China Minzhong Food Corporation announced a 20% rise in its 1Q FY2011 net income to RMB52.4 million ($10.2 million) for the 3 months ended 30 September 2010. Revenue increased 18.4% to RMB264.1 million, underpinned by sales growth across both processed vegetables and fresh vegetables produce segments.

Revenue from processed vegetables increased by 33.2% to RMB111.8 million, on the back of continued strong demand from overseas food manufacturers. Average selling prices for the processed vegetables rose 52.5% as the group shifted towards a portfolio of higher-value processed vegetables.

Revenue from fresh vegetables produce increased by 9.5% to RMB152.3 million. This growth was partly offset by the 9% (or RMB7.0 million) decline in sales of mushroom spores to RMB71.7 million as the group shifted more resources to the cultivation of higher-yield black fungus. Excluding sales of mushroom spores, revenue in the fresh vegetables segment grew 33.5% to RMB80.7 million, which was driven mainly by a 33.5% increase in cultivation volume to 26,940 tonnes on the back of new farmland and better yields from existing farmland.

In line with the higher revenue, gross profit increased by 29.6% to RMB87.2 million. Gross profit margin also saw an improvement from 30.2% in 1QFY2010 to 33.0% in 1QFY2011, boosted by higher cultivation volume, shift towards higher value vegetables and lower cultivation costs as more bases reached maturity.

For the 3 months ended 30 September 2010, the group recorded a 27.2% increase in net cash generated from operations to RMB114.9 million, mainly due to higher sales and better working capital management. As at 30 September 2010, the group was in a net cash position with cash and bank balances amounting to RMB1.21 billion and total bank borrowings of only RMB16.5 million.

China Minzhong says it will continue to benefit from the rising domestic consumption in China, and its emergence as an increasingly important vegetables supplier to the world.