HONG KONG – WH Group Ltd., parent company of Smithfield Foods Inc., reported a 16.9 percent decrease in first-half profit due in part to rising hog prices and the spread of African Swine Fever (ASF) in the Chinese market.
The company said that six-month net profit before biological fair value adjustments were at $463 million compared to $557 million in 2018. Operating profits fell 11.8 percent from $867 million to $765 million this year. WH Group stated that operating profits account for 52.9 percent of the revenue.
WH Group saw total revenue move to $11.3 billion, which is down 0.4 percent.
ASF has devasted the China pork market over the last year. According to statistics by the Ministry of Agriculture and Rural Affairs of the People’s Republic of China, hog inventory has decreased 25.8 percent and breeding sows were reduced by 26.7 percent. Along with ASF, the ongoing tariff disputes with the US will affect the bottom line.
“We anticipate the greatest challenge in China is the continuously soaring hog prices as a result of growing supply shortage which will push down our packaged meats margin,” the company said in a statement. “The greatest challenge in the US is the on-going over-abundant supply of meats which will suppress our fresh pork profitability.”
The group reported packaged meats revenue remaining flat with a 0.3 percent decrease. WH said it was due to consumer market slow down and raised prices. The company also said that the cost of raw material for pork and chicken continued to rise, which led to higher investment in promotions and marketing.
However, the company showed some sales volume increase in packaged meats in Europe, giving the company some bright spots for the beginning of 2019.
“We work diligently to carry on the good momentum in the development of our packaged meats to further enhance the profitability,” WH Group said. “Simultaneously, we speed up the modernization of fresh meat business to uplift operational efficiency. We adjust our export strategy to expand sales channels and improve margin.”