China Agri Industries : Disposal of Biochemical and Biofuel Business Focus on the development of grain and edible oil business as core strategy

HONG KONG, 23 Oct, 2017 - China Agri-Industries Holdings Limited ('China Agri' or the 'Company'; stock code: 606.HK), today announced the disposal of its Biochemical and Biofuel Business ('Target Business') to COFCO Bio-chemical Investment Co., Ltd., a wholly-owned subsidiary of COFCO Group, for a total consideration of HK$8.579 billion ('the Disposal'). The Company will dedicate resources to accelerating its core strategy of developing its processing and branded consumer business of grain and edible oil products, with a view to seizing opportunities arising from increasing consumption of diversified, branded and high-end products. By focusing on this core strategy, China Agri is committed to repositioning itself as the leading integrated player in the grain and edible oil processing and branded consumer sector in China.

Upon completion, the Company expects to record a one-off unaudited gain of about HK$1.09 billion. Proceeds from the Disposal will be used by the Company for the purposes of future strategic development, brand building, and repayment of certain bank borrowings to optimise capital structure. The Company plans to distribute a special dividend of HK$0.20 to HK$0.30 per share, amounting to approximately HK$1.0 billion to HK$1.6 billion, upon completion of the Disposal. The exact amount is subject to the decision of the Board. The Disposal is subject to approval from independent shareholders and includes a number of conditions. For details, please refer to the announcement issued by China Agri on October 23, 2017.
China Agri has been consistently seeking sustainable development opportunities. Grain and edible oil consumption continues to grow rapidly in China, which is an environment conducive to further growth for the Company. According to the latest data from the National Bureau of Statistics, the retail sales value of grain and edible oil products during the period between January and August 2017 totalled RMB1.0234 trillion, up by approximately 10% compared to the same period in 2016. China has entered a phase of continuously expanding consumer demand, thanks to increasing national income and its upwardly mobile consumer base. These favourable industry trends have directly promoted brand-oriented consumption upgrade for rice, flour, edible oil, and other consumer food products.
Therefore, the Company's long-term development strategy will focus on its grain and edible oil value chains. By leveraging its market leading processing capacity and distribution networks, China Agri will concentrate efforts on R&D and management improvement to further enhance a superior value chain and provide high quality products to the market. The Company believes these efforts will further improve its brand awareness and competitiveness, as well as generate new growth drivers.
In September 2017, the Company completed the acquisition of the downstream consumer-pack products business of COFCO Fortune Foods Sales & Distribution Co., Ltd., which was the first step in the Company's restructuring to focus on the grain and edible oil processing and branded consumer business. The Disposal marks a further milestone in the strategic repositioning and restructuring of the Company as a state-owned enterprise. The Company will continue to enhance its processing capacity, sales channels and brand marketing to accelerate development of its core business. Specifically, China Agri plans to increase its total capacity for oilseed, rice, wheat and malt processing from the current 20.21 million tonnes to approximately 40 million tonnes in the next three to five years. Through vertically integrating the entire value chain and horizontal integration across rice, flour and edible oil products, the Company aims to double the sales volume of its consumer-pack products and achieve a higher percentage of sales from high value-added products.
As a flagship listed platform of grain, edible oil and food businesses in the COFCO Group, China Agri will continue to implement its strategies to enhance its market position and value, to achieve better returns for its shareholders.