DAQING, China, March 22 /PRNewswire-Asia/ -- China Nutrifruit Group Limited (NYSE Amex: CNGL) ("China Nutrifruit" or "the Company"), a leading producer of premium specialty fruit based products in China ("PRC"), today announced the Company's decision to cease production of its beverage products, effective immediately, and plans to utilize the additional space at its Daqing facility for production of its core high-margin products.
China Nutrifruit has a beverage production line with a total annual production capacity of 10,800 tons at its headquarters in Daqing, Heilongjiang Province. The Company's beverage products contributed approximately 6.0% of the most recent nine months revenue, generating a gross margin of approximately 29.0%. After careful evaluation and long-term analysis of the product mix, the Company's management team and Board concluded that the added pressure from high production costs, space constraints, and increasing market competition have significantly reduced the attractiveness and margins in the beverage segment. Therefore, it was determined that terminating production of beverages would be in the best interest of the Company and its shareholders. The Company plans to sell all equipment used for production of beverages to unrelated third parties, resulting in availability of free space at the Daqing facility to improve the production efficiency of its new glazed fruit production line. The Company timeline for adding new production lines will depend upon market demand and availability of raw materials.
In addition, China Nutrifruit is currently upgrading all of its fruit concentrate production lines at the Company's facilities in Daqing and Mu Dan Jiang, which have a total fruit concentrate annual production capacity of 9,960 tons. The upgrade will include purchase of additional equipment and implementation of advanced production techniques, resulting in efficient use of raw materials and a favorable impact on gross margins. As the upgrades will be completed before the production season begins in July 2010, any improvements will be reflected in financial results in fiscal 2011. China Nutrifruit estimates the total capital expenditure for the upgrade to be approximately $1.5 million to $1.8 million (RMB10.0 million to RMB12.0 million).
"By exiting the beverage production business, we can now turn our full attention to producing our more profitable and high growth products. We will utilize the free space from the beverage lines to improve the efficiency of production lines for our high-margin glazed fruit products, positively impacting our overall gross margins," commented Mr. Changjun Yu, Chairman of China Nutrifruit.
About China Nutrifruit Group Limited
Through its subsidiary Daqing Longheda Food Company Limited, China Nutrifruit, is engaged in developing, processing, marketing and distributing a variety of food products processed primarily from premium specialty fruits grown in Northeast China, including golden berry, crab apple, blueberry and raspberry. The Company's processing facility possesses ISO9001 and HACCP series qualifications. Currently, the Company has established an extensive nationwide sales and distribution network throughout 20 Provinces in China. For more information, please visit http://www.chinanutrifruit.com .
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act""). Such statements include, among others, those concerning the Company's expected financial performance and strategic and operational plans, the Company's plans to cease production of the beverage production lines, upgrade the Company's fruit concentrate production lines and its favorable impact on gross margins, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the "Risk Factors" section of our filling, and other risks and uncertainties mentioned in our other reports filed with the Securities and Exchange Commission. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.
For more information, please contact:
Company Contact:
Mr. Colman Cheng, Chief Financial Officer
China Nutrifruit Group Limited
Tel: +852-9039-8111
Email: zsj@longheda.net
Web: http://www.chinanutrifruit.com
Investor Relations Contact:
Mr. Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915 (NY office)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
Elaine Ketchmere, Partner
Tel: +1-310-954-1345 (LA office)
Email: elaine.ketchmere@ccgir.com
