China Shenshan Orchard Holdings Co. Ltd., a leading producer of kiwifruits in China announced its financial results for the full year ended 31 December 2022, with a revenue decrease of 23.5% to RMB85.0 million for FY2022 due to severe drought conditions that adversely affected the Group’s annual harvest volume of kiwifruits. The Group’s profit after income tax from its kiwifruit business decreased by 57.5% from RMB57.4 million for FP2021 to RMB24.4 million for FY2022.
Hu Chao, executive director and CEO of the company said: “2022 was a challenging year for the Group. In addition to the impact of COVID-19 pandemic, we faced a prolonged heatwave that has exacerbated severe drought condition in many parts of China, which greatly affected our kiwifruit yield. Despite these challenges, we are glad to have remained resilient by leveraging our competitive advantages. On the bright side, we are optimistic about a rebound in harvest volume and sales as the drought subsides and China's economy recovers from COVID-19 pandemic. Moving ahead, the Group will continue with our efforts to enhance our market presence in China and expand our market share in the premium kiwifruit market segment.”
Other income increased significantly to RMB8.1 million in FY2022, mainly due to increase in unconditional grants from government-related agencies, in support of agricultural activities in China. The Group is optimistic about a rebound in harvest volume and sales as the drought subsides and China's economy recovers from COVID-19 pandemic.
The Group’s revenue decreased by 23.5% from RMB111.2 million for FP2021 to RMB85.0 million for FY2022. The average selling price decreased from RMB29.5 per kg for FP2021 to RMB27.1 per kg for FY2022 while the volume of kiwifruit sold dropped by 16.7% to 3,141 tons for FY2022. The lower sales volume was mainly attributable to prolonged heatwaves in China from May to August 2022 which exacerbated a drought that adversely affected the ripening stage of the kiwifruit and impacted the Group’s annual harvest volume. It was China’s most severe heatwave in six decades with highest temperatures and one of its lowest levels of rainfall recorded.
The growing season for kiwifruit typically lasts up to 240 days per year. The kiwifruit harvest season typically takes place from September to October each year, and sales of harvested kiwifruit will typically occur thereafter within the same calendar year. Thus, the Group will not record any revenue in the first half of any financial year due to the seasonality of the business.
In line with the drop in revenue, the Group registered an adjusted gross profit of RMB78.9 million and an adjusted gross profit margin of 92.8% for FY2022.
A one-off gain on bargain purchase of RMB10.5 million was recognized for FP2021 but was absent for FY2022. This was the excess between the fair value of the net assets of the kiwifruit business acquired by the Company and the net assets of the baijiu business disposed of by the Company as settlement consideration for both transactions.
Other income increased significantly from RMB0.4 million in FP2021 to RMB8.1 million in FY2022, which was mainly due to increase in unconditional grants from government-related agencies in the form of cash subsidies, in support of agricultural activities in China.
As the Group is currently engaged in a qualifying agricultural business, it is therefore entitled to full exemption of enterprise income tax on profits derived from the kiwifruit business.
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