Letter to the Shareholders 

Dear Shareholders,

 

In 2015, the food industry in Taiwan endeavored to escape the food safety crisis; the constantly changing global political and economic environments volatilized exchange rate and bulk commodity prices; and domestic consumption was weakened by the domestic economic slowdown. Although the macro environment was tough, we made no compromise to product quality and safety and continuously developed and released nutritious and healthy products for consumers. With the concerted effort of all employees, the consolidated revenue and profit in 2015 rose slightly compared to 2014. In China, we built new factories, continuously increased brand investments, and strengthened sales channel cultivation; and 2015 revenue increased significantly compared to 2014. Given that “quality and safety” are our ultimate commitment for customers, we will continue to affirm consumer faith with high quality, so that we can stand apart from the competition and create better performance.
In this report, we will present to you our combined business performance in 2015, the summary of our 2016 business plan, our future development strategies, along with impacts from external competitions, the legal environment, and the macro environment.

 

1. Business performance 2015

1.1 Consolidated revenue and profit overview

Unit: NT$1,000


2015 % 2014 % +/- %
Sales revenue 25,514,586 100 21,800,013 100 17
Cost of goods sold 17,473,736 68 15,577,607 72 12
Gross Profit 8,040,850 32 6,222,406 28 29
Earnings before tax 3,398,551 13 2,570,025 12 32
Net income of the year 2,752,467 11 2,090,360 10 32
Total comprehensive profit and loss 2,560,855  10 2,314,234  11  11

 

Compared to 2014, performances in 2015 included: consolidated revenue increased by 17% or NT$3.71 billion to NT$25.5 billion; individual revenue increased by 2% or NT$260 million to NT$11.75 billion; comprehensive income increased by 11% or NT$250 million to NT$2.56 billion. This amount included the comprehensive income of this Company at NT$2.54 billion, with an increase of 10% or NT$240 million.

 

1.2 Status of research and development

In 2015, Standard Foods invested a combined R&D fund amounted to NT$102 million. In addition to new product research, clinical trials, and technology development, we made continual review, improvement, and optimization of the current products, so as to provide consumers with higher quality products.

 

2. Summary of 2015 business plan and future development strategies

2.1  Operating guidelines

    1. Studying consumer shopping habits and product market trends to develop products meeting consumer needs, and developing new products to create new demand, to cultivate the blue ocean on the market.
    2. Optimizing quality control, enforcing product testing procedures from source management, enhancing product processing technology, and providing consumers with safe, nutritious, and healthy food.
    3. Enhancing occupational training to diversify personnel development, strengthening the Group’s vertical and horizontal cooperation, reengineering internal organization, and improving the organization’s operational flexibility and efficiency.

 

2.2  Expected sales volume and important marketing policies

Based on the estimated sales of 393,253 tons in 2016, the future production-marketing policy is summarized as follows:

    1. Production
      • Aligning equipment investments with the Group’s development strategy to effectively allocate internal resources and maximize benefits.
      • Reinforcing cooperation with upstream suppliers and downstream distributors to enhance the efficiency of supply chain operation and smooth supply and demand.
      • Strictly controlling each process of food manufacture, enforcing source management, to ensure all processes, from material input to product delivery to consumers, conform to the control standards.
    2. Marketing
      • Capturing market trends: With the rise of health awareness and regimen trend in consumers, we will continuously promote products with equal emphasis on health, nutrition, and high quality and release new products that meet different consumer demands.
      • Serving customers sincerely and getting closer to consumer needs and feelings to maintain brand coherence.
      • Increasing product exposure with creative and flexible marketing strategies and omni-channel, to raise sales performance and increase market share.
3. Impacts of external competitions, the legal environment, and the macro     environment

3.1 External Competition

Food products diversify as globalization continues. As increasing food manufacturers, both at home and abroad, are vying for the limited domestic food consumer market, competitions are getting keener, and successful products and markets also attract competitors to enter the game. By providing consumers with safe and nutritious products with our unchanged rigorous attitude, we win consumer support among competitors and became a market-leading brand. In the future, we will continue this attitude and develop innovative and highly value-added products to cope with the competitive and constantly changing market.

 

3.2 Legal environment

After a series of food safety crises, the government of Taiwan has optimized the management system of food safety and sanitation by amending relevant laws and regulations to protect food safety and consumer rights for citizens. The Ministry of Health and Welfare promulgated on July 31, 2015 the “Food Manufacturers Requiring the Establishment of Food Traceability and Tracking Systems” to request food manufacturers to establish own food traceability and tracking system and to upload data to the “Food Product Traceability and Tracking Management System (Must Trace)” every month. Aiming to become the most trustworthy food company in the Chinese world, we surpass statutory and regulatory requirements. Besides ensuring all products are 100% traceable and trackable, we implement product data registration to progressively coordinate with relevant laws and regulations.

 

3.3 Macro environment

In 2015, the US economy recovered and grew steadily, while the growth of the Chinese economy slowed down. As the USD strongly appreciated, the New Taiwan Dollar, CNY, and other Asian currencies all depreciated. To the food industry that highly depends on imported ingredients, foreign exchange volatility brings considerable impacts. The export decline lasted for several months led to a negative economic growth for the first time since the last global economic crisis. As economic uncertainties were ahead, consumers became more conservative, and the already weakened domestic consumer market diminished. In addition, as consumers are still under the shadow of the previous food safety crises, the overall food industry has not yet recovered. In the future, the alternation in the economic condition between major countries and regions, the adjustment of market supply and demand, and the flow and deployment of global capitals, the bulk materials, food ingredients, and exchange rate will naturally have considerable effects and impacts. As the domestic economic condition will also affect the momentum of the consumer market, the challenge ahead will be tougher for the domestic food industry that relies on imported ingredients and distributed products mainly domestically. Looking to the future, we will continue to uphold the commitment: quality and safety for consumers and impose strict controls over each part of food manufacture. We firmly believe that providing consumers with satisfactory products and winning consumer trust and word of mouth are key to sustainable operations.

 

Chairman:      Mr. Ter-Fung Tsao
CEO:                Mr. Ter-Fung Tsao
Chief Accounting Office:      Chirs Hong