March 25, 2020
China-based WH Group reported 32% jump in 2019 profits
The world's biggest producer of pork said the surge in profits was due to record high pork prices in China, which increased its exports from the US and boosted its China sales margins, reported Reuters.
Wan Long, WH Group chairman said COVID-19 had not really affected operations and demand for pork, with 95% of the group's operations already resumed.
WH Group's profits totaled US$1.378 billion (before biological fair value adjustments), with revenues up 6.6% to US$24.1 billion. Last year, the group's profits were US$1.05 billion.
WH Group owns Smithfield Inc, a US-based meat processing company.
The group said its operations in China slowed because of poor swine supplies and lower demand after prices for swine increased. 13 million swine were processed in China by WH Group, a 19% drop compared to last year.
Packaged meat sales in China were flat on 2018 with low demand. This is the group's largest profit source.
On the other hand, the group reported a 46% rise in operating profit over its fresh swine business as it sold large frozen meat inventories during low prices and added more cheap swine imports from the US.
WH Group's operating profit from fresh pork in the US was up three times more compared to 2018 at US$150 million, with high performance in the latter half of 2019 as trade disruptions slowed.
Ma Xiangjie, president of Henan Shuanghui Investment and Development, WH Group's China unit said China's swine production and slaughter volume will drop in 2020, despite government efforts to boost domestic swine production.
He added that the company will boost US pork imports to supplement dwindling domestic supply. No specific targets were mentioned.
Wan Long, WH Group chairman said US imports to China has tripled in 2019 because of a huge price spread, adding that US swine prices are four times cheaper compared to China. He projects the huge price spread to stay at 3.5 times in the second half of 2020.
The group aims to expand its poultry output to make up for lower supplies and is currently constructing a combined farm and processing that has a 100 million chicken capacity. The integrated facility will be located in central Henan province.