China looks promising for Natural Dairy

Natural Dairy (NZ) Holdings Limited and its subsidiaries have announced its annual results for the 14 months ended 31 May 2010.

For the 14 months ended 31 May 2010, revenue of the Group amounted to HK$59,576,000 ($7,685,158.73), 989% higher compared with the 12-month FY 2009 period, mainly attributable to the introduction of the food and beverage trading.

However, the Group recorded an annual operating loss of HK$203,244,000 under the Hong Kong Accounting Standard due to the revaluation and reconsolidation of its wholly-owned subsidiary's iron mining assets that were transferred illegally.

Within just one year, the Group has turned around from liabilities of approximately HK$90 million to total assets of approximately HK$1,400 million.

The Group's market capitalization has also surged from HK$92.69 million to HK$4,000 million (as at the suspension of trading on 6 September).

Through the reconsolidation, the Group has transformed from an electronic engineering trading and mining company to a dairy product enterprise and organic beverage manufacturer, to tap the huge potential in China and growing consumer demand for quality and reliable dairy products.

"In the past year, our management team has led the Group's transformation into an enterprise focusing on the production, processing and sales of higher margin dairy products. Our business is heading in the right direction. Our strategic repositioning is based on two considerations," said Wu Neng Kun, chairman.

"First, the melamine contamination issue in China's dairy industry in 2008 revealed the huge market and growth potential for imported quality dairy products in China. Second, as dairy products are daily food products, demand is less affected by macroeconomic cycles compared to our previous core businesses. Therefore, we believe that the shift to dairy products will turn us back to profitability and better development."

From 2009 to 2010, the Group has embarked on three substantial acquisitions to establish a vertically-integrated business structure.

The target company of the first acquisition owns 22 dairy properties with an aggregate area of approximately 8,674 hectares covering quality grassland in New Zealand with approximately 35,000 dairy cattle ensuring a high quality milk supply suitable for dairy farm operation.

The target company of the second acquisition is Global Food Holdings Limited, which owns production lines and the license of the trademark.

The beverage and sweet rice congee under Global Food's brand have been prominent in China, enjoying nationwide popularity which can reinforce the sales and distribution network of the Group.

The Group plans for its integrated industry chain to span farmland, dairy cattle and milk powder production plants in New Zealand (the third acquisition).

The Group has decided to terminate the application of the third acquisition to obtain the permit of early resumption of trading in its stock.