Operations Review
Operations Review
In FY2007, we began harvests of pine trees in our Jiangxi Province plantations, in line with our intention to realise cash from our biological assets.Financial Performance
Boosted by first-time sales of standing timber from our pine forests in Jiangxi Province - where 1,230 hectares were select-harvested, Guangzhao's revenue for the financial year ended 31 December 2007 ("FY2007") rose to RMB11.3 million from RMB247,000 in FY2006, a 4,477% increase. The first harvests of pine on 19,280 cubic meters of our plantations contributed to RMB9.3 million in revenue, while the remaining RMB2.0 million came from sales of tissue-cultured banana plantlets, orchids and ornamental plants from our nurseries in Shanghai.The continued healthy growth of our saplings and trees raised carrying value of our biological assets to RMB695.8 million as at 31 December 2007, a 28.6% increase from RMB541 million as at 31 December 2006. Guangzhao did not acquire any land in FY2007; as such the total land area of our plantations remains at 18,600 hectares or 280,000 mu.
Owing to increases in other operating expenses, including a one-time notes issue expenses and R&D costs, Guangzhao's profit attributable to shareholders decreased by 6.4% to RMB65.9 million in FY2007 compared to RMB70.4 million in FY2006. The Group made a RMB17.0 million income tax provision in FY2007 to account for the timing difference between accounting and tax bases in the recognition of gains arising from changes in fair value of biological assets.
Guangzhao's cash and bank balances increased to RMB67.8 million as at 31 December 2007 from RMB31.1 million a year ago, including a pledged fixed deposit of RMB37.3 million (2006: RMB 25.1 million). Shareholders' equity rose to RMB634.4 million as at 31 December 2007 from RMB494.2 million as at 31 December 2006.
总经理宋学孟在柬埔寨踏查土地。
Guangzhao's CEO, Mr Song Xuemeng,
surveyed the land at Cambodia.
Winter Storms - Update Subsequent To Financial Year
Following the winter storms that struck the PRC in January and February 2008, we conducted initial field surveys to determine the impact on our biological assets.
Based on our preliminary findings, the storms affected our plantations in Anhui, Jiangxi, Guizhou and Hubei provinces as well as Shanghai, but damage to our biological assets are not expected to be significant.
While our plantations in Jiangxi Province bore the brunt of the adverse weather, damage to our biological assets there were minimal as we had harvested our pine trees earlier in 2007. The remaining poplar trees were also protected from the impact of heavy snowfall as they have shed their leaves during winter.
To date, we have dispatched restoration teams to the affected plantations. We have also appointed a valuer to determine the extent of the damages and applied for grants and compensation from the relevant forestry authorities in the PRC.
Supply of Banana Plantlets
Capitalising on the success of our proprietary techniques to cultivate superior breeds of tropical fruit commercially, the Group sealed a five-year deal in March 2007 to supply banana plantlets to the Department of Agriculture, Malaysia, via our Malaysia-based jointventure Jalur Lipur Sdn. Bhd. ("Jalur"). Through Jalur, Guangzhao has also set up a tissue-culture facility with an annual capacity of one million plantlets in the outskirts of the Malaysian capital, Kuala Lumpur, which will complement the Group's expansion into Southeast Asia's lucrative agricultural market.
To date, one million banana plantlets have been delivered which contributed approximately RMB1 million to the Group's sales of agricultural products in FY2007.
Following the winter storms that struck the PRC in January and February 2008, we conducted initial field surveys to determine the impact on our biological assets.
Based on our preliminary findings, the storms affected our plantations in Anhui, Jiangxi, Guizhou and Hubei provinces as well as Shanghai, but damage to our biological assets are not expected to be significant.
While our plantations in Jiangxi Province bore the brunt of the adverse weather, damage to our biological assets there were minimal as we had harvested our pine trees earlier in 2007. The remaining poplar trees were also protected from the impact of heavy snowfall as they have shed their leaves during winter.
To date, we have dispatched restoration teams to the affected plantations. We have also appointed a valuer to determine the extent of the damages and applied for grants and compensation from the relevant forestry authorities in the PRC.
Supply of Banana Plantlets
Capitalising on the success of our proprietary techniques to cultivate superior breeds of tropical fruit commercially, the Group sealed a five-year deal in March 2007 to supply banana plantlets to the Department of Agriculture, Malaysia, via our Malaysia-based jointventure Jalur Lipur Sdn. Bhd. ("Jalur"). Through Jalur, Guangzhao has also set up a tissue-culture facility with an annual capacity of one million plantlets in the outskirts of the Malaysian capital, Kuala Lumpur, which will complement the Group's expansion into Southeast Asia's lucrative agricultural market.
To date, one million banana plantlets have been delivered which contributed approximately RMB1 million to the Group's sales of agricultural products in FY2007.
栽种仅一年的光兆小桐已经硕果累累子。
Guangzhao's proprietary strain of Jatropha
curcas bears plenty of fruits a year after
being planted.
Utilising our R&D capabilities, Guangzhao has successfully developed two varieties of Jatrophas curcas with higher oil content and faster maturity compared to other strains of the biodiesel crop. Our strains of Jatropha curcas have attracted considerable interest from the bio-diesel industry, which uses the seed as a feedstock.
Salt-Tolerant Poplar
In November 2007, Guangzhao received certification from the Shandong Institute of Forestry ("the Institute") for the Group's development of its proprietary salttolerant poplar. Following the certification, the Institute has recommended that the salt-tolerant poplar can be cultivated in the Huang Huai region - between the Yellow and Huai Rivers - where large parcels of land remain unused due to the high saline content of its soil.
The Group's salt-tolerant poplar has also received recognition from renowned environment-biologist Prof GD Farquhar who highlighted how the poplar would be "a valuable resource for reafforestation and rehabilitation of coastal areas and inland areas subject to dryland salinity".
Forward Strategies and Developments
Harvesting our pine and poplar assets
We are encouraged by how our biological assets have grown and their values increased at a time when the PRC continues to experience timber and pulp shortage. Driven by the rapid economic development of the country, timber and pulp prices have continued to climb.
With the PRC's entry to the World Trade Organisation and the economic benefits that accrue from hosting the Beijing Olympics, infrastructure and business developments in the country are expected to gather pace in 2008 and beyond. This is despite concerns of a global economic slowdown.
In November 2007, Guangzhao received certification from the Shandong Institute of Forestry ("the Institute") for the Group's development of its proprietary salttolerant poplar. Following the certification, the Institute has recommended that the salt-tolerant poplar can be cultivated in the Huang Huai region - between the Yellow and Huai Rivers - where large parcels of land remain unused due to the high saline content of its soil.
The Group's salt-tolerant poplar has also received recognition from renowned environment-biologist Prof GD Farquhar who highlighted how the poplar would be "a valuable resource for reafforestation and rehabilitation of coastal areas and inland areas subject to dryland salinity".
Forward Strategies and Developments
Harvesting our pine and poplar assets
We are encouraged by how our biological assets have grown and their values increased at a time when the PRC continues to experience timber and pulp shortage. Driven by the rapid economic development of the country, timber and pulp prices have continued to climb.
With the PRC's entry to the World Trade Organisation and the economic benefits that accrue from hosting the Beijing Olympics, infrastructure and business developments in the country are expected to gather pace in 2008 and beyond. This is despite concerns of a global economic slowdown.
王汉森董事在山东寿光耐盐碱光兆一号杨实
验基地。
Guangzhao's director Mr Davie Ong visited
the Group'splantation in Shouguang, Shandong
Shandong Province, where Guangzhao
Salt-tolerant No.1 poplars are being cultivated
experimentally on high saline soil.
Based on industry estimates, the PRC will continue to experience an annual shortfall of 160 -180 million cubic metres of domestic timber supply till 2010. This figure is expected to hit 300 million cubic metres in 2015, and the country is currently only behind the US in terms of timber consumption.
Guangzhao will be able to capitalise on these favourable market conditions as harvests of pine and poplar trees in our plantations continue in 1Q2008 and 4Q2008 - specifically in Jiangxi Province. To enhance our earnings, we intend to process the timber, which can then be sold at a higher premium on prices for raw standing timber.
Guangzhao will be able to capitalise on these favourable market conditions as harvests of pine and poplar trees in our plantations continue in 1Q2008 and 4Q2008 - specifically in Jiangxi Province. To enhance our earnings, we intend to process the timber, which can then be sold at a higher premium on prices for raw standing timber.
Salt-tolerant poplar
Much of the land in PRC's north and northwestern regions is non-arable, and its size is approximately equal to the country's economically viable and arable land. This problem is compounded by rapid desertification in these regions, which the authorities are eager to reverse with afforestation.
In addition, large swathes of such lands are situated near regions in the PRC that are experiencing high economic growth rates. An example is Shandong Province ("Shandong") - which has experienced rapid economic development in recent years - where the difference in rental prices between commercially viable and arid, nonarable lands can be up to three to four times.
Following accreditations received on our work in developing a salt-tolerant variant of poplar from the Institute and Prof Farquhar, the Group is exploring opportunities in Shandong to reafforest the arid and nonarable lands.
