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Yuhe International Signs Favorable Supply Contracts

August 24, 2010

WEIFANG, China, Aug. 24 /PRNewswire-Asia-FirstCall/ — Yuhe International,
Inc. (Nasdaq: YUII) (“Yuhe” or the “Company”), a leading supplier of day-old
chickens raised for meat production, or broilers, in the People’s Republic of
China
(“PRC”), today announced that the Company signed a series of supply
contracts between May and July of 2010 with two suppliers to purchase external
eggs to be produced by 420,000 sets of parent breeders at fixed prices of
between RMB 1.45 and RMB 1.50 per egg.

The Company estimates that the unit cost per day-old broiler from
externally-produced eggs purchased via these contracts will range between RMB
1.80 and RMB 1.90
, which is equivalent to the first half 2010 unit cost of the
Company’s day-old broilers that relied on internally-produced eggs. The
difference between the cost of broiler eggs and the cost of day-old-broilers
comes from hatchery-related expenses.

At the time of the contract signings, all of the parent breeders were
between two and 39 weeks of age and over 90% of them were in the middle of or
close to entering their egg-laying cycle. The total egg-laying capacity of the
parent breeders is estimated to be between 55 million and 60 million eggs,
with more than 90% of the eggs expected to be produced before May 2011, and
the remainder by August 2011.

Yuhe carefully inspected the quality of the breeder farms and the parent
breeder stocks before entering into these supply contracts. Each supplier is
obligated to continue to comply with Yuhe’s quality control criteria on parent
breeder mortality, broiler egg fertility, hatchability, and hatched broiler
condition throughout its respective contract period.

Yuhe expects these supply contracts to benefit its cost structure by
locking in favorable prices for external eggs; however, these contracts are
not expected to impact the Company’s projected broiler volume output. The
Company continues to expect to achieve a total 2010 output of 150 million
broilers and 2011 output of 250 million broilers.

“We believe that entering into these favorable supply contracts is an
example of our ability to use our industry expertise to capitalize on
opportunities in our market to optimize our input costs,” stated Mr. Zhentao
Gao
, Chairman and Chief Executive Officer. “As we have previously stated, we
believe there will be a supply shortage in our market going forward. We began
to see tangible signs of this as our broilers are currently commanding average
selling prices that are up significantly from the prices we were seeing in the
second quarter of 2010. Given our market outlook we took advantage of a down
period in the broiler market to lock-in a steady supply of quality broiler
eggs at highly competitive prices via these fixed-price contracts. We entered
into these contracts beginning in May of 2010 and finalized the vast majority
of them by the end of June, a period of declining prices in the broiler market
which led to significant price drops in the market for external eggs. As the
price movement of external eggs is positively correlated to that of broilers,
we anticipate a substantial unit price increase for external eggs as the
broiler market continues to recover. We believe that our strategic decision to
fix our external egg supply prices during the broiler market downturn was an
important way for us to hedge against future cost increases.”

About Yuhe International

Founded in 1996, Yuhe is the largest day-old broiler breeder in China. The
Company’s main operations involve breeding, as all broilers are sold within a
day of hatching. Headquartered in Weifang, Shandong Province, the Company has
modern facilities and is led by an experienced team which includes experts in
chicken breeding, disease prevention and animal husbandry science. Yuhe has
two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang
Taihong Feed Co. Ltd., which largely supplies the Company’s internal demand
for chicken feed. Currently, 90% of the Company’s sales of day-old broilers
are in Shandong province through 28 local agents. There are 10 other sales
agents in adjacent provinces. The Company has imported state-of-the-art
equipment from the United States, Germany and Japan and has passed ISO9001
certification, allowing it to adhere to international standards of operation.
For more information on the Company and its products, please visit
http://www.yuhepoultry.com .

Cautionary Statement

This press release contains forward-looking statements concerning the
Company’s business, products and financial results. The Company’s actual
results may differ materially from those anticipated in the forward-looking
statements depending on a number of risk factors including, but not limited to,
the following: general economic and business conditions, development, shipment,
market acceptance, additional competition from existing and new competitors,
changes in technology, and various other factors beyond the Company’s control.
All forward-looking statements are expressly qualified in their entirety by
this Cautionary Statement and the risk factors detailed in the Company’s
reports filed with the Securities and Exchange Commission. The Company
undertakes no duty to revise or update any forward-looking statements to
reflect events or circumstances after the date of this release.

    For more information, please contact:

    Yuhe International
     Mr. Vincent Hu, Chief Financial Officer
     Phone: +86-536-7300-667
     Email: vincent.hu@yuhepoultry.com

     Mr. Jason Wang, Director of Investor Relations
     Phone: +1-765-409-1844
     Email: jason.wang@yuhepoultry.com
     Web:   http://www.yuhepoultry.com

    CCG Investor Relations
     Mr. Athan Dounis, Account Manager
     Phone: +1-646-213-1916
     Email: athan.dounis@ccgir.com

SOURCE Yuhe International, Inc.


Source: newswire



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