It sees drop in 2010 full-year net on oversupply of chicken meat products in China mkt

 

THE Year of the Rabbit has not started well for SGX's only bunny play. China Kangda Food Company, one of China's leading rabbit meat exporters to Europe and Russia, yesterday issued a profit warning.

 

It is expecting a significant drop in 2010 full-year net profit due to a continued oversupply of not rabbit but chicken meat products in China's competitive domestic market.

The company, which is also listed on the Hong Kong Stock Exchange, yesterday said that the expected decline also stems from higher labour and raw materials costs in China squeezing its profit margins for the year ended Dec 31, 2010. This will mean a second straight year of lower full-year net profit.

The company added though that fourth-quarter revenue was likely to grow thanks to recovering demand for its products both overseas and in China, as well as positive contributions from subsidiaries in the second half of 2010.

China Kangda has not had a good financial year. In its latest reported results for the third quarter ended Sept 30, 2010, China Kangda posted a 40 per cent jump in revenue to 263.8 million yuan (S$51.3 million) but net profit still plunged 60 per cent to 4.98 million yuan. This followed large falls in net profit in the first and second quarters of FY10, despite rising revenue in both quarters too.

Last August, the company announced that it had breached certain loan covenants and that the lenders had demanded early repayment of the balance on syndicated loan amounts of HK$23.6 million (S$3.9 million) and HK$31.5 million.

It then said in October that one of its subsidiaries had secured a term loan facility of 100 million yuan for one year from a bank in the PRC, part of which would be used to repay the outstanding balance of those syndicated loans.

China Kangda yesterday advised shareholders and potential investors to exercise caution in dealing in its shares, which closed half a cent higher at 11 cents yesterday, before the release of its profit warning.