Chinese meat group Zhongpin cited “intense” competition in the country’s pork sector after it posted falling first-quarter profits and muted sales growth.
The company, listed on the Nasdaq, booked a 13% fall in net income to US$10.6m as costs were run up on promotions and to support the firm’s higher volumes.
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Zhongpin said volumes for its pork products were up 10.6% when measured in tonnes but, compared to last year’s first quarter, prices were down 7.5%. Compared to the last quarter of 2012, prices inched up 1%. Zhongpin’s profits fell in 2012 amid competition and consolidation in the sector.
“Both comparisons are substantially different from the normal seasonal pattern, when the first quarter prices often peak for the year due to the high demand for pork during the Chinese New Year. Those prices reflect strong competition to gain market share that is pressuring prices and financial performance,” Zhongpin chairman and CEO Xianfu Zhu said.
Sales revenue grew 2% to $382.4m. The Zhongpin chief said the company expected sales from pork to grow but forecast a fall in margins.
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“We expect that the demand for pork in China should remain strong and that Zhongpin’s revenues from pork and pork products are likely to increase modestly based on higher tonnage sold at lower average prices compared with 2012. We anticipate that our net profit margin in 2013 will decrease due to increased competition in the industry, the expected increase in labour cost and overheads, and the expected increase in quality assurance and control costs in response to increased importance on food safety placed by the government and customers,” he said.
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