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Zhongpin to expand cold-chain logistics capacity

Beijing, China:  Zhongpin, one of China’s largest meat and food processors, to expand its cold-chain logistics capacity.

In a statement to shareholders, chairman and chief executive of Zhongpin, Xianfu Zhu, said: “We will build new cold warehouses in our Tianjin location and new cold-chain logistics centers in northeast China and central China, which are critical connecting points in our distribution network.

“Our philosophy and drive have helped us to stand out in a changing marketplace, where China’s traditional wet markets and butchers are being replaced by cold-chain logistics and supermarket distribution,” he said.

“We expect our logistics operation to become a separate business, providing both third-party logistics storage and distribution services and the cold-chain logistics system that is integrated into our own operations. A new cold-chain logistics distribution center in Anyang, Henan province, will service third-party clients.

“We are also building a cold-chain logistics center at our new chilled and frozen food processing and distribution center in Kunshan, Jiangsu province, near Shanghai.

“We are also seeking ways to maximize the use of our existing resources through new product and process developments and innovations. We will be investing about $10.5m in a by-product processing plant in Changge to produce sausage casings and the raw material used to make heparin sodium, in one example of how we are working to develop higher utilization and profits from hogs, our raw material.

“We also are moving upstream with a new joint venture to improve the quality of hog breeding by supplying about 20,000 premium sire boars annually to help create the high-quality hogs for pork products.

“The goal of our strategy and actions is simple – to maximize the long-term returns to shareholders and boost capacity utilization. In 2012, we expect our capacity utilization will be about 75% for our combined pork and pork products operations.

Zhongpin reported 2011 sales revenues up by 54% to $1.45bn. Net income increased by 10% to $64.2m with a gross profit margin of 10.4% and a net profit margin of 4.4%.

The company ended the year with cash of $135.8m, an increase of $51.7m over 2010.

The company one of China’s top pork producers and also has a branded retail operation with stores and dedicated Zhongpin counters in supermarkets. At the end of last year, its distribution network covered 20 provinces and 3,428 retail outlets.

China’s pork market is the largest in the world, accounting for nearly 50% of global production and consumption in 2011, some 49.5m metric tons. China’s hog sector is 4.6 times the size of the United States. The Chinese government aims to reduce the number of hog slaughtering facilities from over 20,000 to around 3,000 by 2015 to encourage large producers with hygienic facilities. Modern hog operations currently represent 30% of production.

“To benefit from the growth opportunities in the world’s largest pork market that is in the throes of modernization and industry consolidation, we will need to continue investing for the long term. As a result, we have put substantial resources into two areas of strategic importance – processing capacity and cold-chain logistics,” Xianfu Zhu said.