"Noodle King" Chen Keming resigned for 100 days, and Keming Food, which has been profitable continuously, "broke its work"

Produced by Radar Finance and Economics, edited by Li Yihui, Deep Sea

Since its listing in 2012, Keming Food's net profit and profitability are about to be broken.

On January 23, Keming Food released its 2023 performance forecast, which is expected to have a net loss of 46 million to 75 million yuan in 2023, a year-on-year change from profit to loss, and a net profit decrease of 127.31% to 144.53% compared with the same period last year. So far, this is also the company's first annual performance loss since its listing.

On March 16, 2012, Keming Food was listed on the Shenzhen Stock Exchange, and the former noodle workshop became the first listed company in China's main dried noodles. Last year, Keming Food spent 624 million yuan to acquire 53% of the shares of Xingjiang Muge, and the main business added the pig breeding sector.

However, as the pig industry as a whole fell into a downturn, Keming Food's performance was dragged down. At a time when the company's performance was at a bottleneck, Chen Keming, the founder of the company, known as the "king of noodles", resigned from all positions such as chairman in October last year and devoted himself to new business.

Somen noodles are not easy to sell

According to the 2023 performance forecast disclosed by Keming Food, the company expects a loss of 46 million yuan to 75 million yuan in net profit attributable to the parent company in 2023, compared with a retrospectively adjusted profit of 168 million yuan in the same period last year, a year-on-year decrease of 127.31% to 144.53%.

If non-recurring gains and losses are deducted, the company expects a net profit loss of 50 million yuan to 75 million yuan in 2023, a retrospectively adjusted profit of 128 million yuan over the same period last year, a year-on-year decrease of 139.17% to 158.76%.

The retrospective reason is that the company's acquisition of 53% of the equity of Aksu Xingjiang Muge Food Co., Ltd. (hereinafter referred to as "Xingjiang Muge") in 2023 is a business combination under the same control, so the number of the same period last year is retrospectively adjusted.

As for the reasons for the performance from profit to loss, Keming Food explained that on the one hand, the company was affected by changes in the market environment and industry cyclicality last year, the sales volume of some of the company's main products decreased, and the sales price of some main products continued to be sluggish, resulting in a year-on-year decline in the company's performance during the reporting period;

Subsequently, on the investor interactive platform, the company's secretary of the board of directors replied to relevant questions, saying that the main products with the above-mentioned declining sales volume are rice and flour products, and the continued low prices are pig products.

Specifically, the main business of Keming Food at this stage includes two major sectors: food and pigs. Among them, the original food business focused on the research and development, production and sales of rice and flour products, mainly including noodles, convenience foods and other products, and invested in the construction of a number of integrated production bases across the country.

According to the data, China is the world's largest producer and consumer of dried noodles, and with the improvement of people's economic living standards, dried noodles have shifted from a single satisfying and convenient function to a healthy, nutritious and functional development trend.

At the same time, with the increase of substitutes such as takeaway and pre-made dishes, dried noodles are becoming more and more difficult to sell, and the industry as a whole is in a bottleneck period of shrinking total volume and intensifying competition. According to data disclosed by the Flour Products Branch of the Chinese Society of Food Science and Technology, China's total dried noodle production fell by 20% to 7.11 million tons in 2021 after reaching 8.88 million tons in 2020.

The article by China Food News pointed out that the market demand for dried noodles will decrease by 4.4% year-on-year in 2023, and it is expected that the overall scale of the dried noodles market will still decline slightly in the next three years.

Duan Qing, the rotating general manager of Keming Food, said that at present, on the production side, the production capacity of 12 major manufacturers almost meets the market demand of 6.78 million tons, and the supply of dried noodles in the market is much greater than the demand.

In terms of food, Keming Food acquired 100% of the shares of Wugu Dojo from COFCO at a price of 106 million yuan in 2017 and began to set foot in the convenience food industry.

However, Keming Foods suffered a loss in this business segment that year, resulting in the impairment of goodwill, resulting in a decline in performance. It wasn't until 2019 that Wugu Dojo turned a profit.

It is reported that the representative products of Wugu Dojo include non-fried instant noodles, fresh mixed noodles, etc., Keming Food has successively launched hot dry noodles, sour bamboo shoots and fat beef and other flavors of instant noodles, and in recent years, the company has launched new products such as tomato pork bone noodles, seafood prawn noodles, and Shenqi meatball noodles to meet the needs of young consumers.

According to last year's semi-annual report, Keming Food's operating income from January to June was 165 million yuan, a year-on-year decrease of 21.96%. Compared with the revenue of 1.426 billion yuan of noodle business in the same period, the contribution of convenience food business to the overall revenue of Keming Food is still limited.

In this regard, the company also said that Wugu Dojo is in the leading position in the product segment, but has a low market share in the convenience food industry.

Pig farming fell into the red

The market demand for dried noodles is sluggish, and Keming Food needs more growth points.

Previously, the company said on the investor interactive platform that in the next three years, it will adhere to the diversification strategy, take dried noodles as the first growth curve, steadily improve the dried noodles business, accelerate the development of convenience food business, and consolidate the second growth curve.

However, in addition to these two growth curves, Keming Food has also opened up new businesses such as pig breeding and prefabricated dishes.

On the evening of December 21, 2022, Keming Food announced that the company intends to acquire all the shares of Xingjiang Muge held by the controlling shareholder Keming Group, Chen Keming, Chen Kezhong and Chen Hui for 357 million yuan, and after the share transfer is completed, the company will increase the capital of Xingjiang Muge by 280 million yuan.

