March 26, 2011

 

Shineway suffers up to US$3billion losses on pork scandal 

 

 

Shineway Group is estimated to have incurred losses totalling US$3 billion - almost 25% of annual revenue, after being exposed for its use of clenbuterol-contaminated pork in meat products.

 

About 2,000 tonnes of the company's meat products have been removed from store shelves after a state television programme revealed that Shineway Group, China's biggest meat producer, was one of several companies found to be using pigs fed with clenbuterol hydrochloride, a banned drug used to stimulate growth of leaner meat. 

 

Shineway's shares dropped by the 10% daily limit following the revelation and were suspended from trading on March 15. The clenbuterol affair also created problems for other meat producers such as Zhongpin, which fell to a year low of US$14 following the news. Investors should give Shineway a wide berth as negative sentiment is likely to continue to weigh on its sales figures and its stock price (once it resumes trading).

 

Since the 2008 tainted milk scandal, Chinese consumers are more wary than ever over food safety so Shineway faces an uphill battle to earn back customers' trust.