Sino Grandness 1H16 Net Profit Surged 121.0% To RMB517.9m From RMB234.3m In 1H15

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SINGAPORE, Aug 11 – Mainboard-listed Sino Grandness Food Industry Group Limited (“Sino Grandness” or “the Company” and together with its subsidiaries, the “Group”), a Shenzhen, China based integrated producer and distributor of own- branded juices and canned fruits and vegetables is pleased to announce its unaudited results for the first six months ended 30 June 2016 (“1H16”).

In 1H16, net profit attributable to shareholders for the Group surged 121.0% to RMB517.9 million compared to RMB234.3 million from the same period last year (“1H15”) as a result of higher sales across the board and higher other operating income. For the second quarter ended 30 June 2016 (“2Q16”), net profit attributable to shareholders increased by 25.0% year-on-year to RMB157.7 million from RMB126.2 million a year ago (“2Q15”).

In 1H16, net cash generated from operating activities for the Group rose to RMB294.2 million compared with RMB108.1 million in 1H15. Cash and cash equivalents for the Group increased to RMB587.3 million as at 30 June 2016 compared to RMB143.0 million as 31 December 2015. The increase in cash and cash equivalents was mainly due to loans obtained and net cash generated from operating activities in 1H16.

Mr Huang Yupeng, Chairman and CEO of Sino Grandness said, “I am pleased with the steady performance we have achieved during the first half of 2016. The positive indicative orders we received during the trade exhibition in Chengdu in March 2016 were reflected in the second quarter as we delivered record quarterly sales for both the beverage segment as well as the domestic canned products segment.”

“In addition to expanding our product range and distribution network, we will continue to invest in various advertising and promotional activities in China and in Hong Kong in order to grow our brand value further and consolidate our position as the No.1 loquat juice brand in China.”

In March 2016, the Group successfully launched various new products under Garden Fresh and Hao Tian Yuan brands during the trade exhibition in Chengdu. Some of these new products include coconut milk beverage and longan juice under Garden Fresh brand and various dried food such as grilled squid, grilled anchovies and spicy shrimps.

Between April and June 2016, Garden Fresh brand was one of the main sponsors of Sing! China for the audition rounds held in Chengdu, Sichuan Province PRC. Sing! China is a popular reality singing talent show in China with a strong following and viewership.

In June 2016, Garden Fresh also sponsored the Shenzhen leg of a popular mixed martial arts competition series. Through executing various brand sponsorship programs which enjoy strong viewership across China, Garden Fresh brand is expected to experience maximum exposure across multiple platforms including televisions, internet and print media.

In 1H16, the Group’s revenue rose by 22.9% to RMB1,852.5 million from RMB1,507.0 million in 1H15. In 2Q16, the Group’s revenue increased by 22.1% to RMB1,128.7 from RMB924.8 million in 2Q15. The growth in revenue was mainly attributed to strong orders for own-branded beverage products and domestic canned products.

Beverage segment sales which comprised the Garden Fresh juices rose 28.0% to RMB 1,341.5 million in 1H16 from RMB1,048.1 million in 1H15 while domestic canned products sales increased by 21.8% to RMB213.3 million in 1H16 from RMB175.2 million in 1H15.

In 2Q16, beverage segment sales rose 27.0% to a new quarterly high of RMB794.0 million from RMB625.3 million in 2Q15 while domestic canned products segment sales jumped 28.4% to a new quarterly high of RMB143.0 million in 2Q16 from RMB111.3 million in 2Q15.

The increase in sales of beverage segment and domestic canned products segment was mainly driven by expansion of product range and distribution network in the PRC market. In 1H16, overseas canned products sales rose 4.9% to RMB297.6 million from RMB283.7 million due to higher demand from existing customers.

Distribution and selling expenses in 1H16 increased by 61.6% to RMB280.8 million from RMB173.7 million in 1H15 mainly due to higher advertising and promotional (“A&P”) expenses and higher transportation costs. Higher A&P costs were incurred as the Group continued to invest in growing brand awareness in PRC market via various advertising and promotional activities, including TV advertising and sponsorship of TV programs.

The increase in transportation costs was mainly attributed to the higher domestic sales of beverage and canned products in the PRC market. In 1H16 the Group’s gross profit increased by 22.9% to RMB768.2 million from RMB625.2 million in 1H15. In 2Q16, the Group’s gross profit increased by 21.6% to RMB471.5 million from RMB387.7 million in 2Q15. Overall gross profit margin for the Group in 1H16 remained stable at 41.5% when compared to 1H15.

Outlook

National Bureau of Statistic of China reported that China’s Gross Domestic Product increased by 6.7% year-on-year to approximately RMB34,063.7 billion during the first 6 months of 2016(“1H16”). Total retail sales of consumer goods in 1H16 rose 10.3% to RMB15,613.8 billion with retail sales in rural area rising 11.0% while retail sales in urban area rising at a relatively slower pace of 10.2%.

The stronger growth of rural retail sales was reflective of the higher growth in per capital disposable income of rural residents, rising by 8.9% as compared to per capital disposable income of urban residents which rose at a slower pace of 8.0%. (source: http://www.stats.gov.cn/english/PressRelease/201607/t20160715_1377636.html)

As a result of rising disposable incomes, improving living standards and busier lifestyles, Chinese consumers have shown increasing demand for convenient, health and wellness related products. Sino Grandness has responded to this trend by steadily expanding its product range for Garden Fresh juices, Grandness canned fruits and Hao Tian Yuan snack food in order to capture a larger market share in the PRC market.

Going forward, the Group will sustain its investments in various advertising and promotional activities as well as sales and marketing initiatives in order to grow the brand awareness of its in- house brands. The Group will also continue to promote & expand its distribution network beyond China’s mainland market to other markets such as Hong Kong, Macau and South East Asia in order to capture a broader customer base and develop its brands in overseas markets. Barring unforeseen circumstances, the Group remains optimistic about its operating performance in 2016.

Update on proposed listing of Garden Fresh

As announced on 31 March 2016, the Company’s wholly owned subsidiary Garden Fresh Group Holding Co., (“Garden Fresh”) has submitted an application to The Stock Exchange of Hong Kong (“HKSE”) for the Proposed Listing on 31 March 2016 (“HKSE Application”). In addition, Garden Fresh has submitted a draft prospectus (the Application Proof) as part of the HKSE Application. The Company will keep shareholders updated on any material developments relating to the proposed listing as and when appropriate.

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