Dear Shareholders,
2025 marks the 13th year since the establishment of DEKON AGR (dating back to the founding of Chongqing DEKON in 2012) and our second full year as a publicly listed company. Taking this annual opportunity, I would like to sincerely share some reflections on DEKON's development.
We are a company that respects historical patterns. The core challenges facing Chinese agriculture are twofold: insufficient per capita resource allocation and a relatively low level of technical specialization. With only 9% of the world's arable land feeding nearly one-fifth of the global population, the only viable path for China's agricultural industrialization is to significantly enhance unit efficiency through technological advancement. Professor Justin Yifu Lin has pointed out that China's agricultural modernization must leverage the advantages of combining labor-intensive and technology-intensive approaches, promote the organic integration of smallholder farmers with modern agricultural development, and persist in innovation-driven growth. This aligns perfectly with my own views. Over two decades ago, I began seeking solutions based on this direction and ultimately committed to the "No. 2 Farm" model as our core future development strategy.
We also need to enable farmers to truly regard pig farming as a lifelong career—one that offers security, profitability, and reliability, allowing them to become modern farm owners. With nearly 600 million people residing in rural areas, the income and dignity of farmers are fundamental to the sustainable operation of the entire agricultural system. DEKON has an unwavering rule: payments to farmers for finished hogs must be made on schedule, without a single exception over more than a decade. Even during industry downturns, we have never delayed a payment. This is not merely a matter of corporate credibility; it stems from the founding principle I established when starting the business in 2005—to deliver tangible benefits for the Chinese people. Having been born and raised in the countryside, I deeply understand the hardships parents endure and the poverty and struggles farmers face. Farmers are the most vulnerable yet resilient group in society. They entrust their livelihoods to us, and we must never betray that trust. "Linking and Leading Farmers" is not just a slogan but the fundamental reason for DEKON's existence—we aim to enable farmers to earn a dignified income and make pig farming a respectable lifelong career. In 2025, the average annual income for settlement entities (individual or grouped farmers operating collaboratively) partnering with DEKON reached RMB 810,000, consistently leading the industry. Through their hard work, combined with DEKON's genetic resources, technical support, and management assistance, they have achieved higher breeding efficiency than the industry average, laying a foundation for sustainable development.
The value of an agricultural enterprise is reflected not only in profitability but also in its contribution to national food security strategy. The key to ensuring food security lies not just in preserving the 1.8 billion mu (approximately 120 million hectares) farmland red line but also in dramatically improving the output efficiency per unit of resource through technological progress. China produces approximately 700 million hogs annually. If breeding and farming technologies can empower farmers to reduce the average feed conversion ratio (FCR) by 0.5 nationally, it could save about 40 million tons of grain per year. Combined with other advancements like genetic improvement and increased pigs per sow per year (PSY), the entire industry could save even more grain, equivalent to roughly 7% of China's total annual grain output. Storing grain in technology is more effective than storing it solely in land.
Our model has been developed through exploration and experimentation. In the early years, I led teams on visits worldwide, extensively studying advanced farming practices in Europe and North America, repeatedly contemplating one question: What kind of enterprise and business model can genuinely solve the efficiency challenges in Chinese agriculture? The more we observed, the clearer the answer became. From the European experience, we identified three key learnings: first, vocational training for farmers, treating pig farming like a professional skill; second, modern hardware standards for pig housing, as good facilities are a prerequisite for high efficiency; and third, advanced genetic breeding systems, where genetics are the "chip" of pig farming. To use an analogy, housing facilities are like highways, breeding stock performance is like vehicle performance, and farm personnel are like drivers. Only when all three components work in harmony can optimal, stable, and efficient results be achieved. I firmly believe that Chinese agriculture and farmers are no less capable than their European or American counterparts; they simply lacked suitable methods. By persevering on this path, Chinese agriculture can achieve a qualitative leap—this is the core belief underpinning DEKON's persistence.
Our strategic direction is clear: to be a service-oriented, platform-based company. We focus on core technology and service capabilities to empower farmers and drive efficiency gains across the entire industry. This path differs from the mainstream industry approach and requires a genuine mindset shift—from "doing it ourselves" to "enabling others to do it," and from managing assets to managing capabilities. Once committed to this direction, we plunged in wholeheartedly.
