Final Results

ANNOUNCEMENT OF THE ANNUAL RESULTS

FoR THE YEAR ENDED 30 JUNE 2012

The board of directors (the "Board") of Asian Citrus Holdings Limited (the "Company" or "Asian Citrus") is pleased to announce the consolidated results of the Company and its subsidiaries (collectively, the "Group") for the year ended 30 June 2012.

Results Highlights

** Conversion at £1 = RMB9.94 and RMB10.36 for the years ended 30 June 2012 and 2011 respectively for reference only

# Core net profits refers to profit for the year excluding net gain on change in fair value of biological assets and share-based payment. The Group's management considers this revised presentation more appropriately reflects the performance of the core operations. In order to conform to the current period's presentation, certain comparative figures for prior reporting period have been reclassified

·; Recommended final dividend of RMB0.13 (2011: RMB0.10) which together with the interim and special dividends of RMB0.05 per share, will make a total dividend of RMB0.18 (2011: RMB0.15) per share for the full year ended 30 June 2012. This equates to approximately 35.0% of the core net profit.

·; Increased core net profit by 8.7% to RMB629.1 million (2011: RMB579.0 million) despitechallenges of heavier than usual rainfall in South China and depressed prices for oranges and juice concentrate.

·; Strong free cash flow of RMB471.4 million (2011: RMB50.7 million) and cash and cash equivalent of RMB2,388.1 million as at 30 June 2012.

·; Total orange production increased by 12.2% to 243,421 tonnes due to increasing maturity of the orange trees. 

·; Continued expansion of direct orange sales, now sold to 24 supermarket chains including one new international chain and a national chain based in Guangxi.

·; Invested RMB458.3 million in Hunan Plantation and planted approximately 1.0 million summer orange trees. Planting of an additional 750,000 trees is scheduled for completion before end of2013.

·; The two existing fruit processing plants are operating at close to full capacity, a third 40,000 tonnes capacity plant is expected to become operational in first quarter of 2013 with trial production in December 2012.

·; Confident in ability to deliver business growth and shareholder value.

Tony Tong, Chairman, commented:

"Although China's economy is predicted to grow at a slower pace, the market for oranges should remain generally stable as they are regarded as a consumer product rather than a luxury good. Our main challenge will be whether we can increase orange prices in a slower-growth economy. I believe this will be possible starting in the fourth quarter of 2012, due to the expected decrease in supply of winter oranges resulting from this year's unstable weather as well as the consistently high quality of our oranges.

For our fruit concentrates business, we will continue leveraging on our experience and expertise developed in our plantation business to achieve greater vertical integration and economies of scale. We see excellent potential for this market, given the growing demand for healthy food, rising household incomes and increasing awareness of health issues amongst Chinese consumers. We are always alert to expansion opportunities in the fruit processing business, if the price is reasonable, and will consider adding other fruit juice concentrates to our existing product lines in order to capitalise on this market.

Our sound foundations augur well for our long-term success. We are one of the world's very few listed plantation companies with orange plantation assets and fruit processing facilities, operating in a highly fragmented market with strong barriers to entry. Despite the challenging circumstances we faced during the year, I am as enthusiastic and confident as ever in our ability to deliver business growth and shareholder value".

Chairman's Statement

I am pleased to present the annual results of Asian Citrus Holdings Limited (the "Company" or "Asian Citrus") and its subsidiaries (collectively referred to as the "Group") for the year ended 30 June 2012.

The past year was a challenging one for both our core plantation business and our juice processing business, owing to heavier than usual rainfall in South China and depressed prices for oranges and juice concentrates. Although our performance was less than optimal, I remain confident about our Company's ability to grow our business and deliver exceptional shareholder value.

Financial Highlights

For the year ended 30 June 2012, the Group's total revenues increased by approximately 25.7% from RMB1,412.6 million to RMB1,776.1 million, while core net profit for the year increased by approximately 8.7% from RMB579.0 million to RMB629.1 million.

Our two operating plantations contributed to a volume increase of 12.2% in our plantation business. This was offset by a decrease of 1.9% in the average selling prices of oranges, the first time we have experienced a drop in orange prices. Reflecting the need to apply additional fertiliser and pesticides for our summer oranges during the heavy rains this year, operating profit from the plantation business decreased by 1.9% from RMB463.4 million to RMB454.7 million.

