Chinese feed group sees drop in Q1 profit

By Jane Byrne contact

- Last updated on GMT

© istock
© istock
Chinese feed giant, New Hope Liuhe, reported a fall in first-quarter net profit as the country’s pig sector faces record low prices, according to Reuters.

The company said today that its Q1 revenue jumped by 1.3% to 14.8 billion (bn) yuan but it recorded a drop in its net profit for the period to 603.7 million yuan (US$95.3m).

New Hope Liuhe did not offer up any explanations for its Q1 decline. However, there have been noted challenges in the Asian pork business in the quarter, with prices still below average production cost.

The Chinese company specializes in feed, livestock breeding and raising and food processing. It operates across China and in 20 other countries and regions including Vietnam, the Philippines, Bangladesh, Indonesia, Cambodia, Sri Lanka, Singapore and Egypt.  

New Hope Liuhe's 2017 financial review, also released today, shows most of its revenue still comes from feed activities - feed sales took up 60% of its earnings last year, with that translating as 45.6bn yuan.

However, it reported that sales from its pig unit increased 70.5% to 3bn yuan last year, following on from investments and acquisitions in that division. It is looking to add more farms so as to produce a further 10 million pigs.

Its poultry division is under-performing, it added, coming in with an operating loss of 179m yuan last year, despite revenues growing 181% to 5.76 bn yuan.

Operating profit for the pig farming business was 438.9m yuan in 2017, while, in feed, profit hit 972m yuan.

New Hope Liuhe said it intends to boost overall production efficiency and it will set up a research institute to focus on feed development.

China US trade spat 

Earlier this month, Liu Yonghao, chairman and founder of New Hope Group, New Hope Liuhe's owner, said the subsidiary could easily ride out the current challenges arising from the trade dispute between the US and China, reported South China Morning Post.

The US is one of China’s main soybean suppliers but Beijing is planning to levy a 25% tariff on imports of US soybeans in retaliation for the Trump proposed tariffs on 1,300 Chinese goods in a spat over IP, technology and other trade related issues.

The New Hope chairman said the company and the whole of the Chinese feed industry could diversify its soybean sourcing, buying from Brazil, Argentina, the Middle East, Russia, India and South Africa. It could also use more corn, rapeseed meal, peanut, sunflower or even coconut meal in feed formulation to reduce its soybean meal needs.

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