On 30 December 2014, Western
Animal Husbandry announced plans to increase the funding of its research
centre, using internal capital to do so. The stated aim is to ensure the
progress of the centre's cow breeding projects.
On 30 December 2014, Xinjiang Western
Animal Husbandry Co., Ltd. (Western Animal Husbandry) announced that it was
dedicating an additional capital sum of USD23.7 million (RMB145 million) to its
wholly-owned subsidiary, the Animal Husbandry Engineering Research Centre of
Xinjiang Production and Construction Corp. This move takes the centre's
registered capital to USD24.5 million (RMB150 million). The intention is to
maintain its progress in several cow breeding projects which it is running.
These projects include the construction of
14 dairy farms, in which the investment will take the form of equity
participation:
2
dairy farms with potential for 1,000 cows each
8
dairy farms with potential for 2,000 cows each
1
dairy farm with potential for 3,000 cows
3
dairy farms with potential for 4,000 cows each
The research centre intends to invest
USD51.6 million (RMB316 million) in these projects, building the farms in
phases, as permitted by working capital, market demand and construction
progress.
Western Animal Husbandry focuses mainly on
selling raw milk, dairy products (Garden Dairy) and breeding stock. Its H1
report of 2014 showed sales of raw milk reached USD11.97 million (RMB73.2
million), a YoY increase of 32.5%, along with the gross profit margin of 26.7%.
This was its business with the quickest growth and the highest gross margins.
This suggests that increased investments will be made in its dairying
operations to maximize its performance.
Several points stand out:
The enterprise
has established partnerships with processors including Yili, Hangzhou Wahaha
Group Co., Ltd. and Want Want China Holdings Limited. By co-investing in plants
and striking supply & marketing agreements with industry the company has
ensured stable sales channels for its raw milk.
Its base area, Xinjiang
Uygur Autonomous Region, is to accelerate the pace of rural reform and promote
land transfer in 2015. This will enable Western Animal Husbandry to secure
rights to land use for its operations, allowing it to develop their scale.
Development of the group's infant formula business will be supported.
Its subsidiary Xinjiang Shihezi Garden Dairy Co., Ltd. (Garden Dairy), was the
region's first enterprise to obtain official accreditation for the production
of infant formula. Last year it produced around 3,500 tonnes of infant formula.
In H1 2014, its net profit reached USD712,300 (RMB4.4 million).
Such upstream cow breeding projects demand
huge inputs over long periods and involve high risks. But the government has
required dairy enterprises to establish own milk sources, and working in line
with the direction of government policy will bring benefits.
Western Animal Husbandry achieved sales of
USD77.5 million (RMB474.4 million) in Q1-Q3 last year, a YoY increase of 19.4%.
Its net profit reached USD5.5 million (RMB33.6 million), a YoY increase of
17.4%. This can be attributed to the increased sales of raw milk and cows.
By 31 December 2013, the total assets of
the research centre were USD889,400 (RMB5.4 million). It made a net loss of
USD2,200 (RMB13,192.2) in 2013.
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Tag: dairy