BEIJING - New Hope Group, China's biggest manufacturer of animal feed by sales and production, is to expand its business in emerging markets through a joint venture with Marubeni Corp, Japan's biggest grain trader, to tap into the region's rising demand for agricultural products.

The companies signed a letter of intent to expand in Africa, the Middle East, Eastern Europe and South America, Bloomberg cited the Japanese company as saying in a statement on Tuesday. Xiang Chuan, board secretary of the subsidiary, New Hope Liuhe Co, confirmed the cooperation when reached on Tuesday, without providing financial details.

New Hope Group has been expanding its overseas business in the face of fierce competition in the animal feed business in China, the company said in its latest annual report. It plans to double its investment in overseas markets annually, according to a report on the company's website.

The company now has 16 feed factories overseas, and it plans to add four more annually. It did not provide a schedule for the opening, according to Tang Yong, a company director, in an interview posted on the company's website in December. Each overseas factory will have a production capacity of between 100,000 and 200,000 tons, the report cited Tang as saying.

Tang was not available for comment, but Qu Yu, a spokeswoman for the company, confirmed the report on Tuesday.

New Hope's overseas animal feeds business has long been based in Asia only. The company set up its first non-Chinese factory in Vietnam in 1999. Since then, it has expanded into other Asian countries, including Cambodia, the Philippines and Bangladesh. Now it is looking to expand in other areas, such as Africa and the Middle East.

The company has completed the construction of an animal feed factory in Egypt, which will soon become operational, according to Tang. It will also begin work on a plant in Johannesburg, South Africa, according to his comments in the report.

The profitability of New Hope's overseas business is strong, according to Jiang Xiaodong, an analyst with Huatai United Securities Co Ltd. "Demand in Southeast Asian countries is increasing rapidly, but their animal feed businesses lag behind. The company will quicken its expansion in overseas markets in the future," Jiang said in a research note.

The company's total production capacity is around 3.8 million tons, including 2.3 millions tons in China and 1.5 million tons overseas, according to Mao Changqing, an analyst with CITIC Securities Co Ltd.

"In the medium- to long term, the overseas business will keep increasing rapidly. Overseas business will be one of the main drivers of the company's overall business expansion," Mao said in a research note.

China Daily

(China Daily 01/18/2012 page15)