Hunan Dakang International Food & Agriculture to issue new shares to investors

Hunan Dakang International Food & Agriculture is tapping investors for as much as CNY 3.30 billion (USD 504.85 million) to finance the construction of a facility in the far-flung border city of Ruili to feed China’s hunger for beef.

The Huaihua-based livestock and farming company is diluting its equity through the issue of up to 1.10 billion new shares in a bid to line its coffers and improve its balance sheet.

Dakang has spent the last several years extending its business as a pig breeder and marketer to include trading, animal husbandry, dairy and food distribution.

The group has also expanded its geographical footprint to include a milk base in New Zealand and an international commodity platform in Brazil.

Dakang garnered global attention last year after its attempt to acquire the Australian beef farming giant S Kidman was scuppered by Australian authorities.

Undaunted, the company made a foray into Latin America through the purchase of a 57.6 per cent stake in Brazilian pesticides, fertilisers, and seeds trader Fiagril Participações.

However, this cash call is part of plans to tap into southeast Asia, as well as the growing downstream demand for beef in China, which is now a top importer despite having a lower per capital consumption rate than the US.

Dakang wants to set up and operate a cattle quarantine, slaughtering and processing plant with a capacity of 50,000 per head annually in Ruili, the major border crossing county-level city which abuts Myanmar.

The aim is to create an integrated chain from importing cattle from its neighbour to warehousing and cold chain logistics to improve profitability and competitiveness.

Revenues have been steadily growing over the last several years, rising from CNY 585.00 million in the 12 months ended 31st December 2014 to CNY 6.22 billion in FY 2016, representing a compound annual growth rate of 119.9 per cent.

The group had an asset to liability ratio of 62.6 per cent, as of 30the June 2017, which should decrease following the private placement.

© Zephus Ltd

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