More than three years of deducting non-losses of more than 15 billion, new hope waiting for "new hope"

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

In 2023, the domestic agriculture and animal husbandry industry will continue to face huge challenges, and at the same time, the new hope of getting involved in feed and pig breeding will not be spared.

Recently, New Hope released its 2023 annual report, and the company's operating income for the whole year was 141.703 billion yuan, an increase of 0.14% year-on-year; The net profit was 249 million yuan, an increase of 117.07% year-on-year.

In comparison, this profit scale is far less than the net profit of 5.04 billion yuan in 2019 at the peak of New Hope. However, it is worth noting that at the bottom of the ultra-long pig cycle, and in the case of many pig companies falling into losses, New Hope has become one of the few profitable enterprises in the industry.

However, from the perspective of deducting non-net profit, New Hope's non-net profit will be -4.608 billion yuan in 2023, compared with -893 million yuan in the same period last year. According to the adjusted data, plus the non-profit loss of 1.935 billion yuan in the first quarter of this year, the cumulative loss of non-net profit deducted by New Hope since 2021 reached 15.357 billion yuan.

Last year, New Hope adjusted its main business and will focus on the two core sectors of feed and pig raising, but at present, the company is facing two major challenges: pig prices continue to grind and feed raw material prices continue to rise. In addition, as of the end of the first quarter of this year, New Hope's debt ratio also reached a record high of 74.03%.

Since 2021, the non-cumulative loss has been deducted by nearly 15.4 billion

Last year, the domestic pig market was sluggish, and many pig breeding enterprises have entered a loss turnaround.

Among them, in terms of the three leading pig breeders, Muyuan shares, Wen's shares and New Hope, the performance is different. According to the financial report, in 2023, Muyuan's operating income will be 110.861 billion yuan, a year-on-year decrease of 11.19%; The net profit attributable to the parent company was -4.263 billion yuan, compared with 13.266 billion yuan in the same period of last year, turning from profit to loss, and the non-net profit was -4.026 billion yuan, down 130.90% year-on-year.

In 2023, Wen's shares will achieve operating income of 89.902 billion yuan, an increase of 7.40% year-on-year. The net profit was -6.39 billion yuan, compared with 5.289 billion yuan in the same period of the previous year, which also turned from profit to loss, and the non-net profit was -6.452 billion yuan, down 229.91% year-on-year.

New Hope released its 2023 annual report on the evening of April 29, and during the reporting period, the company achieved revenue of 141.703 billion yuan, an increase of 0.14% year-on-year; The net profit attributable to shareholders of the listed company was 249 million yuan, a loss reduction of 117.07%.

Compared with historical data, 2023 is also the year when New Hope returns to profitability after two consecutive years of losses. Flush iFinD data shows that in 2021 and 2022, the company's net profit attributable to the parent company will be -9.59 billion yuan and -1.46 billion yuan respectively.

In terms of industries, as the leader of the feed industry, the company's domestic and foreign feed sales will reach 28.76 million tons in 2023, equivalent to 8.9% of the country's total output; The operating income was 81.279 billion yuan, a year-on-year increase of 2.65%, accounting for 57.36% of the total revenue.

As early as 1999, New Hope became the first Chinese feed company to "go overseas", established the first overseas feed company in Vietnam, and has operated more than 60 subsidiaries in 15 countries and regions so far. During the reporting period, the company's overseas market performance was good, with overseas market revenue of 20.078 billion yuan, an increase of 15.67% year-on-year.

In terms of pig breeding, the company has been vigorously developing the pig business since 2016. From 2019 to 2020, New Hope significantly increased its investment in pig breeding. After this round of expansion, the number of live pigs slaughtered in 2022 will reach 14.62 million, and it will further increase to 17.68 million in 2023, ranking third in the country.

However, due to the low average pig price, the company's pig sales will achieve an operating income of 21.302 billion yuan in 2023, a year-on-year decrease of 4.89%, and revenue will account for 15.03%.

