China Organic Agriculture has sold its Jilin Songyuan City ErMaPao Green Rice subsidiary for US$8.7m to Bothven Investments.
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The company’s decision to sell was based on ErMaPao’s “significant” decrease in sales of both green and organic rice since the beginning of 2008, China Organic said today (1 October).
“The sale of ErMaPao occurred, in part, as a result of several disappointing quarters of sales for green and organic rice,” said Jinsong Li, CEO of China Organic. “The exit from ErMaPao was priced at a discount compared to [the] previous year’s earnings potential due to its precipitous decline in sales.
“Since we were able to sell to an interested investment firm before profits deteriorated further, we may now use the cash from this sale to make future accretive acquisitions.”
Second-quarter sales in the ErMaPao segment declined to $398,439 compared to $2.3m in the comparable period of 2007, representing more than an 80% drop in year-on-year sales.
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By GlobalDataThe sell-off coincides with the shift of the company’s focus to agricultural trading opportunities and diversification into products other than rice.
China Organic’s other business segments are not expected to be affected by the sale.
“Based on ErMaPao’s poor performance under previous management, we are lucky to sell at the price we did,” added Li.
