Shao Jun, General Manager of the Ho Chi Minh branch of the company, declared that the company will make opportunistic profits under the current economic conditions in Vietnam even though business has been severely impacted by local inflation.

It has been learned that the company invested a total of USD 20 mln for the establishment of four companies in Vietnam which are engaged in the production and sale of livestock feed, including pigs, chickens and ducks, with an annual production capacity of 600,000 to 800,000 tons. On 14 June 2008, the company announced that it performed well in the first five months of 2008 and achieved RMB 30 mln in profit, of which RMB 9 mln was generated in May alone.

Public information shows that as of the beginning of June, the U.S. dollar/Vietnamese dong exchange rate increased on the black market to 1:18,500 from 1:16,20 0 . Furthermore, as banks are short of dollars, processing fees increased by 13%-15%. The company incurred certain losses as the dong fell against the dollar, which itself decreased against the RMB, as well as increases in production, logistics and labour costs, all the result of a surge in prices for raw materials.

However, as crisis always coexists with opportunity, it was discovered that t here are a great many scattered small feed processing plants in which the livestock breeding industry in Vietnam is highly developed. In the past two months, as the dong depreciated by over 10%, it was impossible for small processors to surpass 10% profitability and many had to cease operations. As the company was first to invest in Vietnam with ample cash, it acquired a number of smaller companies that were forced to shutter due to poor operations. Raw materials were purchased from them at lower prices, resulting in large opportunistic profits for the company.

Source: 21st Century Economic Report

Date: 19 Jun 2008

CN01/MZ/BT/MM