If successful, Guangzhao could receive subsidies or grants from the Shandong provincial authorities for our reafforestation efforts and benefit from the lower land rentals. The Group could also work with foreign governmental organisations in countries such as the US and Australia where there are large swathes of arid and non-arable land.
Presently, we have engaged professional assessors to determine the value of the technology Guangzhao has developed for the salt-tolerant poplar.
Tropical fruit
As part of Guangzhao's foray into Southeast Asia's lucrative agricultural industry, the Group increased its stake in Jalur in January 2008. The strategic value in the acquisition rests in Jalur's tissue-culture facility with plans underway to raise its capacity to four million.
Our entry into Malaysia - where weather and environmental conditions are conducive for the commercial cultivation of tropical fruit - will allow us to export our strong biotechnological expertise to agricultural markets in Southeast Asia. Guangzhao has also been engaged to offer Australian agricultural organisations our expertise in banana cultivation in 1Q2008.
Jatropha curcas
Taking advantage of Cambodia's excellent weather and environmental conditions for cultivating Jatropha curcas, Guangzhao began working with local authorities in 4Q2007 and secured a plot of 40-hectare land in March 2008 as part of a pilot cultivation project.
With the continued harvests of pine and poplar in FY2008 expected to improve the Group's cash flow position, the long-term outlook for Guangzhao remains positive. We are confident that our other developments - tropical fruit business in Southeast Asia, salt-tolerant poplar in Shandong Province and Jatropha curcas - will contribute to our financial performance in FY2008.
Much of the land in PRC's north and northwestern regions is non-arable, and its size is approximately equal to the country's economically viable and arable land. This problem is compounded by rapid desertification in these regions, which the authorities are eager to reverse with afforestation.
In addition, large swathes of such lands are situated near regions in the PRC that are experiencing high economic growth rates. An example is Shandong Province ("Shandong") - which has experienced rapid economic development in recent years - where the difference in rental prices between commercially viable and arid, nonarable lands can be up to three to four times.
Following accreditations received on our work in developing a salt-tolerant variant of poplar from the Institute and Prof Farquhar, the Group is exploring opportunities in Shandong to reafforest the arid and nonarable lands.
If successful, Guangzhao could receive subsidies or grants from the Shandong provincial authorities for our reafforestation efforts and benefit from the lower land rentals. The Group could also work with foreign governmental organisations in countries such as the US and Australia where there are large swathes of arid and non-arable land.
Presently, we have engaged professional assessors to determine the value of the technology Guangzhao has developed for the salt-tolerant poplar.
Tropical fruit
As part of Guangzhao's foray into Southeast Asia's lucrative agricultural industry, the Group increased its stake in Jalur in January 2008. The strategic value in the acquisition rests in Jalur's tissue-culture facility with plans underway to raise its capacity to four million.
Our entry into Malaysia - where weather and environmental conditions are conducive for the commercial cultivation of tropical fruit - will allow us to export our strong biotechnological expertise to agricultural markets in Southeast Asia. Guangzhao has also been engaged to offer Australian agricultural organisations our expertise in banana cultivation in 1Q2008.
Jatropha curcas
Taking advantage of Cambodia's excellent weather and environmental conditions for cultivating Jatropha curcas, Guangzhao began working with local authorities in 4Q2007 and secured a plot of 40-hectare land in March 2008 as part of a pilot cultivation project.
With the continued harvests of pine and poplar in FY2008 expected to improve the Group's cash flow position, the long-term outlook for Guangzhao remains positive. We are confident that our other developments - tropical fruit business in Southeast Asia, salt-tolerant poplar in Shandong Province and Jatropha curcas - will contribute to our financial performance in FY2008.
王汉森-董事在马来西亚光兆子公司香蕉育
苗基地。
Guangzhao Director, Mr Davie Ong, visited the
Group's nursery in Malaysia which houses its
banana plantlets.
光兆推出的最新产品，红袋鼠花。
宋先生与两名来自澳大利亚国立大学的
国际 知名科学家，教授格雷厄姆法夸尔
和黄博士。 杰出的教授格雷厄姆法夸尔
也是皇家学院的 研究员，两位科学家也
以观察员的身份参加 了在济南山东的
光兆盐碱杨树的验证研讨会 。
One of Guangzhao's latest product is the
red kangaroo paws. (Note: Mr Song with
two internationally renowned scientists
from the Australian National University
(ANU), Prof Graham Farquhar and
Dr. Chin Wong. Distinguished
Prof Graham Farquhar is also a Fellow of
the Royal Society. Both scientists are
observers for Guangzhao's salt tolerant
poplar validation workshop at Jinan,
Shandong, PRC.)