Image source @Visual China
Text | Radar Finance, Text | Li Yihui, Editor | Deep Sea
Wen’s shares, a big pig farmer, handed over a “transcript” of huge losses.
On April 15, Wen’s shares released its 2021 annual report. During the reporting period, the company’s operating income was 64.954 billion yuan, a year-on-year decrease of 13.31%; the net profit attributable to shareholders of listed companies was a loss of 13.404 billion yuan, compared with 7.426 billion yuan in the same period last year, A year-on-year decrease of 280.51%.
Flush IFind data shows that this is the first time since 2007 that Wen’s shares recorded a loss in its annual performance. Behind the deep losses, the main reason is that the rise in feed costs has aggravated the serious inversion between the cost of raising pigs and the price of live pigs. According to the financial report, in the past year, the average selling price of Wen’s wool pigs was 17.39 yuan/kg, a year-on-year decrease of 48.18%.
After the huge loss, the company’s 6-year dividend record will also be interrupted. In the annual report, Wen’s shares stated that the company plans not to distribute cash dividends, not to send bonus shares, and not to convert the provident fund to increase the share capital.
In addition, under the circumstance that the net cash flow generated by operating activities decreased by 90.95% year-on-year last year, in order to ensure the safety of operating cash flow, the company has suspended the production capacity of the newly built pig farm, and plans to use its own funds of no more than 7 billion yuan to carry out Entrusted financial management.
As for when the main business of pig farming can get out of the predicament, Wen’s Co., Ltd. judged that the price of live pigs began to enter a unilateral downward stage after January 2021. cycle bottom.
01 Behind the record losses
According to the financial report, Wen’s main business is the breeding and sales of broilers and pigs; it also engages in the breeding and sales of meat ducks, dairy cows, laying hens, pigeons, etc.
During the reporting period, the company’s main products were broiler chickens and hogs, and other products were meat ducks, eggs, raw milk and its dairy products, fresh meat and its processed products, farming and animal husbandry equipment, and veterinary drugs.
Among them, breeding accounts for the absolute majority. In 2021, the revenue of the breeding industry will be 62.545 billion yuan, accounting for 96.29%. Including the sales of 13.2174 million meat pigs (including wool pigs and fresh products), accounting for about 2% of the national slaughter of live pigs; the sales of 1.101 billion broiler chickens, accounting for about 11% of the total national slaughter of yellow-feather chickens and white-feather chickens.
In addition, the dairy industry contributed sales revenue of 1.062 billion yuan, accounting for 1.64%; the revenue of other industries such as veterinary drugs, meat products and equipment manufacturing was less than 1 billion yuan.
Specific to the breeding industry, which accounts for the majority of revenue, broiler products and meat pig products have the most obvious driving effect on Wen’s performance. In 2021, the revenue of the two will be 30.328 billion yuan and 29.494 billion yuan respectively, accounting for the proportion of operating income. were 46.69% and 45.41%.
Although in terms of sales volume, the annual sales of broilers and hogs have increased by 4.76% and 38.47% respectively, but the price of hogs has dropped by nearly half, causing the company’s annual revenue to drop by 13.31%, and the net profit has also declined. The first loss since going public in 2015.
The financial report summarizes these influencing factors into three aspects:
First, during the reporting period, the company’s average selling price of wool pigs was 17.39 yuan/kg, a year-on-year decrease of 48.18%. At the same time, due to the continuous increase in the price of feed raw materials, the company’s outsourcing of part of the piglets for fattening, and the continuous promotion of the optimization of breeding pigs, etc., the company’s pig breeding business profit fell sharply year-on-year, and the meat pig breeding business suffered deep losses.
Second, the broiler market has improved, and the company’s poultry production has achieved good results. During the reporting period, the company’s average sales price of feather chicken was 13.20 yuan/kg, a year-on-year increase of 13.50%. Although the continuous rise in the price of feed raw materials has raised the cost of breeding, the company’s chicken industry production performance has maintained a high level in the company’s history for many consecutive months, and the overall profitability has been achieved. However, the profit of the company’s chicken farming business only made up for part of the loss in the pig farming business.
Although the company promoted the implementation of alternative plans for corn and soybean meal reduction in order to reduce the procurement cost of feed raw materials, excluding changes in nutrient levels and raw material prices, the formula cost of pigs, chickens and ducks was reduced by more than 120 yuan/ton during the reporting period. However, the gross profit margin of the pork business last year was only -30.39% and that of the chicken business was 9.00%. Compared with the previous year, the changes between the two were a decrease of 60.97% and an increase of 8.62%.
Third, during the reporting period, the company amortized equity incentive expenses of 495 million yuan in accordance with the relevant regulations and requirements of the Accounting Standards for Business Enterprises; provision for impairment of about 2 billion yuan was made for the consumable biological assets and productive biological assets currently in stock. Among them, the impairment of breeding pigs was 1.907 billion yuan.
Mainly due to factors such as the high cost of purchasing breeding pigs in the early stage and the low utilization rate of breeding pigs affected by the epidemic, the book value was high, and the estimated recoverable amount was small, so a large amount of biological asset impairment provision was required. At the same time, the company increased financing in response to the downturn in the industry, and financial expenses increased significantly year-on-year.
Wen’s shares said that last year, the net profit of most listed companies in the same industry attributable to shareholders of listed companies fell by more than 50% year-on-year or suffered large losses. The company’s net profit fell by 280.51%. In line with the development of the industry.
02 Asset-liability ratio hit a record high
Industry insiders believe that under severe losses, pig producers need to be alert to cash flow pressures.
Radar Finance noticed that Zhengbang Technology, the king of losses in the industry, has sounded the “alarm” of cash flow.
On the evening of April 14, Zhengbang Technology responded to the letter of concern from the Shenzhen Stock Exchange, saying that if the idle raised funds totaling 3.542 billion yuan were returned to the special account for raised funds at one time, the collection of funds during the period would result in more financial expenses. , In this cold winter, it will also have a certain impact on the company’s current production and operation.
Previously, the company’s performance forecast showed that the loss in 2021 will be 18.2 billion yuan to 19.7 billion yuan, a decrease of 416.84%-442.96% compared with the same period of the previous year.
The company pointed out that during the reporting period, 14.9267 million live pigs were sold, a year-on-year increase of 56.14%. Due to the decline in the domestic live pig market price, the company’s average sales price per head was 16.60 yuan/kg, a year-on-year decrease of 16.10 yuan/kg, and the single head income fell by 1,653 yuan. The increase in sales combined with the decline in sales prices affected the profit of 8.873 billion yuan.
Judging from the third quarterly report in 2021, the monetary funds on Zhengbang Technology’s account are only 6.070 billion yuan. During the same period, the company’s current liabilities were as high as 30.474 billion yuan, including short-term loans of 13.993 billion yuan, notes payable and accounts payable of 5.06 billion yuan.
Funds are tight. In addition to occupying the raised investment funds of previous projects over time, Zhengbang Technology also intends to sell several feed companies to Dabeinong, and is expected to recover 2 billion to 2.5 billion yuan in cash. The cash flow of the company’s controlling shareholder, Zhengbang Group, has also been tested. On the evening of April 15, an announcement showed that the 11.75 million shares held by Zhengbang Group had been judicially frozen.
Wen’s annual report shows that the net cash flow generated by the company’s operating activities in 2021 will be 766 million yuan, and it will be 8.465 billion yuan in 2020, a year-on-year decrease of 90.95%. Mainly due to the sharp drop in the price of live pigs, the increase in the stock of pork and the increase in the purchase price of feed raw materials.
On the contrary, the company increased debt financing, and the net cash flow from financing activities increased by 257.76% year-on-year. This has also led to a sharp surge in the asset-liability ratio of Wen’s shares, rising from 40.88% in 2020 to 64.1% in 2021, while this indicator was only 28.9% in 2019, and it has never exceeded 50% in history.
In terms of liquidity, as of the end of the reporting period, the company’s monetary funds were 7.633 billion yuan, and short-term borrowings were 1.757 billion yuan, but bills payable and accounts payable were 6.772 billion yuan, of which the accounts payable aged within one year was 3.161 billion yuan.
