Increased Pricing, Flavor Business Driving China F&F 1H Results

Led by increased flavor business driven by tobacco flavor enhancers and growing food flavor sales, in addition to rising sales of synthetic extracts from its Wutong Aroma Chemicals Co. Ltd. subsidiary, China Flavors and Fragrances Co. Ltd. (Hong Kong) has reported first half 2010 sales (ending June 30) of RMB319.8 million. Gross profit for the period was 45.9%, benefiting from increased flavor and fragrance pricing. Net profit reached ~RMB33.6 million, down slightly year-over-year due to increased expenses. Finance income for the first half totaled RMB1.5 million.

China cited the Food Safety Law of the People’s Republic of China as a factor in increased material costs. Yet the organization sees the need for manufacturers of good standing as a key opportunity for flavor companies: "[N]ational food and beverages manufacturers and/or personal care products manufacturers would prefer flavor suppliers with certain economic scale of production, good reputation and quality products supported by self-owned technology. [China Flavors and Fragrances] possessed all the above criteria and should capture the opportunities resulting from the trend of the change of flavor suppliers by the national food and beverages manufacturers and/or personal care products manufacturers."

Boosting its efforts to gain more international clients, the company has announced that its new factory will be completed by the end of the year, boosting its production capacity from 3,600 tons to 8,600 tons/year.

Of the future, the company's official statement notes: "Despite the research and development capability we possess, we are going to spend a lot of effort in improving our existing technology in order to increase the portion of flavor in addition to the existing portion of flavor applied in each final product."


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