2018 Annual Results Presentation

March 2019

The information contained in this presentation is intended solely for your personal reference. Such information is subject to change without notice, its accuracy is not guaranteed and it may not contain all material information concerning the Company. The Company makes no representation regarding, and assumes no responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information contained herein. In addition, the information contains projections and forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur, that projections will be achieved, or that the Company’s assumptions are correct. It is not the intention to provide, and you may not rely on this presentation as providing, a complete or comprehensive analysis of the Company's financial or trading position or prospects. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities or financial instruments or to provide any investment service or investment advice, and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment decision in relation thereto.

Disclaimer

Results Highlights

Agenda

1

2

3

4

Business Review and Financial Performance

Outlook

Open Forum

Gross profit increased by 29.9% to RMB312.5 million from RMB240.7 million. The gross profit margin increased from 23.9% to 29.9%.

Cost of sales decreased by 23.6% to RMB586.5 million from RMB767.3 million. If excluding the provision and write-off of inventory, the cost of sales decreased by 24.3%.

Profit attributable to owners of the Company increased by 16.7% to RMB 80.3 million, and earnings per share was RMB 2.5 cents. The total amount of final dividends per share was HK$3.6 cents, which was the same as last year.

Financial position remained sound and stable, with cash and cash equivalents together with pledged deposits and time deposits less total bank borrowings of RMB 637.2 million as at 31 December 2018, representing an increase of RMB156.7 million.

Committed to expanding collagen technology applications to various fields so as to achieve product diversification and extend its reach to the great health industry and the strategic emerging industries, thereby expanding the Group’s areas of collagen applications and enhancing its capability of innovative product research and development.

Results Highlights

Results Highlights

(In RMB million, unless otherwise stated) 2018 2017 Change

Revenue 899.0 1,008.0 -10.8% Gross profit margin 34.8% 23.9% +10.9ppt Profit attributable to owners of the Company 80.3 68.8 +16.7% Net margin(%) 8.9 6.8 +2.1ppt Net cash inflow from operation activities 282.1 422.4 -33.2% Capital expenditure 24.8 31.8 -22.0%

2018 2017 Change

Total assets 3,117.7 3,294.0 -5.3% Gearing ratio (Total bank borrowings / total equity) 2.9% 6.7% -3.8ppt Current ratio (times) (Current assets / current liabilities)

6.3 4.5 +1.8

2

Revenue and Gross Margin Analysis Gross Profit & Gross Margin Revenue Trend

Reasons of Revenue decrease Reasons of gross margin increase Oversupply of collagen sausage casings

resulted from stagnant growth in the domestic meat product industry.

The continued fierce market competition, together with the impact of African swine fever, the sales of the Group’s collagen sausage casings dropped to some extent as compared with the prior last year.

The gross profit margin increased from 23.9% to 34.8%.

The increase in gross profit margin is mainly due to the slight increase in average selling price as well as the decrease in cost of sales.

-10.8%

(RMB million) (RMB million) (RMB million)

1008.0 899.0

Revenue

435.7 430.7 429.9 376.2

618.9 549.9 578.1 522.8

2015 2016 2017 2018

First halfSecond half

2017 2018

240.7

312.5

2017 2018

+29.9%

Cost of Sales Analysis Cost of Sales Analysis

Cost of sales decreased by 23.6% to RMB586.5 million from RMB767.3 million, including the provision and write-off of inventory of RMB15.1 million.

Excluding such items, the cost of sales decreased by 24.3%.

Decline in cost of sales (1) the drop in sales. (2) Taken various measures to control the unit costs of production as well as utilizing its bargaining power of bulk purchases to reduce the costs of raw materials over the past years, and the effectiveness of which has gradually emerged in terms of the cost of inventories determined on the weighted average basis.

267,600

180,900 156,800

203,600

2018 135,700 106,200

2017 2018

- 25.0%

- 23.9%

- 32.3%

2017

Raw materials & Consumables

203,600 34.7% 267,600 34.9%

Water, electricity & coal

135,700 23.1% 180,900 23.6%

Salary & employee

Benefit 106,200 18.1%

156,800 20.4%

Others

141,000 24.1% 162,000 21.1%

(RMB ‘000)

Raw materials & consumables

Water, electricity & coal

Salary & employee benefit

Other income and gains

Other income and gains increased by 5.4% to RMB36.8 million.

There was a gain on change in fair value of a financial asset at fair value through profit or loss of RMB1.6 million recorded during the Prior Year, which was absent for the Year.

In addition, the Group recorded a net exchange gain of RMB3.7 million.

34,900 36,800

0

10,000

20,000

30,000

40,000

2017 2018

+5.4%

(RMB ‘000 )

Selling and Distribution Expenses

Selling and distribution expenses decreased by 9.0% to RMB39.7 million from RMB43.6 million.

Selling and distribution expenses as a percentage of revenue increased to 4.4% from 4.3%.

(RMB ‘000)

43,600 39,700

0

10,000

20,000

30,000

40,000

50,000

2017 2018

-9.0%

Administrative expenses

Administrative expenses increased by 28.2% to RMB202.6 million from RMB158.1 million.

The Group sold or disposed some of the equipment in relatively obsolete condition and loss on disposal of RMB11.3 million was recorded for equipment accordingly, as compared to a loss of RMB265,000 last year.

