China's poultry, pig businesses grow sales

Domestic broiler chickens are big business for China

China’s ban on breeding birds from France and the US is boosting revenue and profitability at domestic poultry firms.

Leading poultry producer Shennong (also known as Sunner Development Group) reported revenue of CNY8.34 billion, up 20.1% year on year, while net profit, at RMB6.79bn, was up 275% year on year – albeit from a low base, given the firm made a loss in 2015. The firm attributed its performance to the squeeze in the number of white-feathered broilers as well as a “rise in average prices for chicken products”.

Shennong pointed to two projects in the Nanping region of Fujian – the firm’s home province – which came online in 2016 and increased its output by 14.4%.

Another key poultry producer Shandong Yisheng Livestock & Poultry Breeding Co is similarly crediting a 240% increase in profitability to the ban on imported breeders. This is “pushing prices up”, according to the company’s annual report. Yisheng saw revenues rise 166% to RMB1.61bn, while profits hit RMB560m – up 240%, although this is compared to a loss of RMB400m in 2015.

Lower feed prices

Pork producers continued to ride the wave of rising prices for pigs, but lower prices for feed also appeared to have helped, particularly on the breeding side of the industry. A leading producer of finishing pigs and piglets, Chuying Agro-Pastoral Group increased its revenues by 66.1% to RMB6.01bn in 2016, while net profits soared by 311% to RMB907m.

A “very good” market for live pigs saw a 90% rise in profits from the firm’s breeding business, while gross profits for breeding rose by 183%, according to the company’s annual report. The average price for finisher pigs rose by 52.8% in 2016, according to Chuying. It also appears that pork meat prices rose sharply in 2016, with Chuying claiming its fresh food division increased its revenue and profits by 33% and 297% respectively.
Focused on pig breeding, the Tian Zhao group – listed on China’s New Third Board, a special stock exchange for medium-sized firms – is crediting a fall in feed prices, combined with higher pig prices, for a 73% year-on-year rise in revenues, which totalled RMB320m in 2016.

Pig feed opportunities
Meanwhile, feed firms are reporting weaker – if still solid – figures for 2016 compared to the stratospheric figures reported by pig breeders and processors. Jin Xin Nong Co, which claims to be the leader in nutrition products for the pig sector, reported an 11.6% rise in revenues, to RMB2.79bn and profits of RMB181m, up 37.8% year on year. The firm’s annual report points to major shifts in the sector, with an exit of smaller-scale pig farmers. “This will create opportunities for large companies like ours if we can compete on advanced technology to supply a more integrated industry,” according to the company’s annual report.

A producer of feed and pigs, Tangrenshen Group Co is reporting revenue at RMB10.9bn, up 16.3% on 2015, while net profits, at RMB202m, rose by 147%. Feed sales rose by 30%, while an effort to adjust the product mix to “high quality-to-price ratio” has boosted revenue, according to the firm’s annual report, which also points out it has adjusted the amount of piglet feed from 10% to 15% of total output.
Among the smaller pork firms, Tian Zhao Zhu Ye Co, listed on the New Third Board, is projecting profits of RMB120m-RMB140m on revenues of RMB320m-RMB350m.

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