(Adds detail, executives’ comments)
By Dominique Patton
BEIJING, Oct 30 (Reuters) - China’s WH Group Ltd said on Tuesday its third-quarter net profit plunged 31 percent to $199 million, as lower prices amid higher supplies and trade disputes dented the world’s top pork producer’s income in the United States.
The sharp decline, based on a comparison of first-half and nine-month numbers released on Tuesday, underlined challenges faced by the pork-producing sector.
WH Group, which owns U.S.-based Smithfield Foods Inc, said average pork prices in the United States dropped 11.9 percent in the first nine months of the year, due to higher supplies.
Escalating trade friction between Washington and some pork-importing nations also affected prices, the company said.
In April, China slapped a 25-percent import duty on most U.S. pork products in response to U.S. tariffs on Chinese steel and aluminium products. Pork products were also included in a second round of tariffs of 25 percent introduced in July.
The Sino-U.S. trade dispute sharply dented U.S. pork exports to China though sales to other markets have increased.
The company’s third-quarter net profit came in at $199 million, a sharp dive from $287 million a year ago. Revenue fell 3.75 percent year-on-year to $5.4 billion, according to calculations based on the nine-month statement.
Henan Shuanghui Investment and Development Co Ltd , the group’s Chinese business, reported a 1.6 percent rise in net profit for the quarter at 1.24 billion yuan ($178.14 million). Revenue fell 2.82 percent to 12.89 billion yuan.
Speaking to analysts, WH Group executives said pig prices in China are set to rise next year because of the rapid spread of African swine fever in the country’s pig herd.
The highly contagious disease has reached 13 provinces since early August, and measures to curb its spread have resulted in a shortage of supplies in some regions, pushing up prices, while other areas face a glut.
WH Group was forced to suspend operations at one of its slaughterhouses for six weeks from August after detecting African swine fever in pigs arriving from the northeast.
That led to a 6.6 million yuan loss, Ma Xiangjie, Shuanghui president, told analysts.
The overall impact from the disease is set to increase in 2019, he added, with the gap in prices between regions widening and prices higher than this year.
But the company will offset the impact by raising product pricing and expanding its range of higher margin products, said executives on the call, continuing a strategy already in place.
Smithfield Chief Executive Kenneth Sullivan said last week the disease could roil pork shipments worldwide next year.
In the United States, trade tensions have had “a significant psychological impact” on the market, Sullivan told analysts on Tuesday, which has hurt profits.
The firm is investing $200 million to automate processes at its U.S. fresh meat plants this year in a bid to lower costs and improve margins, he added.
Hong Kong-listed shares of WH Group have plunged more than 40 percent since Beijing first threatened to hit U.S. pork imports with tariffs.
The stock closed 0.36 percent higher at HKD5.62 per share on Tuesday.
$1 = 6.9609 Chinese yuan Reporting by Dominique Patton, Editing by Sherry Jacob-Phillips and Adrian Croft