The year was also a challenging one for our fruit juice concentrates business, Beihai Perfuming Garden Juice Co., Ltd. ("BPG"). Although BPG showed a 54.6% rise in operating profit from RMB131.8 million to RMB203.7 million over the previous year, we expected better contribution from this business as its operating results were consolidated for a full 12 months in FY2012 compared with only 7 months in FY2011. The reason for this unexpected shortfall was primarily caused by a squeeze on margins in pineapple juice concentrate, BPG's main product. During the year, average selling prices for pineapple concentrate fell as a result of destocking by Thai and Philippine producers - the world's two largest producers of pineapple concentrate - and lower demand amongst European consumers because of the financial crisis. We anticipate that prices for pineapple concentrate will rise again by the end of 2012 once the destocking has finished, although they are unlikely to bounce back quickly to the high levels that prevailed in 2011.

Operational Review

Asian Citrus currently owns three orange plantations occupying a total area of around 103 square kilometres with 3.9 million planted trees. Of these three plantations, two are in operation: the Hepu Plantation in Guangxi Zhuang Autonomous Region ("Guangxi"), which is essentially now operating at full maturity; and the Xinfeng Plantation in Jiangxi Province, which is gradually approaching full maturity and is expected to contribute towards a substantial and steady increase in our overall orange supply over the coming few years.

The Xinfeng Planation is planted with winter oranges trees, whilst the Hepu Plantation is planted with both winter and summer orange trees. We are continuing to replant certain existing winter orange trees with new species of summer orange trees at the Hepu Plantation.

The total winter orange crop yield from our operational plantations was approximately 171,607 tonnes during the year, representing an increase of approximately 19.4% over our total winter orange crop yield of approximately 143,698 tonnes the year before. As I previously mentioned, we are continuing to replace certain existing winter orange trees with new species of summer orange trees at the Hepu Plantation and thus there was less winter orange production from the Hepu Plantation compared with the previous year. The summer orange crop at our Hepu Plantation was 71,814 tonnes compared with 73,194 tonnes for the harvest at the same time last year, representing a decrease of 1.9%. This small decline was principally due to the unexpectedly heavy rainfall during the harvest season which increased the wastage of the summer crop. This is not indicative, however, of any downward trend in production. The annual production volume from our two operating plantations increased approximately 12.2% from 216,892 tonnes to about 243,421 tonnes.

The first harvest from our third plantation in Hunan province, which we started to develop in 2007, is expected to be in 2014. This plantation will specialise in summer oranges with an extended harvesting season. As at 30 June 2012, we had invested approximately RMB458.3 million in this plantation and planted 1.0 million summer orange trees. Planting of an additional 750,000 trees at the Hunan plantation is scheduled for completion before end of 2013.

In 2010, we acquired a 92.94% equity interest in BPG, which has enabled us to diversify our revenue sources and potentially achieve greater synergies through vertical integration. The existing plants in Beihai city and Hepu county in Guangxi are currently operating close to full capacity with an annual output of approximately 60,000 tonnes. To increase our overall production capacity, we are building a third plant in Baise City, Guangxi, with an annual output capacity of approximately 40,000 tonnes. Originally scheduled to begin operating in the third quarter of 2012, trial production is now planned in December 2012 and the plant is expected to become operational in the first quarter of 2013.

Building our Brand

Since 2005, we have been selling our graded oranges under our Royal Star brand directly to supermarket chains in China. These branded oranges, because of their higher quality, are able to command a premium price in the market.

I am proud to say that our Royal Star brand has been very well received by our supermarket chain customers, whose number has increased to 24 from the original 2 we began with in 2005. This is up from 20 last year. We are continuing an aggressive expansion of our distribution network in China for our Royal Star branded oranges by seeking direct contracts with different supermarket chains or, where more appropriate, gaining access to major domestic and international supermarket chains through sizeable distributors. I would like to highlight that recently we began selling our branded summer oranges to a major international supermarket chain and a national supermarket chain in Guangxi. As of this writing, we are currently in negotiations to sell our branded winter oranges to these customers' outlets in Guangdong and Zhejiang province as well as in Shanghai. If successful, this will mark a tremendous milestone in the development of Asian Citrus and the continuing growth of our orange business as well as recognition for our Royal Star brand in China.

