People's Food unit to offer 150m shares in IPO

By Josephine Tay
Apr 20, 2005
The Business Times

WHAT do sausages, infant formula and seafood sticks have in common? They all contain soybean protein isolates (SPI), which Pine Agritech Limited hopes to be able to produce more of after its initial public offering (IPO) next month.

Pine, a China-based manufacturer of soybean-based products, plans to raise at least 370 million yuan (S$74 million) to help expand its operations and capacity by listing on the main board here.

Said David Tsoi, investor relations spokesman for Pine: 'For SPI production, we are operating at more than 90 per cent of capacity.'

Pine plans to use about 110 million yuan for a plant in Linyi to increase SPI production capacity by 20,000 tonnes per year, while 100 million yuan will be used to raise production capacity of a soy syrup by 4,000 tonnes.

The company also hopes to spend 45 million yuan to increase production capacity of 'defatted' soy flakes by 75,000 tonnes, and another 22 million yuan to expand its distribution and sales network.

Another 100 million yuan will be used to reduce bank borrowings.

Currently, the firm has three manufacturing facilities in China - one in Shandong province, and two in Heilongjiang province.

Its main product is SPI, which accounted for 74 per cent of revenue in the year ended Dec 31, 2003. SPI is a key ingredient in dairy foods, nutritional supplements, seafood, processed meats, frozen food, nutritional beverages, cream soups, sauces and snacks.

Soy oligosaccharide syrups, used in health foods, and soybean oil are other products which Pine manufactures.

The Pine group plans to issue 150 million new shares, or 25 per cent of its enlarged issued share capital. There is no information yet on the number of placement shares and price per share.

Its largest shareholder is People's Food Holdings, which holds a 49 per cent stake. Listed on the main board here and in Hong Kong, People's Food is a producer of fresh and frozen meat and processed meat products in China.

Pine Agritech's revenue grew at a compounded annual growth rate of 249 per cent to 373.9 million yuan in the year ended Dec 31, 2003 from 30.7 million yuan in 2001. Over the same period, profit before tax grew at a faster rate, increasing to 92.5 million yuan in 2003 from 5 million yuan in 2001.

The group estimates that it can achieve revenue of 527.9 million yuan and profit before tax of 136.9 million yuan for the year ended Dec 31, 2004.

Pine believes that their strengths set them apart from other soybean-based product manufacturers. For one, according to Mr Tsoi, they have a registered membrane separation technology. This allows them to produce soy oligosaccharide syrup from soybean whey, a by-product of the manufacturing process of SPI.

Another strength is the location of production facilities in the Heilongjiang province, which is a major soybean farming area for non-genetically modified beans.

This, Mr Tsoi said, has led to some interest being expressed from food manufacturers in the European Union.

'The challenge lies in ensuring food safety and quality of our products,' said Mr Tsoi.

'In the light of recent corporate scandals, we want investors to know that since People's Food has a significant share in our company and has one directors on our board, we hope to be as good as them and gain from their experience. The management will ensure good corporate governance, internal audits and responsible governance.'