News From : DagangHalal.com (02 Feb 2010)
SHANDONG-BASED Sozo Global Ltd, a one-stop gourmet convenient food specialist, is banking on tapping Malaysia’s halal food stature on the world stage to penetrate the booming and lucrative global halal food segment which boasts an annual worth of US$2 trillion.
With emphasis on that, chief executive officer Shen Hengbao says the group intends to set up a halal food processing facility in Malaysia. This plan, which is part of its expansion aspirations, will be funded by proceeds from the company’s initial public offering (IPO) scheduled for March, which is expected to raise RM100mil.
He says the group expects to use the halal food hub to target the Middle Eastern markets over the longer term.
“We’ve identified two potential locations for the halal plant in Malaysia but nothing is firm. We’re still exploring,” says Shen, in an interview with StarBizWeek.
Post-IPO, Khazanah Nasional Bhd via its outsource fund Agro Treasures will hold a 9.2% stake in Sozo. (Agro Treasures is a special purpose vehicle initiated by Khazanah and Vida Inc Sdn Bhd for investments in agricultural and food sector.)
Sozo, which targets the premium market, manufactures, packages and markets processed food such as ready to serve (RTS) food, frozen vegetables and canned foods such as fruits and seafood. It also produces vacuum fried food and asparagus tea.
“We are the largest manufacturer of cooked duck meat products for export in Shandong province,” Shen says, adding that Japan is the group’s key overseas export market.
The group has been recognised as a leading agricultural product enterprise of Shandong province since 2007 by Shandong Province Agricultural Department. Currently, more than 90% of its group sales comes from China. Sozo sells its products to wholesalers and distributors in China.
“Sozo’s products are ultimately re-exported,” Shen says, adding that the group could not provide the data as it does not track the export by its clients.
However, he says the packaging materials are printed with foreign labelling and the products are required to be sent for export inspections.
“We know that our products are being exported as our wholesalers and distributors need to work with us to obtain export permits,” Shen explains.
In China, Sozo’s products are sold directly or indirectly to the local supermarkets and restaurants in Shanghai, Beijing and Shenzhen.
The group currently has two manufacturing facilities in Ju County, Rizhao City in Shandong province with a combined production capacity of 38,880 tonnes per annum.
Its products are currently marketed under brands such as Geleifu (Green Food), Hengbao Food and The Four Seasons Farm. Sozo also intends to utilise part of its proceeds from the IPO to move upstream by setting up modern poultry farming, breeding and processing facilities in Shandong. By setting up its own poultry farm, the group will ensure a stable supply as well as control the quality of its raw materials.
“We also plan to commission a third production plant to expand our capacity with the proceeds,” he says, adding that its current capacity is likely to reach maximum efficiency this year.
The commercialisation of the third plant is expected by 2011 which will increase production capacity by over 40% to 56,2000 tonnes. For the financial year (FY) ended Dec 31, 2008, Sozo registered a pre-tax profit of 126 million renminbi (RM63mil) on revenue of 415 million renminbi (RM207.6mil).
For the first six months of FY09 the group’s pre-tax profit of 97 million renminbi (RM48.5mil) was 71.6% higher than 56 million renminbi (RM28mil) registered in the same corresponding period a year ago. Its revenue for the first six months stood at 285 million renminbi (RM142.5mil).
Sozo has also managed to sustain a gross profit margin of over 30% in the last two years. In FY07 and FY08, the company’s gross profit margin was 34% and 32% respectively.
The group has thus far managed to sell its products at a premium as it has been able to secure stable supply of competitively priced and high quality raw materials and target markets. In addition, the stringent requirement for F&B products to enter the Japanese market has also enable the group to sell its products at a premium.