Customers recognise the quality of our graded oranges, which since 2008 have been certified under China's Organic Food Standard. To achieve this standard, which is much more rigorous than other food certifications, we must use pesticides and fertilisers approved by the COFCC (China Organic Food Certification Center). Both of our operating plantations have had their certifications successfully renewed every year since we began receiving them four years ago.

Corporate Governance

We are strongly committed to good corporate governance and seek to be as transparent as possible with investors about our operations. In addition to regular updates on sales orders and harvest figures, we continue to provide new information on our biological assets so that investors can better understand our business.

During the year, we addressed a common concern that investors have about forestry and plantation companies - how we account accurately for our biological assets. To provide independent confirmation to the market, we commissioned an independent third party, with Nationwide Grade A Mapping and Surveying Qualification and is officially qualified to undertake mapping and surveying assignments in the PRC, to carry out an aerial survey of our plantations. Using GPS and digital photography, the surveyor took more than 50,000 digital photos of each operational plantation and processed them with a sophisticated software programme to provide a precise measurement of the land area occupied by our respective plantations and an exact count of the number of orange trees in our plantations.

I am pleased to confirm that the survey shows that the land area occupied by our plantations and the number of trees in our plantations are consistent with our records.

Enhancing Shareholder Value

We are in the fortunate position of being a cash rich company - as of June 2012 we had RMB2.3 billion on hand - with no debt. In an economic environment where credit continues to be very tight, this gives us great flexibility in terms of how we grow and add value for our shareholders.

We instituted a share repurchase programme in February of this year where the repurchased shares are for cancellation. To date, we have spent close to HK$60 million in share buybacks and have repurchased about 1% of our outstanding share capital. Consideration is being given as to how the execution of this programme can be improved. After the close period ends on the publication of the annual report, we will continue with the share repurchase programme if the valuation on our shares continues to be low. Under the Repurchasing Mandate from our Board, we may buy up to a total of HK$250 million in outstanding shares, which will be entirely funded from the internal resources of the Company.

Dividend

The Board recommends the payment of a final dividend of RMB0.13 for the financial year ended 30 June 2012. Together with the interim and special dividends of RMB0.05 paid previously, this equates to approximately 35.0% of the core net profit for the year ended 30 June 2012 (2011: 31.5%). This represents an increase of 20% over last year's RMB0.15. The Board is committed to maintaining a dividend payout ratio of at least 30% of core net profit.

The final dividend, if approved at the Annual General Meeting on 6 November 2012, will be paid in sterling or HK Dollars on or before 31 December 2012, to shareholders on the register at the close of business of 9 November 2012, with an ex-dividend date of 8 November 2012 and 7November 2012 on The Stock Exchange of Hong Kong Limited ("HKEx") and London Stock Exchange PLC, respectively. The actual translation rate for the purpose of dividend payment in sterling or HK Dollars will be determined by reference to the exchange rate on 13 November 2012.

The Company has decided to institute a Scrip Dividend Scheme whereby shareholders will be offered the opportunity to elect to receive the final dividend for the year ended 30 June 2012 in the form of shares. A document providing further details of this Scrip Dividend Scheme will be sent to shareholders in due course.

The Year Ahead

Although China's economy is predicted to grow at a slower pace, the market for oranges should remain generally stable as they are regarded as a consumer product rather than a luxury good. Our main challenge will be whether we can increase orange prices in a slower-growth economy. I believe this will be possible starting in the fourth quarter of 2012, due to the expected decrease in supply of winter oranges resulting from this year's unstable weather as well as the consistently high quality of our oranges.

Our sound foundations augur well for our long-term success. We are one of the world's very few listed plantation companies with orange plantation assets and fruit processing facilities, operating in a highly fragmented market dominated by small farmers. The barriers to growth for these farmers are prohibitively high. In addition to the cost of land and biological assets, the capital expenditures required to operate a large, profitable plantation are out of reach for most of our competitors - at our Hunan plantation alone, the total investment is expected to be RMB585 million.

Our shareholders recognise that plantations do not offer an immediate return. When trees are first planted, they do not begin producing until the fourth year. A typical orange tree in year 4 yields only 8 kilogrammes of oranges; when it reaches maturity in year 10, it will begin producing an average of 130 kilogrammes of oranges for the next 15 years and decline slightly afterwards for the remainder of its 35-year lifespan. As more orange trees come on-stream at our three plantations, we can look forward to many years of high productivity, high margins and high profitability.

