China Dairy Corporation Limited (ASX:CDC), CEO, Youliang Wang introduces the company and its strategy to meet growing dairy consumption in China.
Carolyn Herbert: Hello I’m Carolyn Herbert for the Finance News Network. Joining me fromChinese raw milk producer,China Dairy Corporation
(ASX:CDC) is CEO, Youliang Wang.
Youliang Wang: Thank you, I’m honored to be here. At the same time, I want to thank ASX for giving us the chance to list. At the same time, I want to thank everyone for all of their support, including Aust-China Group, Philip Capital Singapore, Bluemont Capital and Beijing Yuanjing, as well as support from different fields.
Carolyn Herbert: Youliang,congratulations on the listing. For investors not familiar with China Dairy Corporation can you introduce the company?
Youliang Wang: China Diary’s China subsidiary company formed on 21st January 2005. At present, we have over 500 employees. CDC is located at the northern most part of China, Heilongjiang province. Heilongjiang province’s geographic position is about 45 degrees north, and one of the three natural grasslands is located here. The Company currently owns two cattle farm companies, one is Shangzhi Yulong Cattle and the other is Xinhua Cattle. By the end of 2015, the average daily milk production of the company is about 660 tons per day. The total number of cattle is over 46,000. Based on this, CDC is planning to complete a series of acquisitions and enter into the international high-end market.
Carolyn Herbert: And for investors that participated in the IPO what price did you start trading?
Youliang Wang: Our initial IPO price is AUD $0.20, but the actual trading price was AUD $0.24.
Carolyn Herbert: So how much was raised, what value does that put on the company and where are the funds going?
Youliang Wang: We have raised over 17 million Australian dollars, the funds will be used mainly for daily operations, including farm constructions and some project acquisitions.
Carolyn Herbert: And Youliang can you tell us about the business model and your strategy?
Youliang Wang: We have three main business modes. The main business modes are farmer-raised cows and commission cows with self-raised cows as a supplement. Currently self-raised cows occupy a very small percentage; we are mainly focused on farmer-raised cows and commission cows.
Farmer-raised cows mean the Company provides the cows to the farmers and pay cow raising fees and feed fees to the farmers. Farmers sell the fresh milk to the Company’s appointed customers, the Company settles payments directly with the customer and receives the revenue from sales of fresh milk.
Our most important business mode is commission cows. We sell our cows to farmers, farmers pay the price for the cows through installments. Before the installments are fulfilled, the farmers sell fresh milk to appointed customers and the Company gets 30% from the sales revenue as commission. These are the three business modes of our Company.
Our Strategic plan is to complete acquisitions of 1 to 2 dairy manufacturers in Australia within the next 6 months, and at the same time reform. This means we are looking for well-known dairy manufacturers and trading companies who trade to China from Australia. By acquiring 1 to 2 companies, we are preparing to enter into the Chinese market and integrate high-end resources. We want to enter into China’s` high-end diary market by using advanced Australian technology and equipment.
Carolyn Herbert: So who are your biggest customers, and what is forecast in terms of Chinese dairy consumption over the medium term?
Youliang Wang: Our big customers in China are Meng Niu and Heshan Dairy in Tsitsihar. Heshan occupies 16.28% of our 2015 sales revenue. We have 5 other customers who acquire more than 10% of our milk. Our customers are relatively spread out. Our next step is to cooperate further with China’s domestic high-end diary manufacturers.
Carolyn Herbert: And now to your competitors. Australian and New Zealand companies are world leaders in the production of dairy, what is your strategy?
Youliang Wang: As we all know, Australia and New Zealand are powerful nations globally in dairy products manufacturing. Their manufacturers have good international reputations. We are open to future cooperation. Everyone has competition. CDC holds a certain share in the Northeast market in China and even the holds a certain share in the whole Chinese market, so we have our own competitive advantages. We see this listing as an opportunity, plus the establishment of China and Australia’s bilateral free trade zone, we will grasp this rare opportunity to open big doors for CDC. After listing, we want to participate in 1 to 2 diary manufacturers and trading companies who trade to China. By cooperating with the strongest companies, we believe the market opportunity of 13 billion people is enormous for us. We believe there are good cooperation foundations here.
Carolyn Herbert: Last question. Where would you like to see CDC in 12 months time?
Youliang Wang: This is a question that all investors will care about, we as the entrepreneurs, we also want to bring CDC to a more world developed stage. As I said before, China and Australia have entered into a very friendly free trade agreement which will lead to a big leap in the economies of both countries.
We will grasp this rare opportunity. By successfully listing CDC, we will complete acquisitions of 1 to 2 dairy manufacturers and trading companies, and establish full industry chain cooperation.
As you all know, China just opened up the 2nd Child policy, the demand in dairy products is very strong in China. In 1978, China’s GDP was only 365 billion RMB, now in 2015 China’s GDP reached 67 trillion RMB. This means the GDP increased more than 180 times.
Based on this, we believe there is enormous potential to grow the market for dairy products.
China’s consumption in dairy products is still very low. Compared with developing countries, we represent only half of the average consumption rate. Compared to the world average, we are only 1/3 of the world’s average consumption rate and only 1/10 of the developed countries’ average consumption rate. So, I believe China’s market for dairy products is still big. CDC is planning to establish two children liquid milk development facilities and nature feed factories in Mongolia and the Heilongjiang province in China, which will get the company ready for the next step which is cooperating with international market.
Carolyn Herbert: Youliang Wang, congratulations again on the listing.
Youliang Wang: Thank you to the media for their focus and support in CDC’s listing, I invite on behalf of CDC all of the media and friends from all around to visit China and visit our facilities. We will repay our investors and the media with better performance.
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