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Swine fever takes toll on profit at Chinese pork giant WH Group

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Christian Fernsby ▼ | August 13, 2019
China's WH Group on Tuesday reported a 16.9% fall in first-half profit as higher meat prices due to a devastating hog disease hurt margins at the world's top pork processor.
WH Group
WH Group   Profit attributable came to $463 million
Profit attributable to owners of the company, before biological fair value adjustments, came to $463 million compared with $557 million a year earlier, while operating profit fell 11.8% to $765 million.

Topics: WH Group

African swine fever, which has swept across China over the past year, is fatal to pigs but does not harm people. China's pig herd shrank 25.8% in June compared with the same month a year earlier due to the disease, while the sow herd shrank 26.7%, according to official data. Many believe losses are more than twice that number, however.

"We anticipate the greatest challenge in China is the continuously soaring hog prices as a result of growing supply shortages, which will push down our packaged meats margin," the company said in a statement.

Live pig prices have climbed strongly since mid-June and in some areas, such as populous Guangdong province in the south, they have doubled since April to almost 28 yuan ($3.96)a kg.

WH Group said that sales of packaged meats in China were flat as the consumer market slowed and the firm raised prices.

But operating profits from the segment declined substantially as pork and chicken costs rose, and the company spent more on marketing.

In Europe, higher costs also reduced the benefit from stronger sales but a push to higher value products in the United States saw a strong gain in profits.

Packaged meats make up more than half of the group's revenues, which came to $11.1 billion for the six months. The sector accounted for almost all of the operating profits.