After the completion of the share transfer and capital increase, the company will hold more than 51% of the shares of Xingjiang Muge, which will be included in the company's consolidated statements and become a holding subsidiary of the company.

However, at that time, pork prices have been in the doldrums for a long time, a number of listed pig companies fell into huge losses, and Keming Food, which does not have synergy with pig breeding, officially announced cross-border pig breeding, which not only surprised the market, but also made shareholders question.

At that time, in order to realize this transaction, Keming Food also planned to apply for an acquisition loan with a term of no more than 7 years and an amount of no more than 400 million yuan from financial institutions.

In this regard, Ma Shenghui, an independent director, said in the announcement that the current market is volatile, and it is difficult to judge whether it is appropriate to carry out mergers and acquisitions at this point in time, so he has reservations about matters related to this transaction. He abstained from voting on the board of directors on the relevant motion.

In addition, at the first general meeting of shareholders in 2023, when deliberating the proposal on the transfer of Xingjiang Muge, some small and medium-sized investors voted against, accounting for 69.12% of the valid voting shares of small and medium-sized investors attending the meeting.

However, Keming Food overrode public opinion and completed the acquisition of Xingjiang Muge in the first quarter of 2023, adding pig breeding and sales and pig slaughtering business.

From the performance point of view, the pig business has become the company's "burden". According to the financial report, in the first three quarters of 2023, the company's operating income was 3.931 billion yuan, down 8.48% year-on-year, net profit was 11.2547 million yuan, down 91.34% year-on-year, and non-net profit was 6.357 million yuan, down 94.09% year-on-year.

At the subsequent performance briefing, the management mentioned the main reasons for the decline in the company's performance, including the decline in the sales of rice and flour products, "affected by the pig cycle, the company's pig business segment operating performance loss expanded" is also the main reason.

At present, the pig breeding industry may still face greater operating pressure in the first half of 2024. The latest research report of Xiangcai Securities believes that the first fourth round of the cycle is still in the stage of grinding the bottom, the Spring Festival peak season ushered in a relatively off-season, the first half of the production capacity is not large, the second half of the pig slaughter will decline, then the pig price may usher in a relatively considerable rise.

Zhu Danpeng, an analyst of China's food industry, pointed out that pig farming is an industry with a very obvious scale effect, and Keming Food's pig breeding business is not correct, and the overall strategy is wrong.

"Noodle King" Chen Keming

Behind Keming Food, the "first share of dried noodles", stands a self-made entrepreneur Chen Keming.

According to media reports, Chen Keming, who was born in 1952, is a native of Hunan, and he began to learn to do carpentry after graduating from primary school, and has been working for 15 years, becoming a famous carpenter around his hometown.

However, an engineering accident caused Chen Keming's right index finger and little finger to be gouged off by a planer, and his career as a carpenter was terminated. Since then, Chen Keming has set up stalls, collected waste products, and done building materials business, running around for life.

One day, he saw on the street that southerners like to eat noodles, but they didn't think the local noodles were delicious, and would rather wait in a long line to buy noodles on the outside ground. The keen Chen Keming saw that this was a business opportunity and decided to start making noodles to sell.

In May 1984, at the age of 32, he opened a small workshop in Yiyang South County and began to engage in the production and sales of dried noodles. The process of making noodles is not complicated, Chen Keming carefully studied it, and relied on a hand-cranked noodle machine to make noodles, and pulled a cart to sell them along the street.

Relying on unremitting efforts, as well as the image of emphasizing quality and integrity, Chen Keming's business is getting better and better. In 1988, with a small amount of savings, he finally built his own two factories.

In addition, in order to distinguish his noodles from other noodles, Chen Keming had a brand awareness early on and named the brand after himself.

After 13 years of hard work, in 1997, Chen Keming had the idea of establishing a company, so he pulled his fourth sister Chen Yuanzhi and fourth brother-in-law Huang Tianhua to register and establish Nanxian Keming Noodle Manufacturing Co., Ltd., which is the predecessor of Keming Food.

In 2012, Chen Keming led Keming Food to the main board of the Shenzhen Stock Exchange, when he was 60 years old. After the listing, Chen Keming served as the chairman of the company until he resigned due to age in October last year and handed over the company's affairs to his son Chen Hong.

But Chen Keming, who is "idle", does not plan to enjoy his old age in peace. In the short video released, he said: "Although I am 72 years old, I still feel 27 years old, and like young people, I still have a dream, which is to be a listed company in my lifetime." ”

The market speculates that Chen Keming's "becoming another listed company" may rely on Hunan Nuoqian Health Management Co., Ltd. (hereinafter referred to as "Nuoqian Health") to achieve it.

Tianyancha information shows that Hunan Nuoqian Health Management Co., Ltd. was established in 2021, and the legal representative is Chen Keming.

According to the Xingsha Times, Nuoqian Health currently has two major sectors, one is to cooperate with Han's to focus on stem cell services and create a full life cycle health management service system, which is now in the research and development experimental stage, and the other is to develop a healthy staple food with higher nutritional value, and now germinated rice has been listed.

However, the research of stem cell drugs has always been a large investment, a high threshold and a long time. To this end, Chen Keming said that he has made sufficient preparations, "I am ready to fight a protracted war." ”

From the "noodle king" to the field of health and then starting a business, the span is not small. This time, it remains to be seen whether Chen Keming can replicate his past successes.