News blog

China Food Company

• BY: Andrew Hore |
• POSTED: 01/02/2013 |

China Food Company is not selling its animal feeds business any more and it is considering taking action against the proposed purchaser.

The news comes less than three weeks after Hana Mulsan Co sold its 12.3% stake in CFC to institutional shareholders. At 17.5p, the share price remains above the price prior to that sale. CFC is valued at £12.5m.

CFC has completed a £3.5m investment in a new animal feed facility and it hopes that the business will move from breakeven in 2012 to profit in 2013. Trial production has started and full production will start on 1 March - after Chinese New Year.

The capacity of the new plant is 50,000 tonnes of premix and 240,000 tonnes of compound feed, up from 15,000 tonnes and 60,000 tonnes respectively. Revenues have the potential to reach £100m a year at full capacity.

CFC says that it has terminated negotiations with Wisehand Planning Co. Ltd and considering action against the Korean company and its shareholders for breach of the agreement. One of the conditions of the deal was completion of the factory by the end of 2012. Trial production began at the end of 2012.

The disposal was expected to generate cash of £10m and a gain of £4.6m. The convertibles due for repayment on 31 January 2013 were going to be redeemed using this cash. They will be extended to 3 November 2014, just like the other convertibles. The extended convertibles are convertible at 15.5p a share. The interest rate will rise in stages to 25% a year.

Revenues from the core condiments business improved from £16.9m to £20m in 2012, against a forecast of £22.5m. Newly launched premium soya sauce Xaka accounted for £5m of those revenues.

Even so, finnCap has increased its forecast loss for 2012 from £3.1m to £4.3m. CFC had been expected to move back into profit in 2013 but a cut in the forecast for condiment revenues from £30m to £27m makes this less likely.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFJanuary2013_40.pdf