Vedan International Announces 2007 Annual Results

Net profit surges by 54.4% to HK$131.5 million

HONG KONG, April 15 /Xinhua-PRNewswire/ -- Vedan International (Holdings) Limited ("Vedan International"; SEHK: 2317) achieved substantial growth in 2007, with net profit up by 54.4% to US$16,856,000 (around HK$131,500,000). Profit margins also continued to improve, with gross profit margin and net profit margin at 19.1% (2006: 18.4%) and 5.3% (2006: 3.8%) respectively.

For the year ended 31
December
2007 2006 Change
(US$'000) (US$'000)
Turnover 317,431 290,695 +9.2%
Gross Profit 60,586 53,473 +13.3%
Net Profit 16,856 10,915 +54.4%
Gross Profit Margin 19.1% 18.4% +0.7 pts
Net Profit Margin 5.3% 3.8% +1.5 pts
Basic Earnings Per Share (US
cent) 1.11 0.720 +54.2%
Final Dividend Per Share (US
cent) 0.291 0.158 +84.2%
Total Dividend Per Share (US
cent) 0.553 0.358 +54.5%

Basic earnings per share of the Group were approximately 1.11 US cent, 54.2% higher than in 2006. The Board of Directors recommended payment of a final dividend of 0.291 US cent. Together with the interim dividend of 0.262 US cent already paid, the total dividend for the year was 0.553 US cent, representing a dividend payout ratio of around 50%.

Mr. Yang Tou Hsiung, Chairman of Vedan International, said, "The main revenue growth contributors in 2007 were the increased MSG export of our Vietnam operation, growing modified starch sales in the PRC market and rising lysine price. By effectively controlling raw material costs though increased usage of molasses, the Group lowered the production cost of major products such as MSG, GA and lysine, hence achieved satisfactory growth for its businesses."

The Group maintained a strong financial position. As at 31 December 2007, it had bank deposits and cash amounting to US$17,706,000, bank loans decreased substantially by 38% to US$45,478,000. Net gearing ratio was 10.8% (2006: 23.0%) and current ratio was 2.2 (2006: 1.6).

Business Overview

Products
2007 Ratio of the Year-on-Year
(US$'000) total Change
turnover
MSG 204,682 64.4% +8.0%
GA 36,925 11.6% -10.5%
Lysine 20,798 6.6% +35.8%
Modified Starch 25,916 8.2% +51.7%
Special Chemicals 14,844 4.7% +17.7%
Others 14,266 4.5% -4.3%
Total 317,431 100.0%

By product type, MSG continued to be the Group's core product, reporting revenue growth resulting from stronger export sales of the Vietnam plant to especially ASEAN countries and Europe in the second half of the year.

As for the sales of lysine and GA, since the price of lysine started to pick up in the second half of 2007, the Group switched production capacity for GA in Vietnam back to producing lysine, which explained the 10.5% drop in turnover of GA and the 35.8% increase in turnover of lysine.

Turnover of modified starch for the year increased by 51.7%, indicating that modified starch has become another core product of the Group. Sales of specialty chemicals increased by 17.7% because of the growth in demand of thriving industries in Vietnam for hydrochloric acid and caustic soda produced by the Group.

Market
2007 Ratio of the Year-on-Year
(US$'000) total Change
turnover
Vietnam 159,290 50.1% +5.2%
The PRC 52,047 16.4% +16.3%
Japan 47,492 15.0% -10.7%
ASEAN countries 34,794 11.0% +38.3%
Other regions 23,808 7.5% +47.2%
Total 317,431 100.0%

Apart from Japan, all major markets reported growth in turnover. Vietnam continued to be the Group's major market, accounting for over half of the total turnover. The Vietnam market grew slightly slower during the year when compared with other markets, as a result of MSG sales stabilising after years of rapid growth. However, the sales of lysine, specialty chemicals, hydrochloric acid and caustic soda continued to grow steadily.

Turnover from the PRC market also grew substantially and the market has replaced Japan as the second largest market of the Group. The growth was attributable mainly to the higher contribution from the modified starch and MSG businesses. ASEAN countries reported the most outstanding growth, bolstered by substantial growth in MSG and GA sales. The market is expected to sustain the growth momentum in 2008.

Turnover from the Japan market for the year decreased by 10.7%, mainly due to the weak international price of lysine in the first half of the year, commanding the Group to strategically shift capacity to produce GA. Since Japan is the main lysine market of the Group, the shift of capacity lead to a decrease in turnover of the market. With the price of lysine picking up in the second half of the year, the Group resumed lysine production in full force. However, with domestic demand for lysine increasing in Vietnam, the Group focused on sales in Vietnam and performance of the Japan market was inevitably affected.

