Pine Agritech reports 129% jump in net profit

By Ven Sreenivasan
Mar 01, 2007
The Business Times

A SURGE in output and sales of two key products helped Pine Agritech boost its bottomlime more than two-fold last year.

The China-based soy products specialist yesterday unveiled a 129 per cent rise in net earnings to 538 million yuan (S$106 million) in the 12 months to December 2006, from 235 million yuan a year earlier.

This was achieved on the back of a 98 per cent rise in turnover to 1.58 billion yuan, from 797 million yuan a year earlier.

The final quarter of FY06 was a particularly strong period, with year-on-year earnings for the three months rising three-fold to 202 million yuan, on the back of a 128 per cent increase in turnover to 512 million yuan.

The company attributed the strong growth to a 225 per cent increase in capacity for its soy protein isolate (SPI) to 90,000 tons per year. SPI, an important food ingredient used in processed food such as meat products, accounted for 45 per cent of sales.

Also boosting the topline revenue was a strong pickup in the soy oligosaccharide syrup (SOS), a low calorie sweetener that is popular in Japan since the 1970s. Pine appointed health foods distributor Shenji as its main distributor for the product in July 2006 - a move which resulted in a strong pickup in sales of SOS during the the fourth quarter.

'From July 2006 until January 2007, Shenji has set up more than 300 new health stores and appointed 350 sub-distributors across 36 cities in the PRC,' Pine said in a statement.

SOS now accounts for 43 per cent of Pine's total revenue.

Besides strong rise in topline turnover, the company also enjoyed a strong boost in margins, particularly for its SOS product.

Meanwhile, it also yielded significant cost savings from the expanded production capacity for defatted soy flakes, which is the key raw material to produce SPI.

The result was a boost in gross margin to 44 per cent, compared to 34 per cent the previous year.

After an effective tax rate of 15.5 per cent starting last year, net margin was 34 per cent, up from 29 per cent in 2005.

The company fully repaid its 100 million yuan bank borrowings taken in 2005 by the end of last year.

Return on equity was 39.4 per cent, while return on assets was 33.2 per cent.

Going forward, the company expects even higher growth and wider margins in 2007 as it starts selling a a new product, soy peptide. The plant for this product is expected to be ready by June this year, which will see capacity rising from the current 2,000 tons to 12,000 tons per year.

Pine expects its overall margin to be even better in 2007 as key products such as SPI continue to enjoy robust sales growth, even as high margin products SOS and soy peptide gradually take over as the major contributors of the group.

The company has recommended a final dividend of 3.6 yuan cents per ordinary share.