Wed, Apr 02, 2014 - Page 13 News List

Uni-President retains confidence in China subsidiary

By Amy Su  /  Staff reporter

Uni-President Enterprises Co (統一企業) yesterday retained its confidence in stronger sales and profitability for its food manufacturing arm in China within the next 10 years, after the subsidiary reported its first loss-making quarter in the final quarter of last year since listing in Hong Kong in 2007.

“I see no possibility or sign that Uni-President China Holdings Ltd (統一企業中國控股) will see its business go down [in the future],” Uni-President Enterprise chairman Alex Lo (羅智先) told an investors’ conference yesterday in Taipei.

His confidence stems from the company’s strategy to focus on product diversification and avoid price wars with peers, Lo said, in his first conference with investors after taking over the position as company chairman in November last year.

Despite the profitability of Uni-President China possibly remaining steady over the next few years, Lo said the company is able to bear some pain while seeking a long-term development strategy for future.

Last year, Uni-President Enterprise, the nation’s largest food and beverage conglomerate, saw net income of NT$12.76 billion (US$419.25 million), or NT$2.48 per share, up 29.3 percent from 2012.

The company will continue its plan to launch no more than 10 new products per year, either in the instant noodle sector or the beverage sector, with product diversification its major strategy to raise product value, Lo added.

Ton Yi Industrial Corp (統一實業), another major unit of Uni-President Enterprise which focuses mainly on manufacturing tin plates and tin cans for Uni-President China’s products, may also contribute higher sales and net profits to its parent company in the future, Lo said, citing the unit’s plans to start accepting orders from other beverage companies.

However, Yuanta Investment Consulting Co (元大投顧) analyst Bonnie Chang (張文慧) said she is unexcited about the company's China food manufacturing business, as an intensifying competition with Tingyi (Cayman Islands) Holding Corp (康師傅控股) will continue to weigh on Uni-President China’s earnings growth this year.

Instead, Chang said she is more upbeat about the company's other subsidiaries, such as Ton Yi, retailer Uni-President China Holding Co (統一中控) and pharmaceutical maker ScinoPharm Taiwan Ltd (台灣神隆).

"We expect Uni-President's 2014 earnings will be supported by its retail and packaging units, as well as ScinoPharm," Chang said in a note yesterday.

In spite of his positive outlook for various subsidiaries and plans to streamline product lineups to improve gross margin, the company sees the food safety issue as becoming the biggest risk going forward, Lo told investors.

He said the number of food additives applicable in the market totals 400,000, with Uni-President Enterprise products using 7,000 to 8,000 of them.

As a result, the company plans to invest substantially to reduce risks in food safety, adding that a NT$1 billion food safety center is set to launch operation by the end of next year.

Asked about his views of the controversial service trade pact with China, Lo said he supports the nation’s economy in becoming more open and he believes the advantages of the pact far outweigh its disadvantages.

“Taiwan’s service sector is more competitive than the public thinks, so we do not have to be overly worried about the cross-strait agreement,” Lo said.

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