For our fruit concentrates business, we will continue leveraging on our experience and expertise developed in our plantation business to achieve greater vertical integration and economies of scale. We see excellent potential for this market, given the growing demand for healthy food, rising household incomes and increasing awareness of health issues amongst Chinese consumers. We are always alert to expansion opportunities in the fruit processing business. If the price is reasonable, and will consider adding other fruit juice concentrates to our existing product lines in order to capitalise on this market.

Finally, on behalf of the Board, I would like to express my heartfelt appreciation of our management team and employees for their dedication and hard work which have contributed so much to our growth at Asian Citrus. I would also like to take this opportunity to thank all our shareholders, business partners and investors for their continuing support. Despite the challenging circumstances we faced during the year, I am as enthusiastic and confident as ever in our ability to deliver business growth and shareholder value.

Tony Tong

Chairman

21 September 2012

Management Discussion and Analysis

OPERATING PERFORMANCE

Revenue

The breakdown of revenue by types is as follows:

The Group's revenue increased by 25.7% from RMB1,412.6 million to RMB1,776.1 million for the year ended 30 June 2012.

Sale of oranges

Revenue from sale of oranges grew by 9.9% to RMB1,057.3 million for the year ended 30 June 2012. This was achieved by an increase of approximately 12.2% in the Group's production to 243,421 tonnes but offset by 1.9% decrease in average selling price of the Group.

The production yield from Hepu Plantation decreased by 5.7% to 116,720 tonnes for the year ended 30 June 2012 mainly due to the ongoing replanting programme. During the year, 66,449 (2011: 63,584 winter orange trees were removed and replanted with the same number of the summer orange trees. As the orange trees continue to mature, the production yield from the Xinfeng Plantation increased significantly by 36.0% to 126,701 tonnes for the year ended 30 June 2012 from 93,181 tonnes in the comparable year.

The following table sets out the average selling prices of oranges in different plantations:

Unseasonably warm weather in winter time of 2011 resulted in an unusually strong winter orange crop in China, and consequently a short-term over supply of winter oranges to the market and direct competition to the Group's summer oranges. As a result, the average selling price of summer orange in Hepu Plantation was 3.4% lower respectively year on year.

All of the Group's oranges were sold domestically. The Group's customers from the sale of oranges can be divided into three categories, namely corporate customers, wholesale customers, and supermarket chains. The breakdown of types of customers is as follows:

For the year ended 30 June 2012, the production volume and revenue to supermarket chains represented approximately 29.5% and 34.8% respectively of the Group, compared to approximately 31.6% and 39.0%respectively for the year ended 30 June 2011. As the Xinfeng Plantation was still at the early stage, the oranges were mainly sold to corporate and wholesale customers, thereby negatively impacting the percentage of sale to supermarket chains.

For the Hepu Plantation and Xinfeng Plantation, the production volume sold to supermarkets was 39,423 tonnes and 32,347 tonnes for the year ended 30 June 2012, compared to 46,156 tonnes and 22,324 tonnes for the year ended 30 June 2011 respectively. The decrease of the production volume sold to supermarket in Hepu Planation was mainly due to the short-term over supply of winter oranges to the market and direct competition to the Group's summer oranges in Hepu Plantation.

The Company is selling two types of oranges to customers, namely ungraded oranges and graded oranges. Ungraded oranges are neither packaged nor branded and the customers have to arrange for the transportation of the oranges at their own cost. Usually, the ungraded oranges are sold to wholesale and corporate customers. Graded oranges are oranges that the Company grades, packages and delivers to the customers at our cost, usually to supermarket customers. The graded oranges are sold under the "Royal Star" brand at a premium price compared to the selling price of ungraded oranges without brand. The breakdown of types of oranges is as follows:

As the Xinfeng Plantation was still at the early stage, the oranges were mainly sold to corporate and wholesale customers without grading, thereby negatively impacting the percentage of sale of graded oranges.

Sale of processed fruits

The table sets out the volume and revenue from the sale of processed fruits:

Beihai BPG processes over 22 different types of tropical fruits, including pineapples, passion fruit, lychees, mangoes and papayas. Only single products accounting for over 10% of the revenue from the sale of processed fruits are shown separately in the table above.

