China Organic has announced plans to increase its focus on value-added products in a “transformational” move that will see it further capitalise on China’s burgeoning domestic demand for premium products, such as organic foods.

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In a letter to shareholders, CEO Jinsong Li updated investors on developments in the company.


Li said China Organic will begin selling “high quality premium products”, including organic foods and California wines, in the autumn of 2009. The company said it hopes to meet the rising demand for specialty international and organic goods from the new and rapidly growing “affluent middle class in Asia”.


“Our recent acquisition of Dalian Huiming, a major agricultural trading company with fiscal 2007 revenues and earnings of US$40.2m and $2.7m, respectively, is the first of many planned and quickly accretive acquisitions,” said Li.


Li also reiterated China Organic’s recent full-year guidance for 2008. The company predicted revenue of $113m – a 150% year-on-year increase, and net income of $20m – a 40% increase.

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As a result of the current market volatility and global economic conditions, China Organic said it is trading at a price that roughly matches the company’s earnings per share forecast of $0.29 for 2008, giving the shares a projected price-to-earnings of one.


Despite the share price not reflecting its growth to date or potential against the revenue and earnings projections, Li said he is “confident” the shares represent “a very compelling investment opportunity”.


“As I mentioned in our strategic initiatives release in October, we will continue to diversify through acquisitions and offer a spectrum of premium food products, not just to mainland China, but the special administrative region of Hong Kong and other Asian countries as well,” Li noted.