CHANGGE and BEIJING, China,
May 2, 2012
/PRNewswire-Asia-FirstCall/ -- Zhongpin Inc. ("Zhongpin", NASDAQ:
HOGS), a leading meat and food processing company in the People's Republic of China, today
announced that its 2012 proxy statement and its Chairman's annual
letter to shareholders are available in the investor relations
section of its website at www.zpfood.com.
The Chairman's letter to shareholders is included in Zhongpin's
2011 annual report to shareholders. The proxy statement is
available on the Zhongpin website in the SEC Filings section as SEC
Form DEF 14A. Zhongpin is following the U.S. Securities and
Exchange Commission's rules for "notice and access" of annual
meeting related materials, and is making its 2012 proxy statement
and 2011 annual report to shareholders available to shareholders at
a specific website for electronic voting, the address of which will
be mailed in due course to shareholders of record as of the close
of business on April 30, 2012.
Zhongpin's annual meeting of shareholders will be held at its
representative office located at Room 902, Building F, Phoenix
Place, A5 Shuguangxili, Chaoyang District, Beijing, People's
Republic of China 100028, on Wednesday, June 27, 2012, starting at
10:00 a.m. local time.
Below is the annual letter to shareholders from Mr. Xianfu Zhu, Chairman and Chief Executive Officer
of Zhongpin Inc. The letter is dated April
30, 2012.
Dear fellow shareholders,
I am pleased that the Zhongpin team achieved an outstanding year
in 2011. Sales revenues grew by 54% to $1.45
billion, with our chilled and prepared pork products
registering increases in both average prices and tonnage, while
frozen pork sales increased in price on slightly lower volume.
We are committed to meeting the needs of contemporary lifestyles
with China's favorite meat
product, pork, by delivering flavor, convenience, and variety. Our
philosophy and drive have helped us to stand out in a changing
marketplace, where China's
traditional wet markets and butchers are being replaced by
cold-chain logistics and supermarket distribution.
Financial results
We had an excellent year in sales, exceeding our expectations.
Net income increased by 10% to $64.2
million, with a gross profit margin of 10.4% and a net
profit margin of 4.4%. Net income and profit margins were a little
less than we had provided in our guidance for the year, due to
market and competitive pressures in hog and pork prices.
We ended the year with cash of $135.8
million, an increase of $51.7
million over 2010, and a moderate debt level with a debt
ratio of 34.9% net debt to total capital, subtracting cash and cash
equivalents. Interest coverage for the year was 4.2 times net
interest expense. Our moderate debt leverage and reasonable
coverage give us adequate financial flexibility should we need
it.
Building scale in a changing market
We are not just one of China's
top pork producers – we have a unique branded retail concept that
includes our own showcase stores and branded stores, as well as
dedicated Zhongpin counters in supermarkets. At the end of last
year, our distribution network covered 20 provinces and 3,428
retail outlets. The bigger our national footprint becomes, the more
we are investing to bring Chinese consumers a range of choices to
meet their amazing diversity of tastes. Last year we launched 79
new pork products, bringing our current total products to over 410,
and today we have about 90 new products under development.
China's pork market is the
largest in the world, accounting for nearly 50% of global
production and consumption in 2011, or 49.5 million metric tons.
China's hog sector is 4.6 times
the size of the United States. To
give you an idea of the scope and scale of changes underway in the
industry, the Chinese government aims to reduce the number of hog
slaughtering facilities from over 20,000 to around 3,000 by 2015 to
encourage large producers with hygienic facilities. Modern hog
operations currently represent 30% of production.
To benefit from the growth opportunities in the world's largest
pork market that is in the throes of modernization and industry
consolidation, we will need to continue investing for the long
term. As a result, we have put substantial resources into two areas
of strategic importance – processing capacity and cold-chain
logistics.
Capacity expansion in strategic markets
In 2011, we invested $169.1
million on construction, purchase of land use rights, and
property and equipment, adding 201,000 metric tons of annual
capacity for pork and pork products. We brought our total capacity
at year end 2011 to 728,760 tons of chilled and frozen pork, and
126,000 tons of prepared pork. New production facilities came on
line during the year for pork products, at Phase 2 of our
Tianjin facility, and for chilled
pork and frozen pork in Changchun,
Jilin province and Taizhou,
Jiangsu province. These capacity
additions give us improved ability to meet demand in key urban
markets in central China,
northeast China, and eastern
China, as well as help us to meet
our goal of achieving a large national market share.
In 2012, we will be shifting emphasis in capital expenditures,
with a reduced rate of capacity expansion and greater focus on
making use of our existing facilities through business innovation.
Nonetheless, we will add 50,000 tons of capacity at a new
production, research, and training complex in Changge, Henan province. We also will begin work on a
complex in Tangshan, Hebei
province, for pork and logistics functions that will add 102,000
metric tons in capacity for chilled, frozen, and prepared pork
products by 2013.