In 2023, New Hope will include the slaughtering business into the pig industry business group after the food business is divested. During the reporting period, the company slaughtered a total of 3.96 million pigs, a year-on-year increase of 36%; The operating income was 7.058 billion yuan, a year-on-year increase of 6.01%.

In terms of the company's other two major businesses, white feather meat and poultry business and food deep processing business, the operating income during the reporting period was 19.415 billion yuan and 4.614 billion yuan respectively, a year-on-year increase of 6.98% and 10.05%.

On the whole, New Hope achieved a turnaround in net profit last year, but the company still lost 4.608 billion yuan in non-net profit, compared with a loss of 893 million yuan in the same period last year.

In the past few years, the company's non-net profit has been continuously loss-making. The 2023 annual report shows that due to the change of accounting policies, New Hope retrospectively adjusted the accounting data of previous years, and the adjusted non-net profit deducted from 2021 to 2023 was 7.921 billion yuan, 893 million yuan and 4.608 billion yuan respectively.

In the first quarter of 2024, New Hope continued to record losses, and the company achieved operating income of 23.908 billion yuan during the reporting period, a year-on-year decrease of 29.49%; the net profit attributable to the parent company was -1.934 billion yuan, and the loss increased by 14.75% year-on-year; The non-net profit was -1.935 billion yuan, and the loss increased by 12.39% year-on-year.

Based on this calculation, from 2021 to the first quarter of 2024, the company's cumulative loss after deducting non-net profit will reach 15.357 billion yuan.

Debt is high, and "slimming" focuses on the main business

It is worth noting that the feed and livestock breeding business, which are the two pillars of the company's revenue, are currently facing challenges.

According to the financial report, the cost of feed raw materials usually accounts for more than 90% of the total cost of feed. In the past, the feed business accounted for a large proportion of the company's revenue, but due to the fluctuation of feed raw material prices, it can also be partially transmitted to the downstream breeding links to alleviate the pressure caused by the rise in raw material prices.

However, as the pig breeding business accounts for a relatively large proportion of the company's revenue, the impact of rising raw material prices on the company's overall operating costs has increased.

From the perspective of the prices of major feed raw materials, the global prices of agricultural products will fluctuate greatly in 2023 due to various factors, and corn and wheat will still be in a high position compared with the previous years in 2020.

In addition, with the increase in New Hope's pig sales, the pig business now accounts for a greater proportion of the company's overall revenue and profit. However, in 2023, domestic pig prices will be sluggish throughout the year, with an average price of only about 15 yuan/kg, the lowest since 2020.

To this end, the company carries out the procurement of imported low-cost raw materials and alternative raw materials such as wheat, sorghum and brown rice, and hopes to alleviate the impact of livestock and poultry price fluctuations on the company's revenue and profit level by virtue of the layout of upstream feed, midstream breeding and downstream slaughtering in the downward cycle of livestock and poultry prices.

In addition to the pressure of the pig cycle, New Hope's debt situation is not optimistic. According to the financial report, at the end of the first quarter of 2022, 2023 and 2024, the company's asset-liability ratio will be 68.02%, 72.28% and 74.03% respectively.

According to the financial report, as of the first quarter of this year, New Hope's total liabilities were 93.86 billion yuan, including short-term borrowings of 18.867 billion yuan, non-current liabilities due within one year of 8.647 billion yuan, and corresponding monetary funds of 10.937 billion yuan.

CSI Pengyuan Rating believes that New Hope's expansion pace during the period of high pig prices (2018-2021) is more aggressive, and the debt growth rate will slow down after 2022, but the leverage ratio is still higher than that of Muyuan shares and Wen's shares.

In order to alleviate the shortage of funds, New Hope transferred 7 pig farm project companies to Chengdu Tianfu Xingxinxin Agriculture and Animal Husbandry Technology Co., Ltd., a related party, in April 2023, with an amount of 1.317 billion yuan.

In December 2023, New Hope transferred 51% of the equity of its subsidiary Zhongxin Food (the main body of the poultry industry) to China Animal Husbandry Group at a transaction price of 2.7 billion yuan, and transferred 67% of the equity of its subsidiary Deyang Company (the main body of food deep processing operation) to Hainan Shengchen (a related party of the company) at a transaction price of about 1.5 billion yuan.

The two major equity transfers to New Hope to return about 4.2 billion yuan, and the corresponding white feather meat and poultry and food processing sectors will also be spun off from the listed company statements. The follow-up New Hope will focus on the two core sectors of feed and pig raising.

In addition to the "slimming" of the sale of assets, New Hope also plans to raise funds through a private placement plan.

In December 2023, the company released the 2023 annual plan for the issuance of A-shares to specific targets, and the total amount of funds to be raised will not exceed 7.35 billion yuan (inclusive), of which 3.646 billion yuan will be used for pig farm biosecurity prevention and control and digital intelligence upgrading projects, 1.500 billion yuan for the acquisition of minority shares of holding subsidiaries, and 2.204 billion yuan for repayment of bank debts.

The latest disclosed annual report shows that after the plan is reviewed and approved by the company's general meeting of shareholders, it still needs to be submitted to the Shenzhen Stock Exchange for review and registration with the China Securities Regulatory Commission.

The plan to raise pigs at sea has suffered a setback

In addition to the domestic market, so far, New Hope Group has expanded overseas markets for more than 20 years and has achieved certain results in the field of feed.

Previously, New Hope said on the investor interactive platform that overseas feed business is mainly concentrated in Vietnam, Indonesia, Bangladesh, Egypt, etc. The pig business has a small layout in Vietnam.

In the financial report, the company also said that New Hope's feed sales in Indonesia, Vietnam, the Philippines and other countries have entered the top four in the industry.

New Hope, which has many years of experience in the field of feed, once hoped to replicate the pig business in countries such as Vietnam. But now, it doesn't seem to be going well.

According to media reports, since 2017, New Hope has been planning to raise pigs in Vietnam, mainly because of the growth of local consumer demand, as well as the increasing market concentration of pig breeding and the importance of environmental protection to bring about industry consolidation opportunities.

In April 2019, New Hope Group signed a cooperation agreement with the provincial governments of Thanh Hoa, Binh Phuoc and Binh Dinh provinces of Vietnam for high-quality pig breeding projects with a total investment of 1.147 billion yuan. The project is scheduled to be completed by the end of 2021 and will supply up to 930,000 pigs per year to Vietnam.

According to Yicai report, in August 2019, New Hope's first overseas pig project was completed in Binh Phuoc Province, Vietnam, which is the largest single pig farm in Vietnam, with a designed sow herd of 13,500 heads and 300,000 commercial pigs slaughtered annually, and plans to put into production in November of that year.

According to the report, according to the plan, in addition to Vietnam, New Hope Liuhe will also promote poultry farming projects in Indonesia. At the same time, with the changes in the overseas market environment, New Hope re-examined the overseas development model, and adjusted it to shift from a scattered overseas layout to a focus on a few countries, from a basic feed business to an industrial chain-based competition model.

However, even in the Vietnamese market, New Hope's pig farming business is not progressing as smoothly as expected.

Jiemian News reported that recently, Binh Dinh New Hope, a subsidiary of New Hope, decided to end its high-tech pig farm project in Binh Dinh province. According to a report by Vietnamese media outlet Vietnam Investment Review on April 19 this year, the local government of Binh Dinh province also announced its decision to withdraw the high-tech pig project.

It is reported that the termination of this investment project is due to the overly complicated procedures and environmental disputes. Binh Dinh New Hope's implementation of a high-tech pig farm project in Phu My County has been complained by nearby residents about the transportation of construction materials damaging local roads and generating a lot of dust due to environmental concerns.

In the eyes of industry insiders, it is not easy for pig enterprises to go to sea to breed, such as land, environmental protection, feed raw materials, market expansion, protectionism, consumption traditions, etc., which are much more complex than the problems faced by the manufacturing industry.