Mr. Yang Kun Hsiang, CEO of Vedan International, said, "Apart from our major markets and products reporting turnover growth, our effective raw material mix strategy was another reason for our satisfactory performance in 2007. The Group has adopted the latest production technique and used different raw material mix for production. Last year, the price of molasses dropped due to strong harvest of sugar cane, while the price of cassava and cassava starch increased. The Group thus used more molasses and less cassava starch to lower production cost and increase gross profit. Looking ahead, the Management will remain vigilant and flexible in raw material usage and adopting different technical measures in production."

Prospects

Vedan International will enhance competitiveness and profitability through the following measures:

1. Boost the selling price of products and maintain the Group's market
share.
2. Enhance competitiveness through expanding production capacity. The
Group's various expansion projects in the pipeline included:
- Expansion of the Ha Tinh starch factory, construction of the first
phase with daily production capacity of 100 tonnes will be completed
in the third quarter of 2008 and its production capacity will be
expanded to 200 tonnes per day in the first quarter of 2009
- Expansion of the Ve-Yu starch factory from producing up to 100 tonnes
a day to 150 tonnes a day by the fourth quarter of 2008
- Develop projects about starch sources in Cambodia with a local
partner, a memorandum of understanding was signed in early 2008.

3. Actively explore more carbohydrate sources to lower production cost.

To lower reliance of the Group on certain raw materials and reduce production cost, the Group has been actively exploring new carbohydrate sources, including tropical sugar beet and sweet sorghum. Significant progress has already been achieved and will gradually expand the scale of plantation in the coming years.

Mr. Yang Tou Hsiung concluded, "Expecting continuous pressure from persistently high raw material and production cost in 2008, the Management has combative strategies mapped out. The Group will expand and strengthen the production of GA, lysine and modified starch and focus on developing export markets to enhance profitability and competitiveness. It is confident of delivering better returns to shareholders in the coming years."

About Vedan International (Holdings) Limited

Vedan International is a leading producer of fermentation-based amino acids, food additive products and cassava starch-based industrial products in Asia. Leveraging its production facilities in Vietnam and the PRC, its products are sold to food distributors, international trading companies and the food, paper, textile and chemical products producers in Vietnam, the other ASEAN countries, the PRC, Japan and Taiwan. Most of its products are marketed under the "Vedan" brand name. For details, please refer to http://www.vedaninternational.com/ .

For more information

Strategic Financial Relations Limited

Veron Ng +852 2864 4831 veron.ng@sprg.com.hk
Shirley Lo +852 2864 4847 shirley.lo@sprg.com.hk
Ming Chan +852 2864 4892 ming.chan@sprg.com.hk
Courtney Ngai +852 2114 4952 courtney.ngai@sprg.com.hk
Fax: +852 2804 2789

Enclosed: Condensed Consolidated Profit and Loss Account for FY2007

Vedan International (Holdings) Limited
Condensed Consolidated Profit and Loss Account
For the year ended 31 December 2007

Audited
2007 2006
US'000 US'000

Turnover 317,431 290,695
Cost of sales (256,845) (237,222)

Gross profit 60,586 53,473
Other gains - net 2,413 2,188
Selling and distribution expenses (16,907) (16,058)
Administrative expenses (20,990) (19,010)

Operating profit 25,102 20,593
Finance costs (4,364) (5,831)

Profit before income tax 20,738 14,762
Income tax expense (4,878) (3,827)

Profit for the year 15,860 10,935

Attributable to:
- Equity holders of the Company 16,856 10,915
- Minority shareholders (996) 20
15,860 10,935

Basic earnings per share (US cents) 1.11 0.72

Diluted earnings per share (US cents) 1.10 0.72

Dividends 8,428 5,458

Source: Vedan International (Holdings) Limited

CONTACT: All of Strategic Financial Relations Limited for Vedan, Veron
Ng, +852 2864 4831, veron.ng@sprg.com.hk; Shirley Lo, +852 2864 4847,
shirley.lo@sprg.com.hk; Ming Chan, +852 2864 4892, ming.chan@sprg.com.hk;
Courtney Ngai, +852 2114 4952, courtney.ngai@sprg.com.hk; Fax: +852 2804 2789

Web site: http://www.vedaninternational.com/

2008-04-15 22:54:25 0336928 PRNEWSWIRE