Tingyi Profit Misses Estimates on Costs, Slowing Economy

Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said 2011 profit dropped 12 percent, missing analysts’ estimates, hurt by higher raw material costs and a slowing Chinese economy.

Net income fell to $419.5 million from $476.8 million in the year ended Dec. 31, Tingyi said in a statement to Hong Kong’s stock exchange today. The figure compares with the average estimate of $447 million of 16 analysts surveyed by Bloomberg. Sales for Tianjin-based Tingyi increased 18 percent to $7.9 billion, it said.

Tingyi joins Chinese food companies, such as Want Want China Holdings Ltd., which have been hurt by higher raw material costs and rising wages in the world’s second largest economy. Tingyi was under pressure from rising labor costs and price increases for raw materials such as flour, palm oil and sugar, it said in the statement today. Gross margin fell to 26.54 percent from 28.43 percent a year earlier, according to the statement.

Earnings this year will improve as “we do not expect gross margin to continue to slide in 2012 as raw material costs have shown signs of stabilization,” Charlie Chen, an analyst with BNP Paribas Securities Asia in Hong Kong, said in a telephone interview. Chen has a ‘buy’ rating on the company.

Tingyi gained 0.6 percent to HK$23.55 at the close in Hong Kong. Hong Kong’s benchmark Hang Seng Index slid 0.2 percent.

Challenging 2012

This year will be “challenging” as the development of the Chinese economy, which has started to slow down and is affected by the European debt crisis, “is likely to be full of twists and turns,” the maker of Master Kong noodles and ready-to-drink tea, said in the statement today.

China’s economic growth in 2011 slowed to 9.2 percent from 10.4 percent in 2010. Premier Wen Jiabao set a 2012 economic growth target of 7.5 percent on March 5, lower than an 8 percent goal in place since 2005.

Tingyi said Nov. 4 it will swap a stake in its beverage business for PepsiCo Inc.’s bottling operations in China. The completion of the deal is still pending regulatory approval, the noodle maker said today.

Under the agreement, Purchase, New York-based PepsiCo will transfer equity interests in its bottling operations in China to Tingyi-Asahi Beverages Holding Co. In exchange, PepsiCo will receive a 5 percent stake in Tingyi-Asahi, with an option to increase the shareholding to 20 percent by October 2015.

Tingyi will also make, sell and distribute PepsiCo’s carbonated soft-drink and Gatorade brands, and co-brand its juice products under the Tropicana label.

— With assistance by Michael Wei

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