China Foods Limited, subsidiary of COFCO issued profits warning, saying that company’s net profit in 2012 would significantly dropped. “The net profit of China Foods in 2012 is expected to be about 400 million yuan [US$64 million],” said analyst at Huatai Securities, far away from the 1 billion yuan [US$160 million] net profit in 2013 target, set by Luan Xiuju, general manager of China Foods in the first half of 2012.

China Foods has been regarded as the only platform of COFCO for its terminal consumer foods business. “China Foods works, then COFCO works,” said Gao Ning, president of COFCO once said to China Business News. According to the announcement, the decrease of profits in wine business is one main reason for the crisis of China Foods. Data from China Foods reveals that wine business contributed 57% to the total net profit of China Foods.

However, the sales of Great Wall wines, one major brand of China Foods, have dropped by over 30% in Guangdong province last year, reported China Business News. Insiders has suggested that as domestic wines are under great pressure of imported ones for long, the baijiu business, which are of much higher profit margin, would help China Foods to be more profitable. However, different from Legend Holdings, who breaks into baijiu business with clear targets, COFCO is lack of investment strategies in baijiu sector, due to the divergence of the senior managers to company’s baijiu business.

Source: Morning Whistle Feb 2013

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