Fufeng Group Announces its Outstanding 2009 Interim Results

The Group's gross profit surged by 142.8% to RMB 577 million, with gross profit margin up by 13.5 percentage points to 28.1%. Profit attributable to shareholders amounted to RMB354 million, an increase of 3 times from RMB 85.9 million compared with that in 2008.

20 Aug 2009 Fufeng Group Limited, together with its subsidiaries collectively known as "the Group"; a leading vertically integrated manufacturer of corn-based biochemical products in China, announces its outstanding interim results for the six months ended 30 June 2009.

During the period under review, the Group's turnover increased to RMB 2,055 million, representing an increase of 26.1% as compared with that in 2008, propelled by the increased average selling prices and sales of glutamic acid and MSG products after the industry consolidation ended in 2008 as well as the increased average selling price of xanthan gum. The Group's gross profit surged by 142.8% to RMB 577 million, with gross profit margin up by 13.5 percentage points to 28.1%. Profit attributable to shareholders amounted to RMB354 million, an increase of 3 times from RMB 85.9 million compared with that in 2008. Earnings per share for the first half of 2009 amounted to RMB 21.32 cents. The Board has recommended the payment of a interim dividend of HK 10 cents per share for the six months ended 30 June 2009.

Financial Highlights:

- Profit Attributable to Shareholders increased 3 times to RMB 354 million
- Interim Dividend at HK 10 cents per share

Commenting on the results, Mr. Li Xuechun, Chairman of Fufeng said, "The Group continues to play and expand its leading role throughout the consolidation of MSG and xanthan gum industry despite the global financial crisis in the first half of 2009. With the strong sales performance of MSG and xanthan gum products, and the expansion of production capacity, the Group further enlarged its market share successfully. In addition, gross profit margin increased significantly as the price of raw material has further reduced, sustaining the Group record the outstanding results. "

The Group's MSG segment includes glutamic acid and MSG business. During the period under review, benefited from the closures of small and middle size glutamic acid and MSG manufactures, the glutamic acid's average selling price increased by 12.1% compared with that in 2008 to RMB 6,777 per tonne. The average selling price of MSG also increased like the respective period in last year to RMB6,886 per tonne with an increase of 10.1%. During the review period, the Group adopted the strategy of shifting glumatic acid into MSG, which moved down the value chain to focus on higher margin products, has led the turnover and sales volume of MSG increased substantially by approximately 203.1% and 175.3% to RMB906 million and 130,000 tonnes respectively. The increase in production capacity by about 115.4% compared with that in 2008, was completely absorbed by the market.

In the period under review, the gross profit in MSG segment increased 183.6% to RMB 512 million as well as gross profit margin surged 15.1 percentage point to 27.4% as a result of significant reduction of production cost of corn kernels, coal and chemical raw material and taken the advantage of industry consolidation and the overall competition strengths of the Group.

The Group's xanthan gum sale increased from approximately 10.2% to RMB 186 million in the first half of this year, thanks to the increase in production capacity and average selling price. The gross profit of xanthan gum surged 14.1% to RMB 65.3 million. The gross profit margin of the xanthan gum segment was maintained at high level at 35.1% with an increase of 1.2 percentage points compared with that in 2008, due to the price of raw materials has dropped following the global economic downturn, together with the strong cost advantage of xanthan gum production in Inner Mongolia. The average production cost of xanthan gum in IM Plant was more than 30% lower than that in the Shandong Plant.

To meet with the market demand, the construction of the productions facilities for the 12,000 tonnes of xanthan gum, 5,000 tonnes of threonine and 1,000 tonnes of series of new amino acid products have been commenced in the first half of 2009 as scheduled, and is expected to be completed by the end of this year. The Group is in the process of expanding its production capacities of glutamic acid in Baoji Plant by 70,000 tonnes and that of fertiliser by 100,000 tonnes. Construction works of the new production facilities commenced in this year and would be completed in February 2010. At the same time, the Group has also amended its MSG production expansion plant, the additional production capacity from the preliminary 100,000 tonnes to 150,000 tonnes in IM Plant. After the construction, the total production capacity of MSG in IM Plant will increase to 250,000 tonnes per year. The construction is expected to be completed by the end of 2009.

Looking forward to the second of 2009, Mr. Li said," As the leading manufacture of the industry, the Group would utilise its technology know-how, established brand name and cost advantage to further expand the business coverage. The Group also will adopt a steady development strategy in accordance with market changes, with the aim of strengthening its market presence in its strategic markets through capacity expansion, and enhancing its operational efficiency and distribution network. At the same time, the Group will continue its endeavors in the research and development of new products along the product chain so as to diversify its sources of income and with the aim of enhancing its profit margin. The Group will continue to elaborate our advantages and capture the opportunities brought by industry consolidation and will also continue to develop biochemical technology products in order to promote long-term and prudent growth of the Group and become the world's leading manufacturer of biochemical products."