Tech-bank said in the exchange meeting for investors and online explanation session for achievement held on April 28-29 it judged that hog prices would not be pessimistic or even better from the third quarter onwards. The company has made arrangements based on this.
Tech-bank pointed out that the hog prices slightly rebounded in April. Overall, hog prices are down across the first half of this year and will be relatively upward in the second half. Therefore, the company plans to slaughter about 2 million hogs in the first half of the year and 3 million in the second half to complete the annual 5 million target.
The company wrote back CNY 440 million of impairment on biological assets at the end of the first quarter because it was a little more optimistic about hog prices for the next six months at the end of March than at the end of March 2021. It impacted profits of around CNY 350 million. Otherwise, its loss in the first quarter would not be CNY 674 million reported in the financial report but around CNY 1.1 billion. After the reversal, the company still had an impairment provision of CNY 543 million on its books.
If the loss in the first quarter were divided, it would include a loss of about CNY 1.029 billion in breeding, CNY 25 million in food and CNY 60 million in headquarters costs.
Tech-bank slaughtered about 1 million hogs in the first quarter, with an average weight of 115kg per head. The selling price was CNY 12.12/kg per unit and the cost was CNY 16.59/kg per unit, so the gross profit loss was CNY 518 per head. If it included other expenses, such as eliminating sows and vacancy of production capacity, the average loss would have been CNY 1025 per head.
Tech-bank had 280,000 breeding sows and 100,000 gilts by the end of the first quarter. Under the premise of securing capital, it hopes to increase breeding sows to 400,000 to 500,000 by the end of the year. It currently has a production capacity of 770,000 sows.
The company’s weaning cost of piglets in the first quarter was close to CNY 500 per head, and its goal in 2022 is to reduce the weaning cost to CNY 350 per head under full load.
In terms of fattening, it currently has a stock of 2.5 to 2.6 million sows from “Self-build & Lease.” The stocking capacity of cooperative farmers is more uncertain and is currently above 2 million heads. Overall, the stock production capacity has exceeded 5 million, supporting 10 million head of annual slaughter. At present, the actual stock of hogs is about 2.5 million.
The current overall mortality rate is about 10%. The mortality rate of some pig farms completing the renovation of comfort can be controlled by 5%.
Tech-bank hopes to slaughter more than 3 million hogs this year. Since January, the largest pig slaughterhouse in Asia, with an annual capacity of 5 million pigs, has been put into trial operation. At present, it can slaughter 3,000 hogs per day. The company expects it to be at full capacity by January 2023.