orderly manner. With respect to its upstream slaughtering segment, after the new plants in provinces including Anhui, Henan, Jiangxi, Gansu and Hainan commenced operation during 2012, the upstream slaughtering capacity of the Group reached 56.65 million heads per year at the end of 2012, representing an increase of approximately 10.60 million heads as compared to that at the end of 2011. In 2013, the Group will prudently adjust its pace of expansion in line with the operations and capital. The preliminary capital expenditure plan for 2013 will be approximately RMB 1.00 billion, which will be significantly lower than 2012.

It has always been Yurun Food's aim to deliver products of supreme quality. In 2012, as a recognition of its stringent quality control, Yurun Food received The 2nd Award for Outstanding Contribution in Food Safety and Public Health recognising its efforts in food safety and public health. Meanwhile, the Group continued to focus on product innovation and strive to enhance competitive advantages and retain its market share.

Policy Opportunities

During the Year, the Central Government of the PRC promulgated or issued more than ten new laws, regulations and notices to regulate the hog industry and promote food safety. Nine departments including the Ministry of Commerce and the Ministry of Industry and Information Technology joined forces to check and inspect all qualified hog slaughters across the nation. As at the end of 2012, the number of hog slaughtering establishments and small hog slaughterhouses in China significantly decreased by 22.5% and 27.7% year-on-year, respectively. The number of slaughtering enterprises in China decreased 26.2% as compared to 2011. The Company believes that, along with the industry restructuring, consolidation of the slaughtering industry in China will further guarantee sustainable development of the industry and benefit leading enterprises in the industry to sustain long-term development by leveraging competitive advantages in brand building, production capacity and market allocation.

Prospects

In 2012, Yurun Food remained resolutely to implement different measures for resuming normal operation when facing several challenges. Some of the important indicators including slaughtering volume and downstream gross profit margin have gradually improved. Entering 2013, the Group will strive for business resumption and profits, enhance sustainable development and maximize returns for its shareholders.

About China Yurun Food Group Limited (Stock Code: 1068)

Leveraging on its vertically-integrated business model and strategically located production plants, Yurun Food is the leading meat-processor and meat products supplier in China. With its well-established food brands, state-of-the-art production facilities and diversified distribution channels, Yurun Food will further strengthen its leading market position.

Company website: www.yurun.com.hk

SOURCE China Yurun Food Group Limited