We insist on emphasizing "Technology + Management." We have organized study trips for over a thousand personnel to Europe for deep learning, gradually absorbing the world's most advanced farming experiences and integrating them into DEKON's development model. Even during the exploratory phase before the company's formal establishment, we decided to prioritize strengthening technology. We understood that only through deep technological expertise could sustainable development be ensured. In 2013, we specially chartered a flight to import 868 purebred breeding pigs from Canada, embarking on the path of building our own breeding system. Over the past decade, DEKON has established nearly 50 training bases nationwide, training and servicing 25,800 technical personnel, with total training instances reaching 672,800. In December 2025, we further upgraded to the Yibin Practical Training Base model. The Yibin base can train over 300 new farmers annually, with DEKON covering all costs for tuition, accommodation, and travel. These investments, which may seem like "unseen returns" to outsiders, are the source of our current and future competitive advantages.
Today, DEKON is the only company in China to simultaneously operate two National Key Leading Enterprises in Agricultural Industrialization and two National Core Pig Breeding Farms. Since its establishment in 2014, DEKON has raised approximately RMB 1.6 billion in equity financing—one of the lowest among enterprises with an output scale of ten million hogs—yet the returns we have created are among the industry's best. In 2025, our Return on Equity (ROE) reached 15.9%, and net operating cash flow was RMB 2.531 billion, placing us in the industry's top tier. We are confident in maintaining this performance.
We are a company dedicated to executing in the present. The industry has entered a new phase, gradually shifting from capital-driven to technology, operations, and values-driven. However, there remains significant room for overall efficiency improvement. Given the still substantial variance within the industry, we should not complain about the environment but actively seize the present opportunities that always exist, contingent on each enterprise's capability. I started my entrepreneurial journey early and have not taken money from my family since university. Earning a small profit was never my goal; I only considered deeply engaging in the agriculture sector after clarifying how to build a respected enterprise in the market. This original positioning drives us to hold ourselves to the highest standards in this new industry phase, learning from benchmarks like Huawei, and excelling in both technology and management—pursuing absolute technological leadership and极致 operational management. This self-imposed requirement has permeated every stage of DEKON's development and is the fundamental premise for our advantageous position in the current era of存量 competition.
The No. 2 Farm model is the core manifestation of DEKON's "Linking and Leading Farmers" philosophy and the path we have pursued most steadfastly, albeit with difficulty. It is not simple contract farming—DEKON entrusts farmers with our core asset, the breeding sows, for them to raise company-owned sows and independently breed piglets. The company provides unified genetics, unified disease prevention, unified technology, unified training, and unified sales. Farmers, in return for their responsibility and hard work, earn stable income. This creates a genuine community of shared interests, enabling rural production factors—land, labor, existing pigsties—to achieve higher efficiency.
This path has had its bumps. When initially promoting the No. 2 Farm model, few responded, and there were internal doubts: Can technical standards be maintained when sows are entrusted to farmers? How are risks controlled? Will management become uncontrollable as scale increases? Holding fast to our理念 and belief, we persisted in the mindset transformation—from "we raise" to "teaching farmers to raise," from controlling assets to empowering partners. We believe that linking with farmers and promoting appropriate scale is the most sustainable path for Chinese agriculture and most aligned with national strategic direction. Today, we have "model confidence." In 2025, sows delivered to No. 2 Farm owners accounted for 30% of the company's total sow inventory. The all-in cost for No. 2 Farms is lower than company-owned farms, with PSY稳定 above 27. The average annual income for settlement entities partnering in No. 2 Farms saw significant improvement in 2025, demonstrating the model's strong farmer-linking effect. For instance, one No. 2 Farm owner in Yibin, who partnered with DEKON starting in 2018, began with 17 farmer households jointly raising 100 productive sows for DEKON. With the company's comprehensive support in unified genetics, technical assistance, and stable settlement, they achieved sustained profitability and growth. By 2025, their inventory of productive sows reached 300, with an annual slaughter capacity exceeding 7,500 head (actual 2025 slaughter was 6,000 head, during a capacity ramp-up phase). Under the company's systematic technical empowerment, this farm maintained high and stable production levels: average farrowing rate over 90%, average weaned piglets per litter of 11.94, FCR at 130kg stable around 2.5, and average contract farming fee per head reaching RMB 393. A total of 20 farmer households share profits through this model. It has become a regional benchmark for pig farming, demonstrating outstanding带动效益.
