On the evening of October 21, Wens Foodstuff Group Co., Ltd.
In September, the sales price of live pigs fell further to 13.18 yuan per kilogram, approaching Wens’ breeding cost. This decline in costs for pig farmers has largely been attributed to falling feed ingredient prices; however, any fluctuations in material prices or continued drops in pork prices could potentially push the companies back into losses.
Faced with declining performance, Wens' net cash flow from operating activities substantially decreased, and its cash-to-short-term debt ratio fell to a low of 0.38, indicating significant financial pressure.
The report highlights two critical points: first, revenue remained positive in the first two quarters but slipped by 9.8% in the third quarter; second, after a 42.83% decline in net profit in the second quarter, the third quarter saw an accelerated decrease of 65.02%.
Despite an increase in sales volume of live pigs and fresh products by 16.52% in Q3, rising from 7.1878 million to 8.3755 million heads, the downturn in prices negated the positive effect of the higher sales.
In September, the average selling price of pigs at Wens was 13.18 yuan per kilogram, a 5.18% month-on-month decrease and a 30.81% drop year-on-year. Previously, Wens reported the comprehensive cost of raising pigs in August at 6.1 to 6.2 yuan per jin, approximating breeding costs at around 12.2 to 12.4 yuan per kilogram. With continued market downturns, the price of live pigs is again nearing the company's break-even point.
Since mid-August 2024, live pig prices have consistently declined from over 20 yuan per kilogram to around 13 yuan. Currently, the overall pig farming industry is in a state of low profit, with data from the National Development and Reform Commission indicating a net profit of 21 yuan per head for large-scale farms and 6 yuan for backyard operations in July 2025.
Wens remains competitive largely due to its strong cost control capabilities. According to research by CICC, Wens' comprehensive breeding costs in the first half of 2025 were 12.4 yuan per kilogram, which is 2 yuan lower than the industry average. Nevertheless, with pressure from competitors, Wens' cost advantage is diminishing.
Overall, the first three quarters of 2025 showed a continued increase in the domestic pig inventory, slaughter volumes, and pork production, with growth rates widening compared to the first half of the year. This increased supply, set against weak demand, significantly suppresses pig prices, and forecasts on whether pig prices will bottom out in the near term are not optimistic.
In contrast to the consistently falling pig prices, Wens' poultry segment has shown signs of recovery since August, with meat chicken sales prices rising to 6.6 yuan per jin in September and the poultry business beginning to return to profitability. However, because poultry prices were low before August, the offset against the decline in pork business was limited.
Wens disclosed that the total cost for raising chickens in August was 5.8 yuan per jin (11.6 yuan per kilogram), struggling with selling prices below this cost from February to July. The poultry segment incurred a loss of 1.2 billion yuan in the first half, including about 500 million yuan for inventory depreciation.
With both pig and chicken prices remaining depressed, