New Dragon Asia expands flour production

Related tags People's republic of china

New Dragon Asia has acquired the assets of a flour manufacturing
facility valued at $1.33 million, located in Penglai City of
Shandong Province within the People's Republic of China, which aims
to further expand the company's flour production capacity and meet
rising consumer needs.

Although the company - which has an annual production capacity of 110,000 tons of flour marketed in 27 Chinese provinces - gave an approximation of the facility's value, the terms of the deal were not disclosed.

"The acquisition will expand New Dragon Asia's production capacity by approximately 30 per cent and contribute an estimated $3.0 million in additional sales annually. Furthermore, it will provide resources to address China's rapidly growing economy and strong consumer and commercial demand for instant noodles and other flour-related products,"​ said Heng Jing Lu, chief executive officer.

He emphasised the company's ongoing commitment to expansion through organic growth and its intention to continue to pursue an aggressive strategic acquisition programme.

The newly acquired facility, which utilises Swiss machinery as well as production technology from Japan and Korea, has a daily production capacity of 100 tons, operating in an area of approximately 17,000 square meters. It currently serves the north, northeast and central plains regions of China.

Lu said that the acquisition complements the company's ongoing strategy to expand New Dragon's geographic reach and product mix, with a particular focus on attracting commercial customers. As an example, he cited a recently announced follow-on order for specific use flour from purchasing agents of Kentucky Fried Chicken in China.

"The production of flour with specific commercial applications represents an important component of New Dragon's growth strategy and we intend to pursue these markets aggressively,"​ said Lu.

He added that the company is focused on expanding its presence in international markets, as well as urban markets in China, giving a further boost to the company's current $1.14 million export turnover. Lu noted that the company recently received trial orders for the Canadian market, adding that Korea continues to be an important market, with New Dragon exporting approximately 80 million (35g) packets of noodles to the country in 2003, representing approximately 3 per cent of total sales.

Lu also said the company is continuing its efforts to penetrate supermarkets and chain stores in China's urban areas by focusing on raising consumer awareness of New Dragon's name and products. "Once we establish stronger brand awareness of our products in these markets, we will be able to utilise distributors - resulting in reduced selling expenses and higher margins,"​ Lu said.

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