Muyuan Foods reported robust financial results in Q3 2024, with a net profit of nearly CNY 10 billion (about USD 1.4 billion), driven by a 28% revenue increase from Q3 2023. The quarter saw revenue reaching CNY 39.91 billion, attributed to enhanced hog production efficiency and strategic cost control. The company is confident of achieving its cost target of CNY 13.7/kg by the end of the year. Muyuan announced dividends totaling CNY 4.5 billion to boost shareholder value and revised its payout policy to a minimum of 40% of distributable profits through 2026. Additionally, favorable market conditions are anticipated to improve slaughter operations in Q4. Muyuan remains committed to independent breeding, aiming for stable profitability amid market shifts in 2025.
In Q3 2024, Muyuan Foods reported impressive financial performance with a net profit nearing CNY 10 billion (approximately USD 1.4 billion), attributing the gains to increased sales and improved cost control. Here are the highlights:
1. Revenue and Profit Surge
From January to September 2024, Muyuan’s total revenue was CNY 96.775 billion, a 16.64% increase compared to the previous year. The net profit attributable to shareholders reached CNY 10.481 billion, a significant recovery from a CNY 1.842 billion loss in the same period in 2023.
Q3 alone saw revenues of CNY 39.909 billion and a net profit of CNY 9.652 billion, marking year-on-year increases of 28.33% and a staggering 930.2%, respectively.
2. Operational Efficiency and Cost Control
The company’s debt-to-asset ratio improved to 58.38% by the end of Q3, down 3.43 percentage points from Q2.
Total hog output from January to September was 50.144 million head, a 6.67% year-on-year increase. Costs for hog production have been reduced to below CNY 13.7/kg, down from CNY 15.8/kg at the year’s start, thanks in part to falling feed costs and enhanced operational efficiencies.
3. Shareholder Returns and Profit Distribution
Muyuan plans to distribute cash dividends of CNY 4.5 billion, equating to CNY 8.31 per 10 shares, representing a 40.06% payout ratio of its year-to-date net profit.
The company also revised its dividend policy, raising the minimum annual profit distribution in cash from 20% to 40% of distributable profits for 2024-2026, aligning with goals for sustainable growth and shareholder value enhancement.
According to AgriPost.CN, listed companies in the Chinese agricultural and livestock industry, typically set an annual dividend payout ratio of at least 10%. Among downstream companies, Shuanghui Development is known for its high dividends, currently maintaining a payout ratio of 30%.
4. Outlook for Slaughtering Operations
Muyuan expects improved results in its slaughter segment for Q4 2024 due to seasonal demand increases and enhanced utilization rates. In Q3, this segment’s losses decreased, reducing unit losses from CNY 98 per head last year to CNY 53. The company is optimistic about achieving single-month profitability in November or December.
Muyuan Foods anticipates that its total slaughter volume in 2024 will remain on par with last year’s output, which reached 13.26 million head. Qin Jun, Muyuan’s Board Secretary, disclosed that a new slaughter facility with an annual capacity of 2 million head is expected to come online in the second half of next year. This addition will bring the company’s total operational slaughter capacity to 31 million head. However, the company plans to gradually expand capacity in the coming years, prioritizing increased utilization of existing facilities and aiming to boost per-head profitability.
Qin Jun(Source)
5. Commitment to Independent Breeding
The company is steadfast in its independent breeding approach, which includes targeted adjustments to breeding metrics for efficiency and quality in response to market changes.
In a recent earnings call, Qin Jun addressed the company’s breeding program developments. “You may have noticed our recent collaboration with Topigs Norsvin. Since last year, our breeding initiatives have intensified compared to prior years, which aligns with the company’s growth phase,” he explained.
During rapid expansion, the focus has been on metrics like litter size and growth rate, essential for achieving high profits when hog prices are elevated. “However, as pork prices have normalized and the company transitions into a phase of high-quality growth, our strategy has shifted towards enhancing efficiency on an already large scale,” Qin added. This approach includes what the company calls ‘value-driven breeding,’ focusing not only on production metrics but also on meat quality and market feedback from the market, which then inform breeding adjustments and optimizations at the genetic level.
6. Industry Outlook
Muyuan remains cautiously optimistic about 2025 despite market concerns over post-Spring Festival hog prices. The company anticipates stable profitability, leveraging cost control measures and a balanced supply-demand outlook.
Qin Jun commented, “Our overall assessment for 2025 is that it is likely to be a year with normal profitability.”
He further explained that while there is consensus on a seasonal price dip after the Spring Festival, opinions differ on whether the market downturn seen before May 2024 might repeat in the first half of 2025. Despite the strong performance in the third quarter this year, the nationwide recovery in the number of breeding sows has been relatively slow.
On another note, Qin suggested that, in the context of lackluster macroeconomic indicators in Q3, the stable pork prices might be because pork is primarily consumed by households and typically as fresh meat, which can command higher prices than other meat products.
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