WEIFANG,
Concurrently, Weifang Yuhe entered into a service agreement with Mr.
"Upon completion of this deal, Yuhe will be the largest farmer of parent
breeders and the largest producer of day-old broilers in terms of production
capacity in
The five breeder farms have a total production capacity of 430,000 sets of parent breeders, covering an area of approximately 52 acres with building coverage of approximately 680,000 square feet. The assets to be purchased include the buildings and equipment for the acquired breeder farms, and the land leasing rights, which range from 14 years to 24 years. Upon the closing of the transaction, Yuhe will have a production capacity of 2.23 million sets of parent breeders.
The Company plans to spend
In order to ensure the superior quality of Yuhe's products, the Company will not take ownership of the parent breeders at the acquired breeder farms. Yuhe plans to take ownership of four vacant farms (with total capacity of 230,000 sets of parent breeders) within seven working days following the completion of the deal and commence renovations immediately thereafter. The takeover of the fifth farm, which has a capacity of 200,000 sets of parent breeders, will be completed by the end of 2010. The Company plans to put the first four farms into production in September of 2010 and the fifth farm into production in March of 2011. This acquisition is expected to contribute an output of 30 million day-old broilers in 2011 and 43 million day-old broilers in 2012.
The Company's hatchery center will remain in Weifang,
Considering the impact of the five breeder farms the Company plans to acquire and assuming the deal closes, the Company expects the following results:
-- Day-old broiler output of 150 million in 2010 and 250 million in 2011. -- Based on the anticipated production increase and assuming the average selling price for 2009 of RMB 2.74 and a net income margin of 26%, the newly acquired breeding farms are expected to contribute an incremental $3.1 million in net income in 2011 and $4.5 million in 2012.
Mr. Gao added, "We believe the terms of this transaction are very
beneficial for Yuhe and its shareholders. We are acquiring breeder farms with
a skilled management team and staff for significantly less than it would cost
us to build such farms from scratch. This deal also represents the first time
we are using our stock as a currency for making acquisitions. Mr.
Yuhe also announced it is accelerating the openings of the breeder farms
it acquired in early 2010 and the construction of its new hatchery. Five of
the Company's 13 newly purchased breeder farms have begun operations and
additional two breeder farms are expected to commence operations by the end of
Mr. Gao concluded, "We view this as a very attractive time to capitalize
on potential acquisition opportunities within our industry. Acquiring
existing breeder farms has become a more attractive way for us to expand
relative to constructing new facilities from scratch due to the increased
prices of raw materials and labor. After this deal closes, we will be the
largest producer of day-old broilers in
"We have emerged from this period as a stronger company and are well positioned to acquire and integrate farms from our smaller and weaker competitors, many of whom are now looking to leave the market. With the exit of these competitors, we foresee what may be an upcoming period of supply shortage in our industry. We expect to benefit from this trend as we are the leading brand in our market. Our reputation for quality is underscored by the fact that our product carries a premium price and, despite the higher prices our products sell for, we achieved significant volume growth in our business during a period of industry oversupply. We are also confident in our ability to acquire and integrate breeder farms as evidenced by the smooth integration and operation of the breeder farms we acquired in 2009. We have the management talent and human resources to successfully execute on our strategy. We have built a strong team at Yuhe through internal development and training of new university graduates as well as from our success in attracting highly qualified external professionals. Furthermore, we have a strong financial position to help fund our growth and, as a U.S.-listed public company, this is complemented, where appropriate, by our ability to access the capital markets and/or use our stock as an acquisition currency.
"We are currently evaluating additional targets in
Conference Call
The Company will host a conference call at
A replay will be available for two weeks beginning on
About Yuhe International, Inc.
Founded in 1996, Yuhe is one of the largest day-old broiler breeders in
Cautionary Statement
This press release contains forward-looking statements concerning the Company's business, products and financial results. The Company's actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
For more information, please contact:
Yuhe International, Inc.
Mr. Vincent Hu, CFO
Tel: +86-536-7300-667
Email: vincent.hu@yuhepoultry.com
Mr. Jason Wang, Director of IR
Tel: +1-765-409-1844
Email: jason.wang@yuhepoultry.com
Web: http://www.yuhepoultry.com
CCG Investor Relations
Mr. Athan Dounis, Account Manager
Tel: +1-646-213-1916
Email: athan.dounis@ccgir.com
SOURCE Yuhe International, Inc.