BEIJING (Reuters) - Chinese feed and pig producer New Hope Liuhe warned on Friday it could suffer first-half losses as the country’s pig industry grapples with prices at multi-year lows.
The company reported a 5.5 percent fall in first-quarter net profit to 603.7 million yuan ($95.3 million) even as revenue increased by 1.3 percent to 14.8 billion yuan.
It did not give a reason for the profit warning, but hog prices registered one of the sharpest ever declines in the first quarter and are still below average production cost.
Liuhe has expanded production rapidly in the past two years, with current capacity of 14.8 million head, making it one of the country’s largest pig farmers.
While it still made about 60 percent of its income from animal feed last year, amounting to 45.6 billion yuan, sales from its pig operation grew by 70.5 percent to 3 billion yuan, it said in its 2017 earnings report released on Friday.
That came as it doubled the number of pigs sold to 2.4 million after boosting capacity through new farms and acquisitions.
It plans to start operating new projects to produce another 950,000 pigs this year and is ready to break ground on more farms that would produce a further 10 million pigs, the company said.
New Hope Liuhe added that it would counter falling prices by increasing production efficiency in all operations and would set up a research institute to focus on types of feed.
The company’s poultry unit is also weighing on profit, recording an operating loss of 179 million yuan in 2017, even as revenues increased by 181 percent to 5.76 billion yuan.
Operating profit for the pig farming unit was 438.9 million yuan in 2017, while profit from feed reached 972 million yuan.
Total full-year net profit fell 7.7 percent to 2.3 billion yuan.
A breakdown for individual units was not included in the first-quarter report.
($1 = 6.3363 Chinese yuan renminbi)
Reporting by Dominique Patton