China Food Company PLC Trading Update (8148W)
01 February 2013 - 6:00PM
UK Regulatory
TIDMCFC
RNS Number : 8148W
China Food Company PLC
01 February 2013
Press Release 1 February 2013
China Food Company Plc
("China Food" the "Company" or the "Group")
Trading Update
China Food Company Plc (AIM:CFC), the leading Chinese
manufacturer of cooking and dipping sauces, today announces that
construction of the Company's new Animal Feed factory has now been
successfully completed. The facility has been on trial production
and commissioning for the last six weeks and the Board has been
pleased with the performance of the operations. Accordingly, the
facility will become fully operational from 1 March 2013, after the
Chinese New Year break.
The capacity for the new plant is 50,000 tonnes of premix and
240,000 tonnes of compound feed, a substantial increase compared to
the old factory where capacity was only 15,000 tonnes and 60,000
tonnes respectively. Revenue of the old factory operating at full
capacity is GBP24 million, which compares to an estimated revenue
of the new factory operating at full capacity of approximately
GBP100 million. Although the Group's animal feed business was
broadly break-even in 2012, the Board anticipates that it will make
a positive contribution in 2013 due to the additional capacity and
production efficiencies.
The total capital investment for the new factory was
approximately GBP3.5 million, which has been funded from the
Company's internal resources. China Food's new factory is equipped
with the most advanced and up-to-date feed manufacturing equipment
sourced from Buhler Group, a Swiss-based manufacturer of
agriculture equipment.
Based on the completion of the animal feed factory and the
ongoing delays by Wisehand Planning Co. Ltd, the Board has decided
to terminate negotiations and consider action against Wisehand
Planning Co. Ltd and its shareholders under the guarantee for
breach of its agreement. The Company will now focus its efforts on
increasing the new factory's production and reinitiate the sale
process in due course/when appropriate.
As a consequence of this, the Company will not be in receipt of
feed-sale funds in the short term and the convertible loan note due
on 31 January 2013 will now be rolled into a new Loan Note due on 3
November 2014, as previously announced on 2 November 2012. The
total amount of outstanding Loan Notes is GBP4,429,000. The outline
terms of the new Loan Note are as follows:
As the disposal has not been completed by 31 January 2013, the
Loan Note holders have agreed to further extend the redemption date
to 3 November 2014. A redemption premium of 1% of the Loan Note
holder's original holding will be payable on redemption. The
Company and the Loan Note holders have agreed that interest will be
charged at a rate of 12.5% p.a. from 3 November 2012 to 31 January
2013; from 1 February 2013 to 30 June 2013, the rate of interest
will rise to 15% p.a.; from 1 July to 30 September 2013 to 17.5%
p.a.; from 1 October to 31 December 2013 to 20% p.a. and 25% p.a.
thereafter until redemption. The Loan Note holders retain the right
not to redeem their holding until maturity of the Loan Notes on 3
November 2014, in which case the interest rate will be fixed at the
rate prevailing on the date of the Company's proposed redemption.
In the event the Company is unable to transfer funds from the PRC
to pay interest when due, the A, B, & C Loan Note holders have
agreed that interest charged will be rolled up and compounded
semi-annually to maturity.
As the Loan Notes were not redeemed by 31 December 2012, the
price at which the Loan Notes are convertible have been reset to
15.5 pence, being the lower of the average mid-market price for the
period of 20 December to 31 December 2012 and 19 pence per ordinary
share being the closing mid-price on 1 November 2012.
Condiments Business
The Board is pleased to confirm that draft management numbers
indicate that the condiments business was EBITDA positive in H2
2012. The Group achieved sales of approximately GBP20 million
(2011: GBP16.9 million) of which Xaka, the Group's premium soya
sauce product, accounted for 25% (GBP5 million) in its first full
year of sales.
The Board is encouraged by this performance, particularly
because the success of Xaka since its launch has opened new
channels and outlets for China Food's middle-range brand, Hao Tai
Tai. The increase in distribution channels and retail outlets will
form the foundation for growth in both Xaka and Hao Tai Tai in
Shandong and in neighbouring provinces in 2013.
John McLean, Chairman of China Food, commented: "The Board is
pleased with the ongoing progress of the core condiments business
and, in particular, the progress that is being made with our
premium product, Xaka. As well as being successful in its own
right, this launch has provided access to additional distribution
channels for our other products, driving opportunities for further
growth.
"The completion of the construction of the new animal feed
factory is a positive step for the Company, as a modern new feed
operation has been created which will improve operating margins and
make it more attractive to potential purchasers.
"Whilst it is disappointing that China Food will not be able to
complete the proposed disposal, the new operation is expected to be
both profitable and cash generative, thus providing a contribution
until the sale process takes place. Enhancing shareholder value
remains a top priority for the Board and we look forward to
updating shareholders with our progress."
- Ends -
For further information:
China Food Company Plc
John McLean, Chairman Tel: +44 (0) 7768 031
454
www.chinafoodcompany.com
Numis (Joint Broker)
David Poutney - Head of Corporate Tel: +44 (0) 20 7260
Broking 1000
finnCap (Nomad and Joint Broker)
Geoff Nash / Ben Thompson (Corporate Tel: +44 (0) 20 7220
Finance) 0500
Simon Starr (Broking)
Media enquiries:
Abchurch Communications
Henry Harrison-Topham Tel: +44 (0) 20 7398
7702
henry.ht@abchurch-group.com www.abchurch-group.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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