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"CFO Auke Cnossen: "Net profit margin above 30%"

Chinese greenhouse vegetable company Le Gaga expands annually by 100 ha

Le Gaga Holdings Limited is one of the largest greenhouse vegetable growing companies in China. With a yearly average growth of more than 100 hectares, its empire is has become one of the first NASDAQ-listed growing companies and has expanded immensely in the last few years. CFO Auke Cnossen and consultant Piet Keijzer manage the Dutch contribution to the company.

"Investors ask us why we don't grow faster. We have a net profit margin of over 30%. Knowledge about cultivation is the main limitation when it comes to faster growth. Capital is not the 'limiting factor'. We have a good cash flow and a balance of almost 80 million American dollars. Although, every dollar in our company is turned around. The way I see it, that is one thing that separates us from the agriculture sector in the Netherlands. They do not look enough at the 'return on invested capital," says the financial director.




Cnossen studied at the University of Wageningen and received his MBA degree at Cornell University. After that he worked for Rabobank International in the United States and later in Hong Kong where he started working for Le Gaga Holdings Limited two years ago. "I immediately called Piet Keijzer when I started my new position. Piet has been living in China for seven years, speaks the language and has technical knowledge. People like that are worth their weight in gold for your business."



Glasshouse complex in the province of Fujian

The company, that once started as a exporter of broccoli, now achieves almost half of its sales from various peppers and around 10% from tomato crops. Around 85% of all vegetables from the ten growing locations now comes from covered crops. The total greenhouse acreage from Le Gaga Holding now taps into 600 hectares. "We are a big player when it comes to volumes, but the market is still much larger. Approximately 130 million people live just in the provinces of Guangdong and Fujian and that is only 10% of the entire population in China!" A return to the Netherlands is not in the plans for the Dutch man. "What would I have to contribute? The Netherlands is advanced when it comes to technology and productivity but people think too little about whether it is worth it to invest the last euro into the company. In addition, the agricultural sector's dependence on supermarkets is a problem in the Netherlands."



Pingshan

"A vast majority of fruit and vegetable production in China comes from allotments. Our founder and CEO, Shing Yung Ma, wanted to move more towards efficient, productive and qualitative cultivation. China is far behind Dutch crops when it comes to knowledge about production. Here you won't find the trade fairs, trade magazines, clinical trials and instructors. You do see that seed producers have been coming to the market with interesting products, specifically for growth and sales within the Chinese market," says Auke. "We are currently testing substrate growth and climate control to increase productivity."


Xianyou

It is also difficult to obtain land. "The town committee shares pieces of land with small growers and China is bursting with the so-called 'backyard farmers'. We negotiate with the town committee whenever we want to expand. We can offer the farmers good prices. The production sector in China is very fragmented and small farmers earn very little. There are a lot of older growers who have stopped and other growers either come to work for us or go find work in the city. We rent the land for 15 to 20 years, where the rental price of the ground is related to the price of rice." Le Gaga has had very little weather damage in the last few years. "It's true that we are in a Typhoon area, but the concrete poles keep the greenhouses strong."




The wholesale markets in Southern China are by far the most important for Le Gaga, but Northern China and Shanghai are beckoning. The company's certification has not yet been granted, but the buyers are simply not asking for them. We are busy trying to get our brand set up with the growing giants, in order to distinguish ourselves and make a name in the wholesale channels. "We primarily grow leaf vegetables in the summer, such as Paksoi. We are not interested in growing fruiting vegetables due to the heat in Southern China and due to the enormous amounts that are produced in the rest of the country. The turnover of peppers is always increasing and tomatoes are also enjoying increasing sales. Demand for quality products and specialities is really rising."



Xianyou

For more information:
Auke Cnossen
Le Gaga Holdings Ltd.
+852 3162 8585
auke.cnossen@legaga.com.hk
www.legaga.com.hk

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