Workers spray fruit trees at one of Asian Citrus' mainland orange plantations. The Hong Kong-listed company said Tuesday that it plans to raise the price of its winter crop by 8 percent due to a drought which has caused a shortage of supply. Provided to China Daily

Drought causing shortage; net profit up 33%

Hong Kong-listed Asian Citrus Holdings Ltd, China's largest orange producer and plantation owner, said Tuesday it plans to raise the price of its winter crop by 8 percent. This is more than double the usual 2 percent to 3 percent increase, as a drought which hit southern China earlier this year has caused an orange shortage, the company said.

"The Chinese market is very fragmented and a lot of the oranges are supplied by many smaller farmers," the company's finance director, Eric Sung told Bloomberg Tuesday. "We will be able to achieve a much higher price because of the shortage of supply."

On the same day, Asian Citrus also reported a 33 percent year-on-year increase in net profit to 585.5 million yuan for the year ended June as the orange grower has expanded its production and increased sales to supermarkets.

Revenue in the period also grew 21.5 percent to 812.5 million yuan from the previous year.

"Our business has been doing well during the past year, benefiting from the increase in production and sales to supermarkets," CEO Tony Tong said during a press briefing held for the company's annual results.

Approximately 186,938 metric tons of oranges were produced during the year, while the three years between 2007 and 2009 saw the company's production of oranges grow at a compound annual growth rate (CAGR) of 20 percent.

Around 61,157 metric tons of oranges were sold directly to supermarkets this year, representing an increase of 42.3 percent compared with a year earlier. From 2005 to 2010, the number of supermarkets the company sold oranges to increased from two to 20.

Being the largest orange producer in China with a market share of 2 to 3 percent, the company is now poised to expand its scope of operations into the fruit juice concentrates business with the acquisition of the country's largest supplier of tropical fruit juice concentrates.

Asian Citrus announced Monday that it plans to buy a 92.94 percent stake in Beihai Perfuming Garden Juice Company Limited for HK$2.04 billion. Beihai is the largest producer of pineapple juice concentrate and lycee juice concentrate in China with an annual production capacity of over 60,000 metric tons.

"We believe that the acquisition of Beihai will help us tap the mainland fruit juice concentrates market with their established distribution network and experience in this field," said Tommy Tong, executive director of the company.

"As living standard keeps improving in China, we believe that the demand for fruit juice beverages will grow accordingly," he added.

According to a recent Euromonitor report, demand for juice concentrates in China will grow at a CAGR of 30.9 percent between 2010 and 2013. Currently, fruit juice consumption per capita in China is less than one liter, one tenth of the world's average.

"While upgrading our production of high-quality fruits, we are on course to expand into the country's juice market with the potential acquisition of Beihai BPG," said Tony Tong.

China Daily

(HK Edition 10/13/2010 page3)