Leading poultry player Shandong Minhe Animal Husbandry Co has turned in a strong first quarter with profits of RMB60 million a marked improvement on a RMB41.77m loss in the same period last year. The company lost RMB132m in 2015, having made a profit of RMB62.69m the previous year.
Demand for poultry is rebounding in China after several difficult years for the industry, due to diseases like bird flu and food safety scandals. Focused on poultry and beef, Shandong Yisheng Livestock & Poultry Breeding Co has told investors its profit for the first three months will be RMB78m-RMB88m – Yisheng lost RMB63.35m in the same period last year. “Sales of our key products increased in the first quarter,” stated the firm in a note to investors, who will no doubt be relieved given the firm made a loss of RMB233m last year, down from a RMB23.5m profit in 2014.
China’s pork firms are also reporting good news. The share prices of livestock companies have risen in line with rising prices for live pigs, which were up 60% year on year to RMB20/kg on 22 March, according to a Ministry of Agriculture survey, reported by national broadcaster China Central TV – which also reported prices for one-month old piglets meanwhile trebled due to high demand. Among the firms in favour with stock pickers in Shanghai is pig breeding firm Jiangxi Zhengbang Technology, which has announced its March hog sales jumped 44.1% to RMB318m. Its share price is at a six-month high at RMB19.17.
Hog prices rise 8.5%
Higher prices for hogs were cited by Muyuan Foodstuff Co for a flagging a net profit for the first quarter ranging from RMB355m to RMB375m – compared to a loss of RMB20.19m in the same period last year. Another major pig-breeding firm Chuying Agro-pastoral Group Co has told its investors it expects to make a net profit of up to RMB110m for the first three months of 2016, having made a loss of RMB87.7m in the same period last year. Chuying processes in-house, but also supplies piglets and hogs to other pig fattening/processing companies.
A major pork processor, Shandong Longda Meat Foodstuff Co, has announced average selling prices for hogs rose 8.5% in the January-February period compared to average December prices. Meanwhile, the mainland China-listed arm of WH Group, Henan Shuanghui Investment & Development Co, has announced its net profit rose 5.3% year on year in 2015 to RMB4.3bn.
Meat firms hit with debt
While China’s hog prices have been notoriously cyclical over the past decade, the current rebound in prices has drawn some of the country’s largest conglomerates to invest in pigs. New Hope Liuhe Group, China’s largest animal feed maker, recently announced an RMB8.8bn investment to raise its hog breeding capacity to 10 million head by 2020. Also investing is Guangdong Wen’s Foodstuffs Group, which is adding several million head as part of a bid to diversify away from feed into fresh meat processing.
While the current rise in prices has cheered investors, it should be noted that many Chinese meat companies – like corporations in other sectors of the Chinese economy – are heavily indebted and have a patchy record of profitability. Shares of leading poultry player Henan Huaying Agricultural Development Co, for instance, trade with a price-to-earnings ratio of 109. Another leading pork processor, Jinzhi Ham Co, has a price-to-earnings ratio of 250.