KUALA LUMPUR: China-based ready-to-serve food producer Sozo Global
Ltd is looking to spend RM16 million this year to acquire and/or set up a
halal food plant in Negri Sembilan.
Its CEO Shen Hengbao said
the group, which is listed on Bursa Malaysia’s Main Market, is talking
to a local food producer based in Negri Sembilan and hopes to reach an
agreement at the end of this month.
He said Sozo would invest
RM8 million for the acquisition and to expand the production at the
existing plant. The plant currently produces roti prata and spring
rolls.
“In addition to that, the (target) company also owns an
empty land next to its current factory. As such, we are looking at
investing another RM8 million to build a new factory there,” he said at a
media briefing yesterday.
He said the plant currently generates about RM12 million revenue per year.
Shen added that two of Sozo’s major customers have also expressed
interest in the venture in Negri Sembilan but declined to reveal
further. “We are still in discussions and have yet to firm up details,”
he said.
Shen said the halal food plants in Negri Sembilan would help Sozo penetrate the Indonesian market.
“Indonesia
is a strong consumer of duck products. However, the country has banned
the import of certain food items from China. The plant in Negri Sembilan
would allow us to tap into the lucrative market. This is one of the
reasons why our two customers, which are trading companies, are
interested in the venture as well,” he said.
Shen said the group is looking to produce noodles, dumplings and biscuits at the Negri Sembilan plant.
“We
would also source the raw material from producers in Malaysia and
Thailand. It is interesting to note that the cost of duck here is
similar to the ones in China,” he said.
On funding the venture,
Shen said the group is still mulling options. “It could be a combination
of internally generated funds and borrowings,” he said.
As at
Dec 31, Sozo had RM268.9 million cash while borrowings amounted to
RM19.23 million. But while it was sitting on a huge cash pile, its
ongoing expansion plan in China would consume part of the cash, apart
from the new venture in Negri Sembilan.
For FY11 ended Dec 31,
the group’s net profit grew 11.7% to RM113.02 million from RM101.2
million a year earlier. Revenue meanwhile rose 2.8% to RM421.89 million
from RM410.5 million a year earlier.
Sozo’s board of directors has proposed an 18% final dividend payout (of net profit) for FY11, compared to 9% a year earlier.
Shen
said the better results in FY11 were mainly contributed by the strong
performance of its spring rolls product and the increased direct exports
to Japan and South Korea. Sales of spring rolls surged 278.2% to RM26.1
million while direct exports to Japan and South Korea increased 22.8%.
Sozo
currently has two processing plants in Shandong, China with a combined
capacity of 46,160 tonnes of food. The group is currently building a
third processing plant in China, which would produce 17,280 tonnes of
halal-certified food.
Sozo’s chief financial controller Alex
Khor said Sozo has invested 40 million yuan (RM19 million) for the halal
plant and is expecting operations to begin in 2Q12.
The company
is also setting up an egg-laying and incubation duck farm in Anzhuang,
costing 180 million yuan with a capacity of 120,000 ducks per day.
“The setting up of the duck farm is to ensure the strong supply of duck meat for our businesses,” he said.
In
total, Sozo is spending some 220 million yuan for the setting up of
both the duck farm and its third processing plant in China.
Khor
said Sozo is expecting a “moderate growth” for FY12 as the group would
need to have substantial working capital to set up the duck farm.
“We
would need to invest to purchase the parent ducks that would be used
for breeding. In addition, we would need to absorb some depreciation
costs for the setting up of the plant,” he said.
Sozo was listed
on Bursa in December 2010. In the last three months, the counter fell
22% to a low of 51 sen but had recovered some lost ground to close at 61
sen yesterday.
This article appeared in The Edge Financial Daily, March 1, 2012.
