The Standard & Poor's Ratings Services said Monday that it had assigned its 'BB' foreign currency corporate credit rating to Chinese mainland's Chaoda Modern Agriculture (Holdings) Ltd. (Chaoda). The outlook on the rating is stable.

The rating service said the rating reflects the company's leading position in the production and distribution of fresh produce in Chinese mainland, good geographical and product diversification, substantial growth potential and a good financial profile.

These strengths are balanced by the commodity nature of the country's fresh fruit and vegetable industry.

Chaoda is Chinese mainland's largest integrated vegetable and fruit producer and distributor, although it represents less than 1 percent of the market as a whole. With a production area of 11,028 hectares by Dec. 31, 2003, Chaoda's operations are geographically diverse operating from 36 production bases in 13 provinces and municipalities in eastern and southern China.

The company focuses on labor-intensive organic cultivation, which takes advantage of the country's low labor costs, and hires local farmers on a contract basis to produce vegetables and fruit to its own specifications, said the rating service.

Chaoda is one of the lowest cost producers in the world, and exports about one third of its produce. The company is also involved in livestock production, and supermarket and retail operations, although these businesses represent a small proportion of its total revenue. It is listed on the Hong Kong stock exchange and is controlled by Kwok Ho, who has a 45 percent stake in the company.

Chaoda has strong profitability with an operating margin of 50 percent in 2003. The company's margins are expected to decline as it expands its operations in lower margin supermarket businesses.

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