Revenue from the sale of processed fruits increased by 71.4% to RMB715.5 million for the year ended 30 June 2012. It is mainly attributable by the full year results of Beihai BPG which are consolidated into the Group for the year ended 30 June 2012 compared to seven month results being consolidated into the Group in last year follow by the completion of acquisition as of 30 November 2010.

The utilisation rate of two existing processing plants in Beihai and Hepu is approximately 91.8% and 93.6% for the year ended 30 June 2012.

Beihai BPG currently generates most of its sales from the People's Republic of China ("PRC") market, with key customers being beverage mixers supplying major beverage groups.

Sale of self-bred saplings

For the year ended 30 June 2012, RMB3.3 million was recognised from the sale of approximately 284,000 self-bred saplings to local farmers.

Cost of sales

The breakdown of cost of sales of the Group is as follows:

The cost of sales of oranges principally consists of the costs of raw materials such as fertilisers, packaging materials, pesticides and other direct costs such as direct labour, depreciation and production overheads. The production cost of sale of oranges increased by 27.9% from RMB381.7 million to RMB488.1 million. The increase in production costs was mainly due to the increase in raw materials utilised for 12.2% increase in the production volume, slight increase in the average price of fertiliser and higher consumption of pesticides and fertilisers due to adverse weather conditions during the year. 

The unit cost of production in the Hepu Plantation increased by 21.5% to approximately RMB1.81 per kg for the year ended 30 June 2012 (2011: RMB1.49 per kg) as a result of the decrease in production volume of winter oranges due to ongoing replanting programme and higher amount of fertilisers used as a result of the heavy rainfall in the second quarter of 2012.

The unit cost of production in the Xinfeng Plantation slightly increased by 2.8% to RMB2.18 per kg for the year ended 30 June 2012 (2011: RMB2.12 per kg) as a result of higher amount of pesticides used andrelated expenses due to generally warmer weather in winter time of 2011.

The combined unit cost of production increased by 14.2% to RMB2.01 per kg from RMB1.76 per kg in the comparable period due to higher contribution from Xinfeng Plantation with relatively higher unit cost and increase in unit cost in Hepu Plantation.

Cost of sales of processed fruit mainly includes the costs of fruit and packaging materials and other direct costs such as direct labour and production overheads. For the six months ended 30 June 2012, the cost of processed fruits increased by 79.7% from RMB275.3 million to RMB494.8 million. The increase was mainly due to full year results of Beihai BPG which are consolidated into the Group for the year ended 30 June 2012 compared to seven month results of Beihai BPG being consolidated into the Group in last year following the completion of the acquisition as of 30 November 2010.

Gross profit

The Group's overall gross profit increased by 7.3% to approximately RMB792.4 million for the year ended 30 June 2012 (2011: RMB738.6 million). The improvement in gross profit was due to an increase in the production yield of the orange trees of 12.2% and inclusion of the full year gross profit of Beihai BPG of RMB220.7 million.

The overall gross profit margin decreased from 52.3% to 44.6% for the year ended 30 June 2012 due to higher contribution from processed fruits segment and Xinfeng Plantation which has a relatively lower margin, decrease of gross profit margin of the Hepu Plantation and decrease of gross profit margin of the processed fruits segment.

The following table sets out a breakdown of the Group's gross profit margin by plantation:

The following table sets out a breakdown of the Group's gross profit margin by business:

The gross profit margin of the Hepu Plantation decreased to approximately 64.3% (2011: 70.1%) due to the decrease of the production volume of winter oranges from the ongoing replanting programme, lower average selling price of summer oranges and higher amount of fertilisers used as a result of the heavy rainfall in the second quarter of 2012.

Despite better economies of scale being achieved, the gross profit margin of Xinfeng Plantation only grew to 40.4% (2011: 40.2%) due to a higher amount of pesticides used and related expenses as a result of generally warmer weather in winter time of 2011. Over the medium term, as the continuous growth in production volume and better economies of scale, we expect the margin of the Xinefeng Plantation to continue to improve.

Due to higher contribution from Xinfeng Plantation with a relatively lower margin and the decrease in gross profit margin of the Hepu Plantation, the overall gross profit margin from sales of oranges dropped to approximately 53.8% (2011: 60.3%) for the year ended 30 June 2012. 

