9 Jan 2012 11:15
Taihua plc
("Taihua" or the "Company")
Execution of Lease
Update on Forsythia Harvest
Update on Bian Tong Pian Sales
Taihua announces today that it has executed a 20 year lease with Qinyuan Forsythia Farmers' Cooperative in respect of 873 hectares of Forsythia plantation in the Luonan region of the Shanxi province, close to the Company's Traditional Chinese Medicine ("TCM") factory (the "Second Plantation").
As announced on 12 January 2011, Taihua has already leased a significant portion of this plantation (the "First Plantation") and this latest development takes the total area under lease to 1,766 hectares.
Pursuant to the terms of the lease of the Second Plantation, Taihua will manage the cultivation and benefit from its harvest. The annual lease cost is RMB1.31m per annum, but it is a term of the Lease that all 20 years are paid in advance (being RMB26.2m). It is therefore agreed that the Company will pay the first instalment of RMB10 million within 15 days of the date of the Lease and a second instalment of RMB16.2 million will be paid by the Company after the formal handover of the land. These payments will represent full and complete settlement of the 20 year term.
The Second Plantation consists of 173 hectares of cultivated land and 700 hectares of uncultivated land. The Company expects that the yields and costs associated with Second Plantation will be similar to that of the First Plantation (as set out in the announcement of 12 January 2011).
The directors of Taihua can also confirm that the harvest from the First Plantation has been completed and sold. The dry weight harvested was 986 Tonnes and the net of selling tax price was approximately RMB 30.5 per kg. The total overheads are expected to be similar to forecast. Approximately 40% of the sales were for cash and the remaining supplies were sold on 6 month payment terms.
Bian Tong Pian
The directors of Taihua also confirm that sales of its TCM. Bian Tong Pian totalled 305,600 boxes in the 11 months to the end November 2011 against a total forecast for the 12 months to December 2011 of 330,000 boxes. November was a record month with sales of 48,800 boxes
Nicholas Lyth, Chairman, commented "I am pleased to report both the execution of the lease over this second plantation and the maiden harvest from our original plantation. Whilst the quantity of the harvest was less than we had originally hoped for we are pleased that the Forsythia price remains robust. At a total lease cost of RMB26m we believe that this remains an excellent opportunity for the Company. I am thus further encouraged that we have been able to conclude negotiations for the second half of the plantation on very similar terms. We now have a harvest capacity of approximately 2,000 tonnes per annum which we believe makes us a very important player in the supply of Forsythia.
Regarding Bian Tong Pian it is particularly encouraging that we are on target to achieve the challenging 2011 target. I believe 2011 represented a significant shift in the focus of Taihua from Active Pharmaceutical Ingredients to TCMs. The Board remain confident that their experience in the Chinese market and their excellent local government relations mean that this is an area that will continue to generate shareholder value."
For more information please contact:
Nicholas Lyth, Taihua plc +44 (0) 776 990 6686
Katy Mitchell, WH Ireland Limited +44 161 832 2174