hungyee@thestar.com.my

SHANDONG-BASED Sozo Global Ltd, a one-stop gourmet convenient food
specialist, is banking on tapping Malaysia’s halal food stature
on the world stage to penetrate the booming and lucrative global halal
food segment which boasts an annual worth of US$2 trillion.

With
emphasis on that, chief executive officer Shen Hengbao says the group
intends to set up a halal food processing facility in Malaysia.
This plan, which is part of its expansion aspirations, will be funded by
proceeds from the company’s initial public offering (IPO) scheduled for
March, which is expected to raise RM100mil.

He says the group expects to use the halal
food hub to target the Middle Eastern markets over the longer term.

“We’ve identified two potential locations for the halal plant
in Malaysia but nothing is firm. We’re still exploring,” says Shen, in
an interview with StarBizWeek.

Post-IPO, Khazanah Nasional
Bhd via its outsource fund Agro Treasures will hold a 9.2% stake in
Sozo. (Agro Treasures is a special purpose vehicle initiated by Khazanah
and Vida Inc Sdn Bhd for investments in agricultural and food sector.)

Sozo, which targets the premium market, manufactures, packages and
markets processed food such as ready to serve (RTS) food, frozen
vegetables and canned foods such as fruits and seafood. It also produces
vacuum fried food and asparagus tea.

“We are the largest
manufacturer of cooked duck meat products for export in Shandong
province,” Shen says, adding that Japan is the group’s key overseas
export market.

The group has been recognised as a leading
agricultural product enterprise of Shandong province since 2007 by
Shandong Province Agricultural Department. Currently, more than 90% of
its group sales comes from China. Sozo sells its products to wholesalers
and distributors in China.

“Sozo’s products are ultimately
re-exported,” Shen says, adding that the group could not provide the
data as it does not track the export by its clients.

However, he
says the packaging materials are printed with foreign labelling and the
products are required to be sent for export inspections.

“We know
that our products are being exported as our wholesalers and
distributors need to work with us to obtain export permits,” Shen
explains.

In China, Sozo’s products are sold directly or
indirectly to the local supermarkets and restaurants in Shanghai,
Beijing and Shenzhen.

The group currently has two manufacturing
facilities in Ju County, Rizhao City in Shandong province with a
combined production capacity of 38,880 tonnes per annum.

Its
products are currently marketed under brands such as Geleifu (Green
Food), Hengbao Food and The Four Seasons Farm. Sozo
also intends to utilise part of its proceeds from the IPO to move
upstream by setting up modern poultry farming, breeding and processing
facilities in Shandong. By setting up its own poultry farm, the group
will ensure a stable supply as well as control the quality of its raw
materials.

“We also plan to commission a third production plant
to expand our capacity with the proceeds,” he says, adding that its
current capacity is likely to reach maximum efficiency this year.

The
commercialisation of the third plant is expected by 2011 which will
increase production capacity by over 40% to 56,2000 tonnes. For the
financial year (FY) ended Dec 31, 2008, Sozo registered a pre-tax profit
of 126 million renminbi (RM63mil) on revenue of 415 million renminbi
(RM207.6mil).

For the first six months of FY09 the group’s
pre-tax profit of 97 million renminbi (RM48.5mil) was 71.6% higher than
56 million renminbi (RM28mil) registered in the same corresponding
period a year ago. Its revenue for the first six months stood at 285
million renminbi (RM142.5mil).

Sozo has also managed to sustain a
gross profit margin of over 30% in the last two years. In FY07 and
FY08, the company’s gross profit margin was 34% and 32% respectively.

The group has thus far managed to sell its products at a premium as
it has been able to secure stable supply of competitively priced and
high quality raw materials and target markets. In addition, the
stringent requirement for F&B products to enter the Japanese market
has also enable the group to sell its products at a premium.

It
is currently making an application to export to Singapore.