Shuanghui Group '08 net profit up 24 percent

Henan Shuanghui Investment & Development Co (HSIDC), the listed arm of China's biggest meat processor Shuanghui Group, posted a 24 percent increase in 2008 net profit on Thursday (Mar 19), thanks to robust meat sales and improved inventory control and production management.

 

According to HSIDC, net income rose to RMB699 million, or RMB1.15 per share, while sales climbed 19 percent from a year ago to RMB26 billion.

 

The company said the shift from soaring live pig prices, which hit a record high in the first half of last year, to the slack demand for meat products in the second half caused by the economic slump "exerted great pressure on the business".

 

The company, based in Central China's Henan province, slaughtered 3.17 million live pigs last year, down 16.36 percent from a year earlier, while its processed meat products totalled 834,000 tonnes.

 

The company said improved inventory management and measures such as energy-saving and joint bulk procurement helped the company reduce negative impact on its business performance last year.

 

Shares of Shuanghui Investment on Thursday (Mar 19) climbed 2.43 percent to close at RMB32 in Shenzhen trading.

 

Analyst Peng Danxue said the results are generally in line with their estimates and the company is likely to maintain such dynamic growth momentum this year.

 

Peng said falling pork prices and rising meat sales will drive Shuanghui's business performance this year as its main profit stream comes from its frozen meat products.

 

The meat processor, in which US bank Goldman Sachs and Cayman Islands-registered CDH Investment have a combined 51.45 percent stake, said it will spend RMB300 million to expand its frozen meat production capacity and projects.

 

According to the China Meat Association (CMA), meat production is expected to register 3 percent to 5 percent annual growth until 2010.

 

CMA also said the total number of live pigs is forecast to reach 730 million next year and meat output will amount to 87 million tonnes, of which 14 million will be processed, adding that Shuanghui will eye both domestic and international markets and improve its product mix to maintain its leading position in the country.

 

Shuanghui said it will spend almost RMB3 billion on acquisitions and expansion this year as the financial stifles affect operations of smaller rivals.

 

Shuanghui chairman Wan Long said the investment which is 50 percent more than last year, will be used to build or acquire slaughterhouses and meat-processing plants.

 

Wan said the cheaper price of pork which has plunged by about 40 percent from a record high last year, should spur consumption again.

 

According to data shown by the Ministry of Agriculture, the number of pigs slaughtered in China last year rose 7.6 percent from a year ago to 608 million head, while stocks as of December had increased 5.2 percent from a year ago to 463 million.

 

The chairman said Shuanghui's full-year profit may rise by 52 percent to RMB3.2 billion this year because of lower production costs while sales may grow to RMB40 billion from RMB35 billion last year.

 

He also said that the company's sales may jump to RMB50 billion in 2010, and will sell 3 million tonnes of meat products this year, compared with 2.5 million last year.

 

US$1 = RMB50.47 (Mar 20)