AgFeed's Third-Quarter Profit Plummets, Yet Still Ramps Up Pig Farm Construction
AgFeed's Third-Quarter Profit Plummets as It Ramps Up Pig Farm Construction
(Agricultural Wealth Network) Last year's real protagonist of "Goldman Sachs raises pigs," AgFeed International Group, has released its latest quarterly report. Due to rising feed costs in the domestic market and falling pork prices, AgFeed's gross profit for this year's third quarter fell 38% year-on-year. To reverse the unfavorable situation, AgFeed has begun building large numbers of pig farms.
AgFeed's third-quarter financial report shows that the company's revenue was 45.12 million USD, a year-on-year decrease of 8.8% from 49.43 million USD in the same period last year; compared with revenue, AgFeed's gross profit and net income fell even more sharply, with third-quarter gross profit at 7.6 million USD, down about 38% year-on-year; net income was 2.9 million USD, down about 65% year-on-year.
From 2007 to 2008, pork prices in China rose sharply. AgFeed, previously mainly engaged in the feed business, invested all of the more than 100 million USD it raised on Nasdaq into the domestic pig farming industry, building large numbers of breeding pig farms and commercial meat pig production bases in Jiangxi, Shanghai, Fujian, Guangxi, Hainan and other places. It was once mistaken for Goldman Sachs' spokesperson for staking out territory in China's pig farming industry, and was extremely popular for a time.
Regarding the decline in revenue and profit, AgFeed's management headquarters in Nanchang refused to respond. AgFeed's main domestic businesses are divided into two major parts, pig farming and feed. Feng Yonghui, chief consultant of Soozhu, told a CBN reporter that falling pork prices and rising feed costs may be the main reasons affecting AgFeed's sharp profit decline.
Soozhu data shows that the national average pork price has dropped from about 18.4 yuan per kg in April this year to 17.21 yuan per kg in November. While pork prices fell, the prices of products such as corn used as feed raw materials kept rising. Materials published by the China Feed Industry Association show that in the first three quarters of this year, corn in Shandong Province rose from 1.35 yuan/kg to 1.90 yuan/kg, an increase of more than 40%. The rise in feed raw material prices caused the cost of fattening pig feed to increase by 0.3 yuan per kg, further shrinking the profits of pig farming enterprises.
Although the pig farming business faces profit pressure, AgFeed is still continuing to expand its pig farms. AgFeed Chief Operating Officer Gerard Daignault said: "On November 10, AgFeed began construction of a new pig farm in Dahua County, Guangxi, following the Western farm model. In the future, it will reach a capacity of 10,000 breeding sows, and by 2011 it can market 250,000 live pigs, thereby bringing AgFeed's total annual live pig sales capacity to 2.5 million head."
AgFeed's third-quarter financial report shows that the company's revenue was 45.12 million USD, a year-on-year decrease of 8.8% from 49.43 million USD in the same period last year; compared with revenue, AgFeed's gross profit and net income fell even more sharply, with third-quarter gross profit at 7.6 million USD, down about 38% year-on-year; net income was 2.9 million USD, down about 65% year-on-year.
From 2007 to 2008, pork prices in China rose sharply. AgFeed, previously mainly engaged in the feed business, invested all of the more than 100 million USD it raised on Nasdaq into the domestic pig farming industry, building large numbers of breeding pig farms and commercial meat pig production bases in Jiangxi, Shanghai, Fujian, Guangxi, Hainan and other places. It was once mistaken for Goldman Sachs' spokesperson for staking out territory in China's pig farming industry, and was extremely popular for a time.
Regarding the decline in revenue and profit, AgFeed's management headquarters in Nanchang refused to respond. AgFeed's main domestic businesses are divided into two major parts, pig farming and feed. Feng Yonghui, chief consultant of Soozhu, told a CBN reporter that falling pork prices and rising feed costs may be the main reasons affecting AgFeed's sharp profit decline.
Soozhu data shows that the national average pork price has dropped from about 18.4 yuan per kg in April this year to 17.21 yuan per kg in November. While pork prices fell, the prices of products such as corn used as feed raw materials kept rising. Materials published by the China Feed Industry Association show that in the first three quarters of this year, corn in Shandong Province rose from 1.35 yuan/kg to 1.90 yuan/kg, an increase of more than 40%. The rise in feed raw material prices caused the cost of fattening pig feed to increase by 0.3 yuan per kg, further shrinking the profits of pig farming enterprises.
Although the pig farming business faces profit pressure, AgFeed is still continuing to expand its pig farms. AgFeed Chief Operating Officer Gerard Daignault said: "On November 10, AgFeed began construction of a new pig farm in Dahua County, Guangxi, following the Western farm model. In the future, it will reach a capacity of 10,000 breeding sows, and by 2011 it can market 250,000 live pigs, thereby bringing AgFeed's total annual live pig sales capacity to 2.5 million head."