Sino Grandness Food Industry Group Limited
Financial Report Summary and Analysis for Full Year Ending December 31, 2021
Business Description
Sino Grandness Food Industry Group Limited is a Singapore-based food and beverage manufacturer focusing on canned vegetables and beverages. Key product lines include canned asparagus, mushrooms, bamboo shoots, and various fruit products (e.g., lychees, peaches, and mandarin oranges), marketed domestically in China and internationally. Their primary manufacturing plants are located in Anhui, Hubei, and Sichuan, allowing for efficient production and distribution within China and overseas, particularly to Europe and North America.
Industry Position and Competitors
Sino Grandness operates within the competitive food and beverage sector, which has shown resilience despite global market challenges. With a substantial market share in China’s beverage segment, the company also maintains export channels to Europe and North America. Major competitors include other large-scale beverage manufacturers within China and multinational canned goods suppliers, which press the need for continued brand recognition and customer loyalty initiatives.
Revenue Streams and Customer Base
- Revenue Segments:
- Beverages: Dominates the revenue mix, contributing RMB 1,019.8 million (103.2% increase from 2020).
- Canned Products: Includes both domestic and overseas sales, with significant domestic growth (52.5%) reaching RMB 251.8 million, while overseas canned products declined by 23.4% to RMB 109 million.
- Customer Base: Diverse, with no single customer accounting for more than 10% of total revenue, minimizing customer concentration risk.
- Supply Chain: Strengthened by investments in production capabilities, especially in domestic facilities, which supports scalability for increased demand.
Financial Analysis
Income Statement
- Revenue: Increased by 70.6% from RMB 809.3 million in FY2020 to RMB 1,380.7 million in FY2021, primarily driven by beverage sales post-COVID-19.
- Gross Profit: Turnaround from a gross loss of RMB 636 million in FY2020 to a profit of RMB 310.9 million in FY2021, reflecting a positive shift in gross margin from -78.6% to 22.5%.
- Net Loss: Reduced significantly by 97.6% to RMB 36.2 million, showing substantial improvement in profitability, although a loss persists.
- Earnings Per Share: Loss per share decreased to -3.1 cents (from -132.3 cents in FY2020).
Balance Sheet
- Total Assets: Increased, driven by property, plant, and equipment investments in production facilities in Anhui, Hubei, and Sichuan.
- Current Liabilities: Decreased slightly, mainly due to debt settlements, although bonds and related party loans remain substantial.
- Equity: Decreased from RMB 1,918.4 million to RMB 1,882.2 million due to ongoing losses.
Cash Flow
- Operating Cash Flow: Positive cash flow from operations, largely due to cost-effective distribution and improved receivables collection.
- Investing Activities: High capital expenditure in non-current assets, reflecting expansion efforts and production line improvements.
- Financing Activities: Minor net increase due to additional bank loans for working capital.
Dividend and Special Actions
- Dividend: None declared for FY2021 due to the company’s continued loss position.
- Strategic Actions:
- Continued focus on production expansion and brand enhancement in domestic and international markets.
- Proposed listing of the beverage business unit (“Garden Fresh”) to raise capital and enhance market reach.
Key Strengths and Risks
Strengths
- Revenue Growth: Strong revenue recovery post-pandemic, especially in the beverage segment.
- Cost Management: Reduction in distribution and administrative costs, contributing to improved operating income.
- Market Expansion: Increased production capacity and investment in manufacturing suggest preparation for long-term growth.
Risks
- Debt Levels: High current liabilities, including bonds and shareholder loans, may pressure liquidity.
- Profitability Challenge: Despite revenue growth, the company has yet to achieve net profitability, risking continued investor concern over return on investment.
- Pending Legal Matters: Ongoing disputes with creditors, including Goldman Sachs and Soleado Holdings, which could have financial repercussions.
Investment Recommendations
For Existing Shareholders
Hold – Given Sino Grandness’s improved revenue trajectory and focused strategy on expanding its beverage business, existing shareholders may consider holding their positions. However, they should remain cautious of the company’s debt obligations and pending legal issues, which could affect future liquidity and earnings.
For Potential Investors
Wait – While the company shows growth potential and industry resilience, prospective investors may wish to wait until profitability stabilizes and the legal disputes are resolved to ensure a more secure investment environment.
Disclaimer: This recommendation is based on the company’s financial performance for FY2021. Investors should consider their financial objectives and consult a financial advisor before making any investment decisions.
