Yuhe International Signs Favorable Supply Contracts
WEIFANG, China, Aug. 24 /PRNewswire-Asia-FirstCall/ -- Yuhe International, Inc. (Nasdaq: YUII) ("Yuhe" or the "Company"), a leading supplier of day-old chickens raised for meat production, or broilers, in the People's Republic of China ("PRC"), today announced that the Company signed a series of supply contracts between May and July of 2010 with two suppliers to purchase external eggs to be produced by 420,000 sets of parent breeders at fixed prices of between RMB 1.45 and RMB 1.50 per egg.
The Company estimates that the unit cost per day-old broiler from externally-produced eggs purchased via these contracts will range between RMB 1.80 and RMB 1.90, which is equivalent to the first half 2010 unit cost of the Company's day-old broilers that relied on internally-produced eggs. The difference between the cost of broiler eggs and the cost of day-old-broilers comes from hatchery-related expenses.
At the time of the contract signings, all of the parent breeders were between two and 39 weeks of age and over 90% of them were in the middle of or close to entering their egg-laying cycle. The total egg-laying capacity of the parent breeders is estimated to be between 55 million and 60 million eggs, with more than 90% of the eggs expected to be produced before May 2011, and the remainder by August 2011.
Yuhe carefully inspected the quality of the breeder farms and the parent breeder stocks before entering into these supply contracts. Each supplier is obligated to continue to comply with Yuhe's quality control criteria on parent breeder mortality, broiler egg fertility, hatchability, and hatched broiler condition throughout its respective contract period.
Yuhe expects these supply contracts to benefit its cost structure by locking in favorable prices for external eggs; however, these contracts are not expected to impact the Company's projected broiler volume output. The Company continues to expect to achieve a total 2010 output of 150 million broilers and 2011 output of 250 million broilers.
"We believe that entering into these favorable supply contracts is an example of our ability to use our industry expertise to capitalize on opportunities in our market to optimize our input costs," stated Mr. Zhentao Gao, Chairman and Chief Executive Officer. "As we have previously stated, we believe there will be a supply shortage in our market going forward. We began to see tangible signs of this as our broilers are currently commanding average selling prices that are up significantly from the prices we were seeing in the second quarter of 2010. Given our market outlook we took advantage of a down period in the broiler market to lock-in a steady supply of quality broiler eggs at highly competitive prices via these fixed-price contracts. We entered into these contracts beginning in May of 2010 and finalized the vast majority of them by the end of June, a period of declining prices in the broiler market which led to significant price drops in the market for external eggs. As the price movement of external eggs is positively correlated to that of broilers, we anticipate a substantial unit price increase for external eggs as the broiler market continues to recover. We believe that our strategic decision to fix our external egg supply prices during the broiler market downturn was an important way for us to hedge against future cost increases."
About Yuhe International
Founded in 1996, Yuhe is the largest day-old broiler breeder in China. The Company's main operations involve breeding, as all broilers are sold within a day of hatching. Headquartered in Weifang, Shandong Province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., which largely supplies the Company's internal demand for chicken feed. Currently, 90% of the Company's sales of day-old broilers are in Shandong province through 28 local agents. There are 10 other sales agents in adjacent provinces. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com .
Cautionary Statement
This press release contains forward-looking statements concerning the Company's business, products and financial results. The Company's actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
For more information, please contact:
Yuhe International
Mr. Vincent Hu, Chief Financial Officer
Phone: +86-536-7300-667
Email: [email protected]
Mr. Jason Wang, Director of Investor Relations
Phone: +1-765-409-1844
Email: [email protected]
Web: http://www.yuhepoultry.com
CCG Investor Relations
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: [email protected]
SOURCE Yuhe International, Inc.
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