China Yurun Food Group Limited Announces Its Annual Results for the Year Ended 31 December 2011

HONG KONG, March 9, 2012 /PRNewswire-Asia-FirstCall/ --

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 its annual results for the year ended 31 December 2011 today (the "Year").

During the Year, the Group recorded a turnover of HK$32,315 million (2010: HK$21,473 million), representing a 50.5% growth over the same period last year. The Group's gross profit and profit attributable to shareholders were HK$2,785 million (2010: HK$3,098 million) and HK$1,799 million (2010: HK$2,728 million) respectively, representing a decrease of 10.1% and 34.1% respectively as compared to those of 2010. The Group's overall gross profit margin reached 8.6% during the Year. The decrease in gross profit margin was mainly due to the significant increase in raw material costs (in particular hog price), together with weakened market confidence in the Group's products, and the increasing difficulty in transferring the Group's increased operation costs to its customers. The decrease was also attributable to product promotion activities conducted by the Group in the fourth quarter of 2011 which targeted at retaining market share.

The board of directors of the Company does not recommend the payment of final dividend for the year of 2011.

Mr. Zhu Yicai, Chairman of Yurun Food said, "In 2011, the pork product and hog slaughtering industries in China faced unprecedented challenges. It has been a short term turmoil experienced by the highly fragmented hog slaughtering and meat processing industries in China. For Yurun Food, this crisis allowed us to better recognize the challenges and opportunities of the Group's development in all aspects. The possible insufficient communication with the market during our development led to misunderstandings on the Group's quality management processes, which triggered a crisis of trust. Having experienced this setback, Yurun Food will remain committed to the realization of its long-term development strategies, optimize the communication channels between the Company and consumers, so as to rebuild the brand and regain the trust of consumers of the Group, as well as to bring returns to shareholders."

Mr. Zhu continues, "The management believes that the Group's business has reached the light at the end of the tunnel. We are confident that our business will progressively return to normal and realize a long-term steady growth. Looking ahead, the Group will be fully committed to our motto of 'you trust because we care', continue to implement internationally recognized internal quality control measures, strive to realize its nationwide marketing and production capacity development, so as to capture the business opportunities brought by industry consolidation, and to strengthen its leading market position."

Business Review

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

Production Capacity

As at 31 December 2011, slaughtering capacity of the Group was 46.05 million heads per year, representing an increase of 10.45 million heads as compared to 35.60 million heads at the end of 2010, while the Group's annual capacity of downstream meat processing was 304,000 tons. The Group will continue to expand its capacity, accelerate the enhancement of its nationwide production capacity in the coming years and aim to reach a slaughtering capacity of 70 million heads per year, as well as a downstream capacity of 600,000 tons per year by 2015, so as to further strengthen its leading position in the industry and capture the tremendous business opportunities in both upstream and downstream markets.

Product Quality and R&D

Quality control and food safety are crucial to the success of the Group as well as the whole industry. The Group continued to implement stringent quality control procedures and individual testing on quality of hogs to ensure that rigorous internal control procedures are in place to monitor all processes ranging from raw materials selection and procurement to production so that our products are in line with national and international food safety standards. Leveraging on its stringent quality control, Yurun Food was awarded "Food Safety Model Enterprise" and "Outstanding Contribution Enterprise" at the 9th Annual China Food Safety Conference in 2011. Meanwhile, the Group continued to focus on the development of competitive products so as to maintain its competitive advantages and consolidate its market share in the industry.

Prospects

Following the continuous stable development of the Chinese economy, as well as a series of favorable policies by the Chinese Government to stabilize hog prices and support the development of the hog slaughtering industry, it is believed that the hog slaughtering and meat products market will maintain its ongoing development.

The Chinese Government promulgated the "Guideline for National Hog Slaughtering Industry Development (2010-2015)" in late 2009. The plan aims to accelerate industry consolidation, eliminate outdated hog slaughtering plants nationwide and systematically increase the sales percentage of chilled meat and small packaged pork products in China. The Group believes that increasing attention to food safety by consumers will strengthen the determination of the Chinese Government to implement industry consolidation policies, promote continuous stable development of the Chinese pork product industries as well as the leading enterprises which implement internationally recognized food quality control system, so as to provide high quality and safe products for Chinese consumers

In the beginning of 2012, nine departments including the Ministry of Commerce, the Ministry of Agriculture, the Ministry of Health, the State Administration for Industry and Commerce as well as the General Administration of Quality Supervision, Inspection and Quarantine, undertook the review and clearn-up of designated hog slaughtering plants throughout the country. Through this measure, the authorities have gradually disqualified enterprises with outdated production capacity, to ensure that all qualified hog slaughtering enterprises comply with regulations and stipulated standards under the "Food Safety Law" and the Administrative Rules of "Hog Slaughter, greatly enhancing the food safety of meat products. Since the promulgation of the Administrative Rules of Hog Slaughter, local governments have abolished the qualifications of over 3,000 hog slaughtering enterprises through its review and screening process, which enhanced the consolidation of the slaughtering industry and its management standards, as well as promoted the long-term development of the Chinese hog slaughtering industry.

Looking forward, under the guidance of its outstanding management team and benefiting from favorable government policies, the Group will steadily expand its upstream and downstream capacity in a timely manner, to strengthen its nationwide distribution in the extremely fragmented meat products market in China, and to enlarge its competitive advantages in the market through reinforcing corporate image, strengthening public relations efforts and implementing a series of marketing activities, so as to capture any lucrative opportunities arising from industry consolidation, deliver even better results and bring more satisfactory returns to shareholders in 2012.

For further details about the Group's 2011 Annual Results Presentation, please kindly click: www.todayir.com/webcasting/yurun_11ir/archive_e.php

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 together with high standard of food safety and stringent internal quality control measures, Yurun Food will further strengthen its leading position in the industry by leveraging on the industrial consolidation and food safety regulation promulgated by the Chinese government. Yurun Food was included in MSCI Global Standard Index (MSCI China Index) on 29 August, 2008, which is an important recognition of Yurun Food as a leading company in the meat processing industry by the investment community. Company website: www.yurun.com.hk

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