April 29, 2019 / 10:39 AM / 5 months ago

China pork producer WH Group quarterly profit falls 21 percent

BEIJING (Reuters) - Chinese pork producer WH Group on Monday report a 21 percent fall in first-quarter attributable profit, dragged down by weak fresh pork prices in all markets and lower sales volumes in the United States.

FILE PHOTO: Workers sort cuts of fresh pork in a processing plant of pork producer WH Group in Zhengzhou, Henan province China, November 24, 2017. Picture taken through glass. REUTERS/Dominique Patton/File Photo

Higher raw material and other costs in China and oversupply in the U.S. hog market hurt overall profits, said the company, the world’s largest pork producer. The average hog price in the United States decreased 17 percent in the quarter versus the same period last year.

WH Group said attributable profit, before biological fair value adjustments, decreased by 21.3 percent to $196 million while operating profit fell by 10 percent to $341 million.

The group, which owns U.S.-based Smithfield Foods Inc, said a later Easter holiday compared with last year undermined sales of packaged meats in the U.S., and exchange rates in China also hit revenue that came in at $5.28 billion, a 6 percent fall.

Oversupply and weak prices in the U.S. and Europe pushed operating losses in hog production to $168 million from $13 million in the quarter, it said.

The group’s Chinese unit, Henan Shuanghui Investment and Development Co Ltd, however, said in a separate announcement on Monday its net profit in the first quarter rose 20.3 percent to 1.28 billion yuan ($190.16 million).

Shuanghui slaughtered 4.7 million pigs in the reported period, about a fifth more compared to a year earlier, as the firm took advantage of relatively low hog prices before China’s Lunar New Year holiday in February and the impact of African swine fever, a deadly disease that has swept across the country.

Hog prices were under pressure earlier this year as measures to tackle an outbreak of African swine fever, a deadly disease that swept across China, led to a build-up in inventory in many parts of the country.

But WH Group also said that external sales volumes of fresh pork in the quarter were stable at about 1.1 million tonnes.

The company did not comment on the potential impact of rising raw material prices.

African swine fever, which is fatal to pigs but does not harm people, has caused huge losses in the world’s largest hog herd, pushing up the price of live hogs since March.

Prices in China could jump by 70 percent in the second half of the year, said an agriculture ministry official earlier this month.

Rising pork prices are also expected to pressure major overseas processors such as Hormel Foods Corp, as surging imports from China drive up global prices.

Reporting by Dominique Patton; Editing by Shounak Dasgupta and Emelia Sithole-Matarise

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