Cold-chain logistics and business innovation
A key element of our strategy is to expand our cold-chain
logistics capacity. We will build new cold warehouses in our
Tianjin location and new
cold-chain logistics centers in northeast China and central China, which are critical connecting points in
our distribution network. We expect our logistics operation to
become a separate business, providing both third-party logistics
storage and distribution services and the cold-chain logistics
system that is integrated into our own operations. A new cold-chain
logistics distribution center in Anyang, Henan province, will service third-party
clients. We are also building a cold-chain logistics center at our
new chilled and frozen food processing and distribution center in
Kunshan, Jiangsu province, near
Shanghai.
We are also seeking ways to maximize the use of our existing
resources through new product and process developments and
innovations. We will be investing about $10.5 million in a by-product processing plant in
Changge to produce sausage casings and the raw material used to
make heparin sodium, in one example of how we are working to
develop higher utilization and profits from hogs, our raw material.
We also are moving upstream with a new joint venture to improve the
quality of hog breeding by supplying about 20,000 premium sire
boars annually to help create the high-quality hogs for pork
products.
The goal of our strategy and actions is simple – to maximize the
long-term returns to shareholders and boost capacity utilization.
In 2012, we expect our capacity utilization will be about 75% for
our combined pork and pork products operations.
Looking ahead
The year 2011 was one of rapid growth for us, leading to some
pressure on margins. In 2012, our focus is on sustainability,
deepening of our business model, and preparing to thrive in the
aggressive industry consolidation that is accelerating and is
expected to be completed in about five years.
Our market growth, our integrated application of science,
industrial processes, and information technology to our business,
and our steadfast aggressiveness and determination have afforded us
opportunities, but we must continue to advance and grow rapidly
within the massive pork industry consolidation that is happening in
China. Looking ahead, and with the
help of all our stakeholders, from customers to shareholders,
employees, and suppliers, I believe Zhongpin will continue to do
well for the benefit of all its stakeholders.
Sincerely,
Xianfu Zhu, Chairman and CEO
About Zhongpin
Zhongpin Inc. is a leading meat and food processing company that
specializes in pork and pork products, vegetables, and fruits in
China. Its distribution network in
China covers 20 provinces plus
Beijing, Shanghai, Tianjin, and Chongqing and includes 3,428 retail outlets as
of December 31, 2011. Zhongpin's
export markets include Europe,
Hong Kong, and other countries in
Asia. For more information about
Zhongpin, please visit Zhongpin's website at
http://www.zpfood.com.
Safe harbor statement
Certain statements in this news release are forward-looking
statements made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Zhongpin has based its
forward-looking statements largely on its current expectations and
projections about future events and trends that it believes may
affect its business strategy, results of operations, financial
condition, and financing needs. These forward-looking statements
can be recognized by the use of words such as "believe," "expect,"
"will," or words of similar meaning. These forward-looking
statements are not guarantees of future performance and are based
on a number of assumptions about the Zhongpin's operations, and are
subject to risks, uncertainties, and other factors beyond the
Zhongpin's control.
These projections involve risks and uncertainties that could
cause actual results to differ materially from those in the
forward-looking statements, which may include but are not limited
to such factors as downturns in the Chinese economy, unanticipated
changes in product demand, interruptions in the supply of live pigs
and or raw pork, the effects of weather on hog feed production,
poor performance of the retail distribution network, delivery
delays, freezer facility malfunctions, Zhongpin's ability to build
and commence new production facilities according to intended
timelines, the ability to prepare Zhongpin for growth, the ability
to predict Zhongpin's future financial performance and financing
ability, changes in regulations, and other information detailed in
Zhongpin's filings with the United States Securities and Exchange
Commission. These filings are available at www.sec.gov or from
Zhongpin's website at www.zpfood.com.
You are urged to consider these factors carefully in evaluating
Zhongpin's forward-looking statements and are cautioned not to
place undue reliance on those forward-looking statements, which are
qualified in their entirety by this cautionary statement. All
information provided in this news release is as of the date of this
release. Zhongpin does not undertake any obligation to update any
forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.
For more information, please contact:
Zhongpin Inc.
Mr. Sterling Song (English and
Chinese)
Director of Investor Relations
Telephone +86 10 8455 4188, extension 106 in Beijing
ir@zhongpin.com
Mr. Warren (Feng) Wang (English
and Chinese)
Chief Financial Officer
Telephone +86 10 8455 4388 in Beijing
warren.wang@zhongpin.com
Christensen
Mr. Julian (Yujia) Zhao (English
and Chinese)
Telephone +86 10 5826 4727 in Beijing
yzhao@christensenir.com
Mr. Tom Myers (English)
Telephone +86 139 1141 3520 in Beijing
tmyers@christensenir.com
www.zpfood.com
SOURCE Zhongpin Inc.