TIDMCFC

RNS Number : 9882V

China Food Company PLC

19 December 2013

 
     Press Release       19 December 2013

China Food Company Plc

("China Food", "Group" or the "Company")

Update on Banking Facilities and

Sale of Animal Feed Business

China Food Company Plc (AIM:CFC), a leading Chinese manufacturer of cooking and dipping sauces, today provides the following update.

The Board has been informed that Fortune Food (China) Co. Ltd ("Fortune Food), a 100% subsidiary of the Group, had extended guarantees to banks and financial institutions on behalf of third parties to enable the Company to obtain bank facilities, which is common practice in China. One of these parties has defaulted in its facility and the bank has enforced Fortune Food's guarantee of approximately GBP3 million. Accordingly the Company's working capital position has been reduced by GBP3 million. The Board believes that the funds will be recovered.

Mr Fu Guo Ping, Chairman and legal representative of China operations, has agreed to indemnify the Group in full against any losses from the other party's default including any future losses pursuant to such third party guarantees. Furthermore, the Group owes Mr Fu approximately GBP5.9 million in shareholder loans and accrued interest and has the option to set off these amounts pursuant to this and any other such defaults. As stated in the interim results issued on 26 September 2013, the Company had bank facilities of GBP12 million and cash of GBP5.9 million, as at 30 June 2013. An estimated GBP7 million, of the current bank facilities was supported by cross guarantees, as at 31 August 2013.

John McLean, Chairman of China Food, said: "Whilst the repayment of the guarantee will add short term pressure to the Group's working capital, I am pleased that due to the indemnity provided by Mr Fu, there is no loss to the Group and the Board is working to replace this short term issue with additional borrowing facilities."

Sale of Animal Feed Business

As previously announced, PwC Beijing is managing the sale of the animal feed business and following discussions with several potential investors both in China and internationally, China Food is pleased to report that PwC has received expressions of interest from seven parties, and the initial due diligence process is now commencing. The next stage in the process will be site visits, management presentations and then receipt of indicative offers. The sale is expected to conclude by summer 2014 and the Board will provide further updates throughout the process.

- Ends -

For further information:

 
      China Food Company Plc 
      John McLean, Chairman        Tel: +44 (0) 7768 031 454 
                                    www.chinafoodcompany.com 
 
 
      finnCap 
      Geoff Nash / Ben Thompson (Corporate       Tel: +44 (0) 20 7220 
       Finance)                                                  0500 
      Simon Starr (Broking) 
 
 
      Numis Securities 
      David Poutney (Joint Broker)       Tel: +44 (0) 20 7260 
                                                         1000

Media enquiries:

 
      Abchurch Communications 
      Henry Harrison-Topham               Tel: +44 (0) 20 7398 
                                                          7702 
      henry.ht@abchurch-group.com       www.abchurch-group.com

Notes to Editors:

China Food is a well-established food manufacturing business based in Shandong province in the People's Republic of China, a region with a population of circa 94 million. A recent report identified Shandong province as one of the five most attractive 'city clusters' in China, due to the high number of large cities in the province*. The Group manufactures numerous different product lines including soya sauce and bean paste, all targeting the Chinese domestic market, and sold through a network of distributors and outlets of supermarket chains in the north-eastern region of the PRC, such as Walmart, Carrefour and Jialejia.

The Chinese sauces, dressings and condiments market is expected to be worth CNY115 billion (US$15 billion) by 2013, driven by Chinese population growth and economic prosperity. The Chinese domestic market is rapidly expanding, and the Group is well positioned to benefit from China's demographic growth and increased urbanisation.

The Group's operations are highly scalable and able to support further growth, and with net assets of GBP32 million (as at 30 June 2013), the prospects for China Food are strong. Further information on China Food Company can be found at www.chinafoodcompany.com.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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