February 7, 2023

 

Fengxiang: Short-lived listing for a major white feather broiler producer

An eFeedLink Hot Topic

 

Previously listed on the Hong Kong Stock Exchange in July 2020, Fengxiang was the second-largest fully integrated white feather broiler producer in China in 2019, with a market share of 3.1%.

 

The company was also the largest integrated white feather chicken exporter in China, with an export volume of 44,200 tonnes in 2018, accounting for 10.14% of the local market share.

 

However, Fengxiang, which was founded by Liu Xuejing in the early 1990s, changed hands after just two years of listing to the surprise of its founder and the market. Last October, it was announced that Falcon Holding LP acquired all 70.92% of Fengxiang's equity held by controlling shareholder GMK Holdings Group Co., Ltd. Falcon Holding would later acquire the rest of the shares and delist Fengxiang from the market.

 

Is Fengxiang's sudden downfall be attributed to the downturn of China's poultry industry? Indeed, it should be noted that as pork prices continued to soar in 2020, chicken prices began to plunge due to its short production cycle, dropping below production costs and resulting in severe losses for white feather broiler producers. However, this development does not fully explain the company's decline.

 

Another reason (linked to the sales of Fengxiang shares) was the rupture of the company's controlling shareholder funds.

 

In 2004, Liu Xuejing was not satisfied with being only a major player in broiler farming in China. Thus, he ventured into another business, using money earned from producing chickens to invest in the copper industry. Funds were put into establishing Xiangguang Copper, which later became the world's largest copper smelter. In 2009, Liu officially merged his broiler and copper businesses to form GMK Holdings Group Co., Ltd. Xiangguang Copper was singled out for precipitating the sales of Fengxiang's shares. Eventually, GMK's capital chain was rendered unsustainable, leading to the change of Fengxiang's controlling shareholder.

 

Today, Fengxiang struggles to maintain profitability. Its performance has been hampered by rising raw ingredients costs (particularly, the soaring prices of soybean meal), increased sales expenses and weak demand due to the pandemic.

 

Despite the unfortunate development in relation to its delisting, Fengxiang still holds promises in the white feather broiler market. As a matter of fact, in the first half of 2022, the company's processed chicken product revenue expanded by more than 20%.

 

- David Lin, eFeedLink