Yuhe Doubles its Breeder Farms

CHINA - Yuhe International, Inc. has acquired 13 breeder farms from Weifang Dajiang Corporation, bringing its total number to 27, as well as purchasing land use rights for a new breeder farm.

5 January 2010

3 minute read

Asia

Yuhe International Inc., a leading supplier of day-old broilers in the People's Republic of China has announced that it has recently entered into an agreement to purchase 13 breeder farms from Weifang Dajiang Corporation. The Company also entered into an agreement to purchase land use rights for a 5.3-hectare parcel of land in Weifang, Shandong Province, where the Company intends to build a new breeder farm.

The aggregate purchase price for the 13 breeder farms is RMB103.87 million (approximately $15.2 million). According to the agreement, Yuhe already paid 80 per cent of the purchase price on or before 31 December 2009 and will pay the remaining balance within two months after formal delivery of the farms, expected in early March 2010. Built from 1996 to 1999, the farms cover a total area of 37 hectares, for which Yuhe acquired all the ground buildings as well as the land use rights for 36 years. The purchase price also includes in-house breeding facilities which supply feed, water and air to the parent breeders. The breeder farms are in good condition and require only RMB17 million (approximately $2.5 million) for renovation. These farms will add 600,000 sets of parent breeders for Yuhe by the third quarter of 2010.

Zhentao Gao, CEO of Yuhe, said: "By purchasing these thirteen breeder farms, we are able to quickly increase our production capacity of day-old broilers. We will leverage our expertise in modern chicken breeding, disease prevention and animal husbandry science to capture the tremendous market potential for poultry in China."

In a separate agreement, the Company purchased the land use rights for 50 years of a 5.3 hectare parcel of land for RMB18.0 million (approximately US$2.64 million), which was paid at the end of 2009. Yuhe also paid an additional RMB2.0 million (approximately US$0.29 million) for a building and other facilities within the area. The construction of this new breeder farm will start in February 2010 and finish by the second quarter of 2010. It will add 120,000 sets of parent breeders for Yuhe. The total capital expenditure for construction and equipment will be around RMB17 million (US$ 2.5 million).

Mr Gao commented: "Our solid balance sheet and strong operating cash flow will support our capital expenditures. Furthermore, the newly acquired land use rights provide us with additional financial flexibility as they can be used as collateral for long term bank loans."