The successful implementation of the No. 2 Farm model rests on three layers of supporting competitiveness, all indispensable:
First, Breeding. Genetics are the "chip" of pig farming. Mastering the high ground in breeding is a prerequisite for future efficiency advantages. DEKON's three main breeds (Landrace, Large White, Duroc) all rank among the top performers in national core breeding farms. Z-line sows average over 17 total born piglets per litter. E-line boars, during the critical 30-100kg growth phase, achieve an average FCR of 1.92 and daily gain exceeding 1,200 grams, truly turning "more feed into meat." Behind these metrics are DEKON's sustained breeding investments totaling billions of RMB since 2011, over 360,000 performance records, and accumulated genomic data on 61,412 animals since 2019. We place extreme importance on the assessment and incentives for the breeding department—good "raw materials," a stable team, and continuous R&D investment are all essential.
Second, Training. Over the past decade, DEKON has conducted 672,800 training instances, upgrading to the Yibin Practical Training Base in December 2025. Farm owners undergo centralized training for no less than three months before starting, receive monthly on-site visits from specialists afterwards, and the company provides one dedicated technician per 10,000 fattening pigs. Our farmers include former kindergarten teachers, returning migrant workers, and ordinary farmers who had never entered a pig farm—through this system, they have grown step by step. Many now earn annual incomes exceeding one million RMB, have built new houses, and no longer need to seek work away from home. What outsiders see as pure cost, I view as DEKON's most crucial strategic investment—trained farmers are the foundation for replicating and scaling the DEKON model nationwide, the core competitive barrier of our platform.
Third, A Culture of Collaboration and Positive Reinforcement. DEKON genuinely creates value for farmers, focusing on "areas where ordinary farmers cannot achieve, general companies perform poorly, but farmers truly need support." Currently, our contract farming fees offer significant advantages over similar industry models. Furthermore, the company is actively exploring upgrading the traditional linear contract relationship into a multi-dimensional value co-creation ecosystem. Under this new paradigm, the positive cycle of "A-class enterprise + A-class partners" ensures technological advantages are effectively realized and is a key factor in DEKON's sustained outperformance in industry chain profitability.
The foundation of our execution capability is the spirit of the DEKON team. Our team holds itself to very strict standards. The DEKON Declaration encapsulates our ethos. It is this spirit that drives the DEKON team to execute meticulously in every detail and continuously iterate. In 2025, 1,759 employees received promotions, accounting for 15.48% of the workforce. Mid-level turnover was 5.51%, and senior-level turnover was 0%. This retention is not based solely on compensation but on shared belief and mission. DEKON's all-in cost, PSY, ROE, and profit per head all rank in the industry's top tier. These results are not due to luck but stem from solid execution by every individual at every step.
Looking ahead, we will base ourselves in Southwest China, radiate nationwide, and further drive efficiency across the entire industry chain. The proportion of hogs sourced from No. 2 Farms will continue to increase; all-in costs will keep declining; the food segment will steadily advance focusing on high-quality pork and food safety standards; and the proportion of platform service revenue will rise. We are confident in delivering on these goals one by one, achieving reasonable returns for society and shareholders. We will seize the current industry efficiency improvement opportunities through clear implementation pathways, turning each target into tangible developmental outcomes.
We are a company that always focuses on the long term. I am accustomed to preparing for events a decade ahead. Over a decade ago, I invested RMB 1.5 million to support my elder brother, Mr. Wang Dehui, in firmly exploring the "Linking and Leading Farmers" direction. Later, with DEKON's formal establishment, we further implemented this long-term vision. Reflecting on the past, every major strategic move by DEKON was inevitably based on planning with a horizon of ten years or more. Three early key布局 laid the competitive foundation we see today.
