May 19, 2009

Zhongpin Inc, a leading meat and food processing company in China, reiterated its 2009 outlook and said pork prices are expected to pick up later this year due to a market correction and government initiatives.

Food prices, especially meat and poultry, have been declining since 2008 in China and the downward trend accelerated in recent months, slashing the profits of meat processors across the country.

Ben Baoke, executive vice president of Zhongpin, said the company had no plans to change its annual outlook as pork prices were expected to recover soon as the market had seen some positive signs. In February, Zhongpin said its revenue in the 2009 fiscal year would range between US$780 million and US$810 million.

China's pork prices started to rise in 2007, prompting more farmers to raise hogs, which led to the disparity in the supply-demand curve this year.

Meanwhile, the Ministry of Commerce announced Friday (May 15) that if the need arises, the government would purchase pork reserves to balance the country's supply and demand situation.

Ben forecasted that pork prices will recover to a level equal or slightly higher than that of last October by the end of this year.

Zhongpin's net profit for the first quarter reached US$9.74 million, an on-year increase of 33.6 percent. The company's revenue rose 41.5 percent to US$153.8 million.

Ben said the latest outbreak of AH1N1 flu had initially hit Zhongpin's sales hard but sales recovered quickly after people realised pigs were not the cause of the virus. He added that the flu outbreak will not affect China's pork sales in the long run as the traditional structure of pork accounting for two-thirds of meat consumption in China will not change.