Beihai BPG processes over 22 different types of fruit with different gross profit margins. The normalised gross profit margin of Beihai BPG for the year ended 30 June 2012 decreased to 30.8% compared to 34.0% in last year. This was mainly due to the inclusion of the trading of fruit juice with minimal gross margin at special request by customers during the year and lower selling price of the pineapple juice concentrates as a result of the decrease in prices in the international market.

Gain on change in fair value of biological assets

The Group recorded a gain of RMB166.9 million from net gain on change in fair value of biological assets for the year ended 30 June 2012, compared to a gain of RMB507.7 million in last year. The lower increase was mainly due to the fact that all the orange trees in the Xinfeng Plantation became fruit bearing in the previous year and there was substantially less infant trees becoming fruit bearingin current year. 

The net gain on change in fair value of biological assets does not have any effect on the cash flow of the Group for the year ended 30 June 2012.

Selling and distribution expenses

Selling and distribution expenses mainly comprise sales commissions, advertising, salaries and welfare of sales personnel, travelling and transportation expenses. The selling and distribution expenses of the Group decreased from approximately RMB63.3 million for the year ended 30 June 2011 to approximately RMB60.6 million for the year ended 30 June 2012, representing an decrease of 4.3%, mainly resulting from the decrease of the production volume sold to supermarket from Hepu Plantation.

As a result, selling and distribution expenses represented 3.4% of the Group's revenue, a decrease of 1.1 percentage points as compared to 4.5% in last year.

General and administrative expenses

General and administrative expenses comprise mainly salary, office administration expenses, depreciation, amortization, raw material utilised for infant trees and research costs. The general and administrative expenses of the Group were approximately RMB157.6 million for the year ended 30 June 2012 (2011: RMB142.4 million), representing an increase of 10.7%. The increase was mainly due to more expenses for the continued development of Hunan Plantation and inclusion of the administrative expenses amounting to RMB11.6 million of Beihai BPG.

General and administrative expenses represented 8.9% of the Group's revenue, a decrease of 1.2 percentage points as compared to 10.1% in last year, demonstrating the Group's ability to control the costs effectively during rapid business expansion.

Profit

The profit attributable to shareholders for the year ended 30 June 2012 decreased to approximately RMB750.2 million, compared to approximately RMB1,039.0 million in last year, representing a decrease of approximately 27.8%. The decrease in profit is mainly due to lower increase in the net gain on change in fair value of biological assets as all the orange trees in the Xinfeng Plantation becoming fruit bearing in the previous year and there was substantially less infant trees becoming fruit bearing in current year.

The core net profit, which refers to profit for the year excluding net gain on change in fair value of biological assets and share-based payments, for the year ended 30 June 2012 was approximately RMB629.1 million, compared to approximately RMB579.0 million in last year, representing an increase of approximately 8.7%. The increase was mainly attributable to the increase in production volume of oranges and a full year results of Beihai BPG consolidated into the Group during the year compared to seven month results in corresponding period last year.

CHANGE IN ACCOUNTING POLICY

In the year ended 30 June 2012, the Group changed its accounting policy with respect to the costing of infant trees. Cost of fertilisers and pesticides, the principal directly attributable costs incurred during the period of biological growth to the stage the trees start bearing fruits (i.e. from age 0 to 3), are now capitalised as additions to the relevant biological assets. In prior years, these costs were expensed as incurred and included in general and administrative expenses in profit or loss. The management believes the new policy is preferable as it will provide relevant and reliable information and more fairly reflects the financial results of the Group's agricultural activities.

This change in accounting policy has been applied retrospectively. The effects of the change in the consolidated income statement for the year ended 30 June 2011 and in the consolidated statements of financial position at 30 June 2011 and 1 July 2010 are set out in Note 4 to the Consolidated Financial Statements.

FINAL AND SPECIAL DIVIDENDS

The Directors are pleased to recommend a final dividend of RMB0.13 (2011: final dividend of RMB0.10 and special dividend of RMB0.03) per share. The final dividend, together with the interim and special dividend of RMB0.03 (2011:RMB0.02) and RMB0.02 (2011: RMBNil) per share respectively, will make a total of RMB0.18 (2011: RMB0.15) per share for the whole year ended 30 June 2012.

PRODUCTIVITY

The increasing maturity of the oranges trees together with effective managerial planning and production supervision, have led to productivity gains.

