DaChan Food in search for money for food investments

The listing candidate is a Mainland-based subsidiary of Taiwan-listed DaChan Great Wall Enterprise and ranked the largest chicken slaughterer in China in 2005.

Apart from being an exclusive sourcing agent for McDonald’s in China, DaChan is responsible for one-third of the supply of chicken meat to KFC in China and is the largest processed food exporter for Ito-Yokado and 7-Eleven in Japan.

It is also one of the top 10 animal feed producers in China, the second largest supplier of animal feed in Malaysia and the third largest in Vietnam.

In 2006, 59% of the company’s revenue came from the production of chicken meat, while the production of animal feeds contributed 35%. Processed food accounted for only around 6% of its income, but this is expected to increase over the next few years.

The company mainly wants to invest in the processed food section, because profit margins are much better than in producing raw materials (meat, feed) for this sector.

To achieve this, DaChan is going to spend more than half of the net IPO proceeds to expand its production capacity, especially within the processed food division.

The company will also reserve funds for potential acquisitions, expansion of sales and marketing, as well as research and development.