SHENZHEN, China, Jan. 25, 2006 (PRIMEZONE) -- New Dragon Asia Corp. (AMEX:NWD) today announced it has signed a definitive agreement to acquire a company which controls a state-owned noodle manufacturing facility in Chengdu, Sichuan Province, for approximately $3.3 million. The acquisition, which is expected to close mid-February, 2006, is subject to the completion of due diligence and the satisfaction of certain customary closing conditions.
The facility occupies approximately 386,661 square feet. New Dragon Asia intends to upgrade the facility with new machinery and four new production lines, expanding its overall output by one-third with additional annual production capacity of 360 million packages of instant noodles. The company expects production at this facility will commence in the second quarter of 2006, assuming the upgrade of facilities goes according to plan.
"This acquisition in the Western region of China complements the company's existing presence in Eastern and Northern China and its strategic initiative to ultimately establish a cornerstone in four geographic regions of the country," said Li Xia Wang, chief executive officer of New Dragon Asia.
She noted that the acquisition will enable New Dragon Asia to transfer a portion of its domestic instant noodle production requirements currently served by the company's Shandong facility to the Chengdu facility. Wang added that this production shift will enable New Dragon Asia to then utilize more of its production capacity generated from the Shandong facility to meet export sales demand, which generates higher margins and provides the benefit of tax refunds available to the company through Shandong Xinlongya Distribution Company Ltd., an export operation that it acquired in December 2005.
Chengdu has a population of approximately 11 million people. It is located in Sichuan Province, a region with an estimated 83 million people.
Wang said a portion of proceeds derived from a recently completed private placement will be utilized to fund the Chengdu acquisition.
About The Company
New Dragon Asia Corp. is engaged in the milling, sale and distribution of flour and related products, including instant noodles and soybean-derived products, to retail and commercial customers throughout China. New Dragon Asia markets its well-established product line through a network of more than 200 key distributors and 16 regional offices in 27 Chinese provinces with an aggregate production capacity of approximately 110,000 tons of flour and more than 1.1 billion packages of instant noodles.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the company's operations and financial performance, condition and success of its acquisition program. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products and pricing; changes in consumer preferences and tastes or perceptions of health-related issues; effectiveness of advertising or market-spending programs; changes in laws and regulations; fluctuations in costs of production, foreign exchange and interest rates; and other factors as those discussed in New Dragon Asia Corp.'s reports filed with the Securities and Exchange Commission from time to time.