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MarketScreener Homepage  >  Equities  >  SHENZHEN STOCK EXCHANGE  >  Henan Shuanghui Investment & Development    000895   CNE000000XM3

HENAN SHUANGHUI INVESTMENT & DEVELOPMENT

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Henan Shuanghui Investment & Development : Swine fever takes toll on profit at Chinese pork giant WH Group

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08/13/2019 | 07:11am EDT
People walk into an investment luncheon by WH Group Ltd. in Hong Kong

BEIJING (Reuters) - China's WH Group on Tuesday reported a 16.9% fall in first-half profit as higher meat prices due to a devastating hog disease hurt margins at the world's top pork processor.

Profit attributable to owners of the company, before biological fair value adjustments, came to $463 million compared with $557 million a year earlier, while operating profit fell 11.8% to $765 million.

African swine fever, which has swept across China over the past year, is fatal to pigs but does not harm people. China's pig herd - the world's largest - shrank 25.8% in June compared with the same month a year earlier due to the disease, while the sow herd shrank 26.7%, according to official data. Many believe losses are more than twice that number, however.

"We anticipate the greatest challenge in China is the continuously soaring hog prices as a result of growing supply shortages, which will push down our packaged meats margin," the company said in a statement.

Live pig prices have climbed strongly since mid-June and in some areas, such as populous Guangdong province in the south, they have doubled since April <JCI-HOG-GDONG> to almost 28 yuan ($3.96)a kg.

WH Group said that sales of packaged meats in China were flat as the consumer market slowed and the firm raised prices.

But operating profits from the segment declined substantially as pork and chicken costs rose, and the company spent more on marketing.

In Europe, higher costs also reduced the benefit from stronger sales but a push to higher value products in the United States saw a strong gain in profits.

Packaged meats make up more than half of the group's revenues, which came to $11.1 billion for the six months. The sector accounted for almost all of the operating profits.

Speaking to reporters, Ma Xiangjie, president of the group's China unit, Henan Shuanghui Investment and Development, said the company had raised prices three times during the first half.

It would continue to raise sales prices and introduce higher value products to offset high raw material prices that will continue into next year, he said.

He added that the pressure on China's farming and slaughtering sectors from African swine fever and the trade war offered the group opportunities for expansion. He did not give further details.

In China, the group slaughtered 8.58 million pigs in the first half, up 3.67% year-on-year, as it took advantage of relatively low hog prices earlier in the year.

But volumes were later constrained by the reduction in market supplies due to African swine fever and the softening in demand, it said.

Profits from fresh pork in the United States, where the group owns Smithfield Foods Inc, suffered from high hog prices, which were pushed up by expectations of strong demand from China, as well as by trade disruptions, it said.

(Reporting by Dominique Patton. Additional reporting by Kevin Liu in Hong Kong; Editing by Tom Hogue/Keith Weir)

Stocks mentioned in the article
ChangeLast1st jan.
HENAN SHUANGHUI INVESTMENT & DEVELOPMENT End-of-day quote.
WH GROUP LTD 2.74% 6.37 End-of-day quote.4.94%
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Financials (CNY)
Sales 2019 55 186 M
EBIT 2019 6 022 M
Net income 2019 4 812 M
Finance 2019 2 319 M
Yield 2019 6,05%
P/E ratio 2019 15,0x
P/E ratio 2020 14,3x
EV / Sales2019 1,27x
EV / Sales2020 1,10x
Capitalization 72 161 M
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 11
Average target price 26,59  CNY
Last Close Price 21,87  CNY
Spread / Highest target 60,0%
Spread / Average Target 21,6%
Spread / Lowest Target -3,98%
EPS Revisions
Managers
NameTitle
Xiang Jie Ma President
Long Wan Chairman
Yun Gong Hu Chairman-Supervisory Board
Song Tao Liu Chief Financial Officer & Executive Vice President
Mu You Director & Vice President
Sector and Competitors
1st jan.Capitalization (M$)
HENAN SHUANGHUI INVESTMENT & DEVELOPMENT10 259
TYSON FOODS64.53%32 041
HORMEL FOODS-2.88%22 096
JBS SA151.08%19 004
WH GROUP LTD4.94%11 604
BRF S.A.75.88%7 716