Starting in 2005, we established the direction of "Linking and Leading Farmers, Service-Oriented Platform." Each step was non-mainstream in the industry, but it represented the most fundamental mindset shift, setting DEKON's strategic foundation for the subsequent two decades. Even during the pre-establishment exploration phase, we decided to prioritize strengthening technology. The 2013 special charter import from Canada and exceeding international core breeding指标 by 2016—recognizing genetics as the "chip"—this超前投入 is the core source of our持续领先 all-in costs today. In 2015, we began systematically reserving development land nationwide. When the African Swine Fever outbreak occurred in 2018, DEKON was one of the few large-scale breeding enterprises that increased output—when the opportunity arose, we didn't need to scramble for temporary land; we were ready. Genuine competitive advantage comes from solidifying the foundation before others perceive the threat.
Focusing on the long term involves not only knowing when to charge ahead but also when to pause. In 2020, amidst extreme industry狂热, we firmly hit the brakes, halting all new capital expenditures and declaring that "starting new projects equates to job losses." We did not want the industry to fall back into the historical pattern of detrimental "involution," and we deeply understood the national desire for stable development in the pig industry, avoiding sharp fluctuations. Based on this sense of responsibility towards the industry and society, we proactively adjusted our development pace. Almost all our capital allocation and operational moves have been counter-cyclical, preceding industry trends by over a year. This ability to assess the situation and advance appropriately is another crucial manifestation of DEKON's long-term focus and has become an integral part of our competitive DNA.
In 2019, we partnered with Tönnies, focusing on a ten-year layout for the food segment. Tönnies is the world's second-largest meat union and Germany's largest integrated meat processor. Together, we invested in building a fully integrated project encompassing supporting slaughterhouses and meat processing centers, benchmarked against EU high standards. The first phase commenced operations in December 2023, with an annual slaughter capacity of 2 million head, featuring Asia's largest online cutting line. Current capacity utilization is in the ramp-up phase, resulting in slight losses, but development is progressing according to plan—the direction is unequivocally correct. This is a ten-year布局, and we have ample patience.
Today, DEKON's strategy is increasingly clear: focus on both ends of the industry chain and empower the middle. Master the genetic "chip" at the breeding end; enhance产业链 value through slaughtering and deep processing at the food end; and utilize the platform model to empower farmers in the middle养殖环节. The synergy among these three ends constitutes DEKON's true long-term competitive moat. From pig farming to the No. 2 Farm model, to slaughtering and food processing, and now to integrated crop-livestock farming, every step of the initially conceived blueprint is gradually becoming reality. Our partner, Xiyangfeng Farm, is exploring integrated utilization models—growing citrus and other cash crops alongside pig farming, where crop revenues significantly exceed those from pigs. This is an experiment looking twenty years into the future.
Currently, the company is heavily investing in digitalization and smart technologies, actively embracing technological change. From whole-genome breeding to digital farm management systems, from big databases for breeding stock performance to RFID traceability chips at the slaughter end, technology is not just a tool but the core infrastructure of the DEKON platform model. Digitalization and AI enable us to accurately assess the value of each partner, making platform standards quantifiable and replicable. Our investments in this area will continue.
Conclusion
Pig farming is a demanding industry—capital-intensive, subject to significant cycles, where practitioners face real pressures and challenges daily. Precisely because it is arduous, the industry has fostered a group of truly dedicated individuals. DEKON's journey to this point would not have been possible without policy support from the Party and the state, the trust of local governments and partners at all levels, the hard work of all employees over more than a decade, the collective efforts of thousands of partnering farmers, and, most importantly, the long-term companionship and trust of our shareholders.
On our future development path, we will steadfastly maintain our定位 as a platform-based, service-oriented enterprise. Our mission is to help farmers earn more, enhance overall industry efficiency, provide consumers with safe, high-quality pork, contribute to the national food security strategy, and deliver reasonable returns to our shareholders. This is our使命.
Thank you.
Wang Degen, Chairman, DEKON AGR
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