February 10, 2022

Chinese swine producer Zhengbang inks deal to boost cashflow

China's second biggest swine producer, Jiangxi Zhengbang Technology, has signed an agreement with Jiangxi Railway Aviation Investment worth US$1.6 billion that it says will increase cashflow, Reuters reported.

Zhengbang's stock declined after it warned of heavy earnings losses on January 29, 2022. The company said in its Wechat account that the investment group has plenty of funds and the agreement will ease pressure on Zhengbang's funding requirements and manage its downturn in the market.

Jiangxi Railway has bought CNY 80 million (~US$2.6 million; CNY 1 = US$0.16) in livestock feed for Zhengbang and will continue to purchase feed and other products.

The agreement also includes a joint venture comprising of rural revitalisation and supply chain management.

China's live swine prices have fallen below cost to CNY 12.1 (~US$3.32) per kg. Analysts are projecting low prices until the second half of this year.

According to data from Refinitiv, Zhengbang's ratio of total debt to enterprise value is more than three times of competitors Wens Foodstuff Group and New Hope Liuhe.

On the same announcement by Zhengbang on January 29, the company said it has been badly affected by declining prices and the loss of over 2 million sows because of diseases and cost-cutting measures, even though the company increased its sales by 56% to almost 15 million swine in 2021.

-      Reuters