China Minzhong’s 11% Rise in Net Profit

China Minzhong China Minzhong Food Corporation Limited (SGX: K2N) saw its revenue for Financial Year 2013 (FY2013) soar by 26.4% to RMB 3,247.8 million from RMB 2,568.8 million in the previous year. The increase in revenue was due to “better performances in both the Processed (comprising of processed vegetables, beverages and other processed products) and Cultivation (comprising of fresh vegetables produce and mushroom spores) business segments.” The gross profit margin was at 34.4%. The margin slipped by four percentage points from FY2012 because of higher raw material costs and lower yields from new productive farmland.

The net profit was at RMB755.1 million, an improvement of 11.1% over FY2012. The net profit margin was at 23.2%. The earnings per share for FY2013 was at RMB 1.28 (S$0.27).

On the balance sheet, the trade receivables increased 13.5% in FY2013 to RMB 1,098.0 million. The company said that 99% of overdue receivables belong to long-term standing customers who have yet to default on any payment previously and are currently making regular payments on the receivables. The trade receivables turnover increased from 85 days in FY2012 to 116 days in FY2013. The cash conversion cycle increased from 76 days in FY2012 to 93 days in FY2013.

The net operating cash flow jumped 164.4% over the previous year to RMB 949.4 million.

The company has proposed its first dividend payout, since listing, of 1.0 Singapore cents per share.

China Minzhong’s Executive Chairman Mr. Lin Guo Rong, said, “The past financial year was filled with corporate milestones for the Group, in many areas including financial performance, business expansion plans and corporate development. We are pleased to deliver our 4th consecutive year of record profit despite heightened cost pressures in our business operations. Our increased focus on industrialized farming has led to expansion into new cities and also extended the cultivation methodology to more crops, which will improve our raw material self-sufficiency and cost efficiency in the future.”

On a separate note, in response to Glaucus Research’s allegations, the company released an announcement saying that after doing a preliminary review of the report, China Minzhong notes that most of the issues raised by Glaucus were nothing new and came about due to a complete lack of understanding of the business model of the company as well as the operating environment in China. The company added that it would release a detailed response that its financials are sound and that there were no fabricated sales or cover up on its part.

The company’s shares are still halted and is currently at $0.53. The PE is at 1.96 and the dividend yield is at 1.9%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.