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China's WH Group reports weaker first half on rising labour, grain costs

Chinese pork processing giant WH Group said that first half profits slipped 2% to $539 million due to higher costs in its fresh pork business, even as sales of packaged meat improved amid an easing of the COVID-19 pandemic.

13 August 2021, at 8:13am

According to Reuters, revenue at the group, which also owns US-based Smithfield, grew 6.8% to $13.3 billion on increased sales in both the United States and Europe.

But profit before biological fair value adjustments slid after the company was forced to write down pork inventory in China following a plunge in local prices, while hog costs, labour shortages and high grain prices ate into profits in the United States and Europe.

China says its massive hog herd, decimated by the deadly African swine fever (ASF) virus during 2018 and 2019, has fully recovered.

The rapid increase in supply in recent months pushed hog prices down 65% in the first half, eroding the value of meat inventories.

Ma Xiangjie, executive director and president of the group's China business Shuanghui Development, told reporters after earnings were published that Chinese hog prices would stabilise in the fourth quarter, with both slaughter volume and demand increasing in the period.

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Prices would be generally lower in 2022 than this year but could rise in the second half due to the recent culling of some breeding stock, he added.

"In June, the domestic pig raising sector saw serious losses and the elimination of sows was quite significant, which will impact the production of hogs in the second half of 2022," he said.

WH said inflation would continue to have an impact.

"In 2021, negative impacts from ASF and COVID-19 on us are retreating but global inflation has imposed new challenges," it said in a statement.

The group also announced that its chairman, Wan Long, had stepped down as chief executive and would be replaced by Chief Financial Officer Guo Lijun.

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