China Food said today (17 September) that despite rising raw material and distribution costs it had posted strong growth in revenue and gross profits for its first half.
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However, net profit at the London-listed condiment maker fell as the company absorbed higher corporate overheads.
China Food said that first-half revenue growth of 49% year-on-year to GBP16.2m (US$m28.9m) and gross profit growth of 15% came in a business climate of rising raw materials and distribution costs.
“Our condiments business remains strong despite the inflationary environment and our production facilities operating at full capacity, being affected only marginally in gross margin terms, while maintaining a revenue growth of 18.8% to GBP6.8m,” the company said.
In a statement, the Shandong province-based company said that, despite margin erosion due to inflationary pressures, both globally and locally, its existing business units achieved an aggregate increase in net profit of 12% compared to the equivalent prior year period.
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By GlobalDataHowever, overall, the group’s net profit dropped marginally by 4.4%, or approximately GBP115,000, compared to the same period in the prior year.
The fall was largely attributable to higher corporate overheads following China Food’s AIM listing. Overheads soared by 377.4%, or around GBP307,000, while net profit was also hit by increased administration costs and amortisation of land use rights of 208.2%, or around 139,000) due to its new facility.
John McLean, chairman of China Food, said: “The opportunities over the next few years for China Food’s business are considerable. We are currently in the process of completing our new production facility and when this is fully operational, it should add another 50,000 tonnes of soya sauce production annually to our existing condiments production capacity of 100,000 tonnes. We are also investing in branding and improving our distribution and marketing channels, as it is our intention over the next few years to become one of the leading condiments brands in China compared to our current market in Shandong which has a population of 94m.”
He added: “The cost of this expansion programme to date has been approximately GBP19.3m, which has been funded out of internal resources and borrowings. Whilst our total spend on the project will be approximately GBP25m as planned, we estimate that, in the current inflationary environment, the cost of such a project would be substantially higher and a significant barrier to entry to other players. We now find ourselves in a very strong position and I view the future growth of the company with confidence.”
