Zhongpin's 2012 Proxy Statement and Chairman's Annual Letter to Shareholders are Available Online
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.
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.
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.
Xianfu Zhu, Chairman and CEO
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:
Mr. Sterling Song (English and Chinese)
Director of Investor Relations
Telephone +86 10 8455 4188, extension 106 in Beijing
Mr. Warren (Feng) Wang (English and Chinese)
Chief Financial Officer
Telephone +86 10 8455 4388 in Beijing
Mr. Julian (Yujia) Zhao (English and Chinese)
Telephone +86 10 5826 4727 in Beijing
Mr. Tom Myers (English)
Telephone +86 139 1141 3520 in Beijing
SOURCE Zhongpin Inc.