According to the financial report, since January 2021, the price of live pigs will drop rapidly from about 36 yuan/kg, and the minimum will fall below 10 yuan/kg. In order to ensure the safety of the company’s operating cash flow, the company decisively suspends the production capacity of new pig breeding farms to live within their means. At the same time, actively expand financing channels and prepare for “winter” funds.
In addition, in view of the fact that the distributable profit realized by the company in 2021 is negative, and considering the company’s future business development needs, the company has decided not to distribute cash dividends or bonus shares in 2021. Move to the next year. According to iFinD, the company’s 6-year dividend record since its listing will also end.
However, from the perspective of the industry, in the context of falling pork prices, there are still pig companies that “bet” production capacity against the trend. On April 11, Tang Renshen announced that the proposed increase of no more than 1.22 billion yuan will be used for pig breeding projects and supplementary liquidity.
According to statistics, 9 A-share listed pig raising companies, including Muyuan, Aonong Bio, and New Hope, will target a total of 98.829 million slaughtered pigs this year, an increase of 30% over the 2021 slaughter volume.
However, an analyst in the agriculture, forestry, animal husbandry and fishery sector reminded that behind the expansion of production capacity, the cash flow strength of hog companies is more tested. For a farm, the stable operation of cash flow is the key to ensuring its smooth operation.
03 When will the performance reversal come?
The losses of Wen’s Co., Ltd. and Zhengbang Technology are not an exception.
According to the performance forecast, New Hope expects a loss of 8.6 billion to 9.6 billion yuan in 2021, compared with a profit of 4.944 billion yuan in the same period last year; Tianbang Co., Ltd. is expected to lose 3.5 billion to 4 billion yuan, compared with a profit of 3.24 billion yuan in the same period last year.
When the industry has turned losses on a large scale, when will the “pig cycle” bottom out? Wen’s Co., Ltd. said that the price of live pigs will fluctuate at a high level in 2020. After January 2021, the price of live pigs will enter a unilateral downward phase. In October, the price of live pigs will hit a new low, and by the end of this reporting period, it will start to drop again, and it is still at the bottom of the cycle. .
Statistics support this judgment. According to the monitoring of the Ministry of Agriculture and Rural Affairs, from April 4th to 10th, 2022, the average purchase price of live pigs in designated pig slaughtering enterprises above designated size nationwide was 13.82 yuan/kg, an increase of 0.6% month-on-month and a year-on-year decrease of 42.7%. The average ex-factory price of white strips was 18.52 yuan/kg, up 0.3% month-on-month and down 40.9% year-on-year.
However, due to financial pressure or bearishness on the future market, pig companies have increased their slaughter volume. From the data disclosed in March, the sales of Jinxinnong’s live pigs increased by 192.77% month-on-month, Wen’s sales increased by 35.49% month-on-month, New Hope’s sales increased by 46% month-on-month, Tianbang’s sales increased by 17.20% month-on-month, and Zhengbang Technology’s sales increased by 93.36% month-on-month .
Tianfeng Futures recently stated in a report that while the number of live pigs to slaughter increased in March, the inventory data at the end of March remained high; the current piglet production data may imply that the total number of live pigs to slaughter in April and May will be similar to that in February and March. The month is quite the same; the pressure of slaughtering in the third quarter of this year is still not to be underestimated.
In addition to supply and demand factors, pig companies also have to face cost pressures. Since 2022, feed prices have continued to rise, resulting in further increases in breeding costs, and farmers are caught in a double-sided squeeze.
It is understood that the cost of feed accounts for 75% of the cost of breeding, and 60% to 70% of the feed is corn. my country’s imported corn is mainly used for feed processing. Due to the lack of corn in my country, it is highly dependent on the import of raw materials.
In 2021, my country will import 19.83 million tons of corn from the United States, accounting for 70% of the total imports; 8.24 million tons will be imported from Ukraine, accounting for 29.07%. Some analysts believe that the escalation of the situation in Russia and Ukraine has begun to have an impact on the international agricultural trade pattern, which may push up international food prices.
Pacific Securities previously pointed out that rough estimates show that the current unit cost of raising pigs is 1 yuan/kg higher than that before the Spring Festival, an increase of about 7%. Pacific Securities believes that under the dual influence of rising costs and low pig prices, the industry continues to suffer substantial losses and the capital chain is further strained.
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