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China Pork Producer WH Group's Quarterly Profit Falls 7%

Published on Mar 16 2019 10:30 AM in Supply Chain tagged: Trending Posts / China / Pork / Trade War / WH Group

China Pork Producer WH Group's Quarterly Profit Falls 7%

China's WH Group said its fourth-quarter net profit fell 7% to $290 million (€256.43 million), as low pig prices in China and the Sino-US trade war hit the income of the world's top pork producer.

The decline, based on a comparison of nine-month and full-year numbers released on Friday, underlined challenges faced by pork producers around the world.

Net profit for 2018 came to $1.05 billion (€930 million), WH Group said, down 4% from the previous year. Revenue rose 1% in 2018 to $22.61 billion, it said in a statement.

WH Group, which owns US-based Smithfield Foods Inc, said average pork prices in the United States dropped 9% in 2018 due to higher supplies from an expanding slaughter sector.

Import Duty

Also, the China-US trade war has hit pork shipments between the two countries. In April, China slapped a 25% import duty on most US 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.

Speaking to reporters, WH Group chairman Wan Long said the group's pork shipments from Smithfield Foods to Shuanghui, its Chinese business, tumbled 45% last year due to the trade dispute.

Weak exports and expansion of output in the United States pushed down pig and pork prices, and hurt company profit, Wan added.

Impact Of Swine Fever

Lower pork prices in China due to an outbreak of severe African swine fever disease also hurt the competitiveness of US exports, WH Group said.

China is battling a fast-spreading epidemic of African swine fever. The disease has now spread to 28 provinces and regions since the first outbreak in August last year.

Pig prices in major production regions fell sharply late last year after a government ban on live hog transport restricted trade and caused oversupply.

But prices have started to recover in the past weeks, in early signs that the deadly African swine fever has slashed production in the world's largest pig herd.

The Ministry of Agriculture and Rural Affairs said on Friday that China's pig herd shrank 16.6% in February from the previous year due to the disease.

China made its biggest purchases of US pork in nearly two years last week, US Department of Agriculture data showed on Thursday, as Chinese hog prices surged higher.

Live hog prices in China hit a 14-month high this week.

Outlook

Pig prices in China are set to rise significantly in the second half of the year and next year, Ma Xiangjie, President of Shuanghui, told analysts.

Hong Kong-listed shares of WH Group are up more than 30% since the start of the year as the market expects higher pork prices in 2019 on reduced supplies.

WH Group will keep expanding its slaughtering capacity, the company added.

It will also increase US exports to China if the Sino-US trade issues can be resolved, Wan told reporters.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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