News... Discloses Fire at Beijing Facility
Miyun County, Beijing, China, May 31, 2007— Millennium Quest, Inc. (OTC Bulletin Board: MLQT.OB, the “Company”), a leading China-based food processing company engaging in the development, manufacture and sale of food products worldwide, disclosed that there was a fire at the manufacturing facility of one of its four operating subsidiaries, Beijing Green Foodstuff Co., Ltd. (“Beijing Lorain”) located in Miyun County, Beijing on May 26, 2007. Management estimates that the fire caused around 6.5 million RMB (approximately $850,000) in damage, calculated based on the historical book value of the property damaged. The main equipment and production buildings survived the fire. The production at this facility is being re-assigned to the Company’s other production facilities such that the loss of production as a result of the fire is limited.
The fire consumed around 2,000 square meters of production space having a book value of approximately of 5 million RMB (approximately, $654,000), and equipment that was worth approximately 1.5 million RMB (approximately, $196,000) on the Company’s books. The cost to rebuild the portion of the Beijing production facility that was damaged by fire will be around 10 million RMB (approximately, $1,307,000). The local government of Miyun County has indicated that it plans to subsidize 2 to 3 million RMB (approximately, $260,000 to $392,000) of the cost of rebuilding the facility. The Company does not have any insurance covering this loss. Accordingly, the Company will have to make a cash payment of 7 to 8 million RMB (approximately, $915,630 to $1,047,000) after the subsidy to rebuild the facility. Additionally, the Company estimates an approximate 5 million RMB (approximately $652,000) loss of revenue and a 2 to 3 million RMB (approximately, $260,000 to $392,000) impact on net profits this year, each from not being able to use the facility during the reconstruction.
Chestnut production is not in its peak season and the fire only resulted in a partial suspension of Beijing Lorain’s production capacity. The Company continues to produce frozen vegetables at its Beijing facility, except for frozen peas, the production of which was outsourced to the third party in Beijing. Production of the Company’s ready to cook pork chop soup and chestnut products using specialized Nitrogen processing technology has been re-assigned to other Company production facilities in Shandong. Management believes that the Beijing facility will be able to resume normal production no later than July 5.
“The fire was apparently the result of a short circuit. Fortunately, no lives were endangered in the fire. As a result of the fire and our concern for similar unforeseen events, we now plan to have all the factories insured as soon as possible.” said the CEO Mr. Si Chen, “Although the fire has reduced our production capacity from the Beijing facility, production there has not been totally suspended and we have been able to re-assign production to our other facilities such that the reduction in production is insignificant. We do not believe that the fire will materially impact our net profit targets for this year.”