The production volume of winter oranges increased to 171,607 tonnes for the year ended 30 June 2012, representing an increase of 19.4%. The production volume of winter oranges in Hepu Plantation dropped from approximately 50,517 tonnes last year to approximately 44,906 tonnes in the current year, representing a decrease of approximately 11.1%, which was due to the ongoing replanting programme. In the year to 30 June 2011, 63,584 winter orange trees were removed and replanted with the same number of the summer orange trees.

In addition, the production volume of winter orange from the Xinfeng Plantation increased from approximately 93,181 tonnes last year to approximately 126,701 tonnes in the current year, representing an increase of approximately 36.0% due to increased maturity during the year.

The production volume of summer oranges decreased slightly to 71,814 tonnes for the year ended 30 June 2012 (2011: 73,194 tonnes) due to the unusual heavy rainfall at the time of the harvesting season.

CAPITAL STRUCTURE

As at 30 June 2012 there were 1,221,097,182 shares in issue. Based on the closing price of HK$4.35 as at 30 June 2012, the market capitalisation of the Company was approximately HK$5,311.8 million (GBP437.6 million).

HUMAN RESOURCES

There were a total of 1,692 employees of the Group as at 30 June 2012. The Group aims to attract, retain and motivate high calibre individuals with a competitive remuneration package. Remuneration packages are performance-linked and business performance, market practices and competitive market conditions are all taken into consideration. The Group reviews the employees' remuneration packages on an annual basis. The Group also places heavy emphasis on staff training and development so that employees can reach their maximum potential.

FINANCIAL PERFORMANCE

Liquidity

The current ratio and quick ratio was 47.49 and 43.49 respectively. The liquidity of the Group continues to be healthy with sufficient reserves for both current operation and future development.

Profitability

The asset turnover of the Group improved to 0.21 (2011: 0.18) for the year ended 30 June 2012. The higher asset turnover was mainly due to full year results of Beihai BPG being consolidated into Group in current period compared to seven month results in last corresponding period.

The basic earnings per share for the year ended 30 June 2012 was RMB0.62 (2011: RMB0.99). This was because of the 35.5% decrease in profit attributable to shareholders for the year and the dilution effect from the issuance of new ordinary shares in FY2011. However, the decrease in profit attributable to shareholders is mainly due to a substantial decrease in the net gain on change in fair value of biological assets as all the orange trees in the Xinfeng Plantation became fruit bearing in the previous year and there was substantially less infant trees becoming fruit bearing in current year.

The core net profit per share for the six months ended 30 June 2012 was RMB0.52 (2011: RMB0.55).

Debt ratio

The net cash positions of the Group were RMB2,388.1 million and RMB2,232.2 million at 30 June 2012 and 2011 respectively.

Internal cash resource

The Group's major internal cash resource is its cash and cash equivalents. The effective interest rate for bank deposits during the year ended 30 June 2012 is approximately 0.93% (2011: 0.35%) per annum.

The Group did not have any outstanding bank borrowings as at 30 June 2012.

Charge on assets and contingent liabilities

None of the Group's assets were pledged and the Group did not have any material contingent liabilities as at 30 June 2012.

Capital commitments

As at 30 June 2012, the Group had capital commitments of approximately RMB87.7 million mainly in relation to the construction of the farmland infrastructure in the Hunan Plantation and the new juicing plant in Baise city.

Foreign exchange risk

The Group is exposed to currency risk primarily through its cash and cash equivalents that are denominated in a currency other than the functional currency of the operation to which they related. The currencies giving rise to this risk are primarily Hong Kong dollars, United States dollars and British pounds.

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuation arise. The Group currently does not use any derivative contracts to hedge against its exposure to currency risk. Management manages its currency risk by closely monitoring the movement of the foreign currency rate and considers hedging significant foreign currency exposure should the need arise.

PLANTATIONS

The Group has three orange plantations in the PRC occupying in total approximately 155,000 mu (equivalent to approximately 103.3 sq.km.) of land, with approximately 46,000 mu (equivalent to approximately 30.7 sq.km.) at the Hepu Plantation in the Hepu county of the Guangxi Zhuang Autonomous Region, approximately 56,000 mu (equivalent to approximately 37.3 sq.km.) at the Xinfeng Plantation in the Xinfeng county of the Jiangxi province and approximately 53,000 mu (equivalent to approximately 35.3 sq.km) at the Hunan Plantation in the Dao county of the Hunan province.

