The level of operation has decreased and the operation has recorded a substantial loss:
As of December 31, 2012, Yurun's annual income was HK $26.78 billion, down 17.1% from a year earlier; gross profit was HK $398 million, down 85.7% from a year earlier; gross profit fell from 8.6% last year to 1.5% in 2012; operating profit lost HK $570 million, down 129.9% from a year earlier; a loss of HK $605 million for the year; no dividend for the whole year. For the whole of 2012, the government subsidy was 888 million Hong Kong dollars. Excluding government subsidies, the company lost nearly 1.5 billion Hong Kong dollars in 2012. The company's losses mainly come from upstream business, because more profits lead to a decline in gross profit margin, an increase in operating expenses, and a decline in customer purchase confidence due to the "pork incident", resulting in a substantial loss in annual performance.
Upstream business is the main cause of performance losses, and it will take time to recover:
In 2012, the company's overall sales revenue from its upstream business was HK $24.79 billion, down 16.2% from a year earlier; gross profit margin was-0.3%, down 6.8% from a year earlier, down 0.9% from the first half of 2012. Among them, the gross profit margin of cold and fresh meat was 1.7%, down 4.9% from the same period last year, 0.7% lower than that in the first half of 2012, and there was no turning point in the second half of the year. For 2013, the production rate of the upstream business is likely to continue to be below the break-even point of 40% Mel 50%. The company aims to seek room for improvement in gross margin this year, but the space is expected to be limited.
The gross margin of the downstream business has improved, but there is still room for it to be higher than the historical level:
In 2012, revenue from the company's downstream business was HK $2.688 billion, down 30.0% from a year earlier, and gross profit margin was 16.4%, down 5.7% from a year earlier. Among them, the gross profit margin of high-temperature meat products dropped to 13.1% from 18.6% in 2011, and the gross profit margin of low-temperature meat products decreased from 22.6% to 16.8%, but increased by 1.2% over the first half of 2011. Thanks to the continued decline in pork prices, the company's low-temperature meat business gross profit margin has continued to rise since the first half of 2012, but it is still a long way from the normal level (29%) in the first half of 2012.
Outlook for the future:
The company suffered heavy operating losses in 2012, and there was a serious crisis of customer confidence in buying. The company plans to slow its expansion in the future. In 2012, due to poor operating conditions, the company's capital expenditure was 2.4 billion yuan, which was cut by half compared with the original plan. In 2013, the company will adopt a more cautious attitude and plan to cut capital expenditure by half again to 1 billion yuan. In the company's existing investment plans, those that have already started will continue, and those who have not yet started will stop.