For the technologies acquired by the Group through the acquisition of Guangdong Victory, the intangible assets are amortized over five years. The related amortization expense was RMB50.8 million for both years.

Impairment of RMB22.8 million on the goodwill arising from the acquisition of 80% interest in Guangdong Victory.

Impairment of RMB13.6 million on the 25% interest in Ferguson Wuhan.

(RMB ‘000)

202,600

0

50,000

100,000

150,000

200,000

250,000

2017 2018

+28.2%

158,100

Net Profit and Margin

Major reasons ：

A slight increase in average selling price.

The effect of controlling the unit cost has gradually appeared, and the cost of sales has decreased.

The Group’s selling and distribution expenses and administrative expenses for the exploration of new products, including facial masks, instant edible solid collagen and collagen rice noodle, for the Year and the Prior Year totaled RMB15.7 million and RMB35.2 million, respectively.

0

50,000

100,000

2017 2018

68,800 6.8%

80,300 8.9%

+16.7%

The accounts payable turnover days decreased by 15.8 days. The Group tried to use the credit period provided by the suppliers for a credit period of 60-180 days.

The receivables turnover days increased by 15.5 days. The Group closely monitors the operation of the Chinese meat food industry and strictly controls customer credit. The credit period is generally one month, and for some customers, which can be extended to up to three months. About 76% of the receivables are aged for less than 3 months.

Working Capital Analysis

131.9 153.7

128.6 112.8

020406080

100120140160

1H17 FY17 1H18 FY18

89.9 92.2 107.7

020406080

100120

1H17 FY17 1H18 FY18

120.4

Working Capital Analysis

The inventory turnover days of raw materials, finished goods and work-in-progress are higher than the end of 2017

Reduced proportion of sales of old stock at lower prices during the year

African swine fever has a certain degree of impact on sales in the second half of the year

34.1

24.9

36.8

0

20

40

1H17 FY17 1H18 FY18

29.2 406.1 300.8

429.9 338.4

0

200

400

600

800

1H17 FY17 1H18 FY18

Cash and Bank Borrowings

Cash and cash equivalents together with the pledged deposits and time deposits amounted to RMB 719.9 million Total bank and other borrowings amounted to about RMB 82.7 million, which includes:

RMB 40.0 million denominated in Renminbi HKD 48.7 million denominated in Hong Kong Dollars (equivalent to RMB 42.7 million)

Net cash position of RMB 637.2 million, representing an increase of RMB 156.7 million Debt-to-equity ratio reduced to approx. 2.9% (6.7% as at 31 Dec 2017) Operating cash net inflow was RMB 282.1 million, decreased by 33.1%. In 2017, there were more cash net inflows, mainly due to the higher proportion of old inventories sold at lower prices in 2017, so the inventory in 2017 was significantly reduced.

Note: Debt-to-equity ratio was calculated by dividing total borrowings by the total equity

Product Diversification The Group was committed to facilitate the construction of an industrial chain featuring collagen technology as its core. During the Year, the Group continued to experience new advancement in product diversification.

For collagen food products, products such as collagen rice noodles, bovine collagen and collagen solid and liquid drinks developed by the Group were put into trial production, some of which were already sold in the market.

For collagen skincare products, certain new products in the series are undergoing trial production, particularly the collagen masks with “instrument” label (械字號) has achieved substantial progress.

For healthcare products, Ferguson (Wuhan) Biotech Company Limited carried out research and development of 21 new products including new nutrient softgel capsules for pregnant care, methylfolate tablets, new Ferguson nutrient softgel capsules for junior and iron supplements for pregnant care.

For collagen medical materials, “highly reactive collagen-based bone repairing biomaterials (高活性膠原基骨修復生物材料)” was tested for its product technical indicators. In addition, new products such as “sterile low endotoxinmedical collagen (低內毒素無菌醫療級膠原蛋白)” and “hydrophilic band-aids (親水性創口貼)” were under research and development.

3

Outlook A crucial year regarding the implementation of the “Thirteenth Five-Year Plan”.

Product research and development, production technologies and market expansion are increasingly mature. Coupled with national industrial policies and local development plans.

Centering on “principal business consolidation and new product launch” as its work priorities and endeavoring to stabilize and enhance product quality as well as to solidify its foothold in the collagen sausage casing market.

Promote the production and operation of collagen food products, skincare products and medicinal products, speed up the implementation of product diversification strategies and the transformation of the industry.

Strategy and Plan Increase efforts in the production, advertising and sales planning of collagen with rice noodles by fully

engaged in marketing activities in respect of e-commerce, micro commerce and agent sales.

Accelerate the research and development of solid collagen and liquid collagen drinks, improve process technologies, equipment and ancillary facilities.

For collagen skincare products, actively promote the construction of the collagen skincare product industry, finished the construction and production of the Singapore base, and spare no effort in advertising and sales planning.

Continue to be active in developing its collagen medical material segment. Strive for the clinical trial approval of highly reactive collagen-based bone repairing biomaterials (高活性膠原基骨修復生物材料) during 2019.

Will relocate Guangdong Victory and will speed Wuzhou Victory’s purchase of equipment.

Expected to receive the GMP production permit in the first half of 2019 and will commence the production of products including water-soluble collagen and hydrophilic band-aids (親水性傷口貼).

4

Slide Number 1Slide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20