Hepu Plantation

The Hepu Plantation is fully planted and comprises approximately 1.3 million orange trees of which approximately 1.1 million trees were producing oranges during the current year. During the year, 66,449 winter orange trees were removed and the same number of summer orange trees were replanted as part of the ongoing replanting programme.

Xinfeng Plantation

The Xinfeng Plantation is fully planted and comprises 1.6 million winter orange trees and all of which are producing oranges during the current year.

Hunan Plantation

The Hunan Plantation is still under development and comprises approximately 1.0 million summer orange trees planted as at 30 June 2012. During the year ended 30 June 2012, approximately 622,000 summer orange trees were planted with approximately 750,000 summer orange trees to be planted in the financial year ending 30 June 2013. By that time, the construction of Hunan Plantation is expected to be completed.

The first batch of the 427,400 summer orange trees is expected to begin trial production in the summer of 2014.

The below table sets out the age profile as at 30 June 2012 and the production volume of the plantations for the year ended 30 June 2012:

Summer orange trees

Winner orange trees

*Note: 66,449 winter orange trees (age: 15) were removed and replanted with the same number of summer orange trees (age: 0) during the year ended 30 June 2012.

The below table sets out the age profile as at 30 June 2011 and the production volume of the plantations for the year ended 30 June 2011:

Summer orange trees

Winner orange trees

*Note: 63,584 winter orange trees (age: 14) were removed and replanted with the same number of summer orange trees (age: 0) during the year ended 30 June 2011.

VALUATION OF BIOLOGICAL ASSETS

The Group has engaged an independent valuer to determine the fair value of the orange trees less costs to sell as at 30 June 2012. 

The valuations of the Group's orange trees were conducted on the basis of discounted cash flow. The discount rate being applied to the discounted cash flow model is based on Capital Asset Pricing Model. The independent valuer begins with the appraised value of the Group's orange trees by discounting the future income streams attributable to the Group's orange trees to arrive at a present value and deducts the assets (including plantation related machinery and equipment and land improvements) from theappraised value which are employed in the operation of the Group's plantations. The independent valuer conducted inspections of the plantations in connection with the valuation exercise of the Group's orange trees.

Major assumptions

The discounted cash flow method adopted a number of key assumptions, which include the discount rate, market prices of oranges, production yield per tree, related production costs, etc. The values of such variables are determined by the independent valuer using information supplied by the Group, as well as proprietary and third-party data, as follows:

1) The discount rate applied for the year ended 30 June 2012 was 18.0% (2011: 20.0%). The discount rate reflected the expected market return on the asset and can be affected by the interest rate, market sentiments and risk of the asset versus the general market risk.

2) The yield per tree variables represent the harvest level of the orange trees. The yield of orange trees is affected by the age, species and health of the orange trees, the climate, location, soil conditions, topography and infrastructure. In general, the yield per tree increases from age 3 to 10, remains stable for about 22 years, and then decreases until age 32. An agricultural consultant of the independent valuer estimates that the yield per tree based on field inspection of general growth conditions of orange trees and average yield data of typical orange plantations in the PRC.

3) The market prices variables represent the assumed market price for the Summer Oranges and Winter Oranges produced by the Group. The independent valuer adopted the market sales prices prevailing as of the relevant balance sheet date for each type of orange produced by the Group as the sales price estimate. The selling prices of winter oranges and summer oranges from the Hepu Plantation and winter oranges from the Xinfeng Plantation adopted were RMB3,310 per tonne, RMB5,200 per tonne and RMB3,730 per tonne, respectively, for the year ended 30 June 2012 and RMB3,230 per tonne, RMB5,300 per tonne and RMB3,660 per tonne, respectively, for the year ended 30 June 2011.

4) The direct production cost variables represent the direct costs necessary to bring the oranges to their sales form, which mainly include raw material costs and direct labour costs. The direct production cost variables are determined by reference to actual costs incurred for areas that have been previously harvested and cost information for comparable areas with regards to areas that have not been harvested previously.

Sensitive analysis

1) Changes in the discount rate applied result in significant fluctuations in the Group's gain from changes in fair value of orange trees less estimated point-of-sale costs. The following table illustrates the sensitivity of the Group's gain from changes in fair value of orange tree less estimated point-of-sale costs to increases or decreases by 100 basis points in the discount rate of 18.0% applied by the independent valuer for the year ended 30 June 2012: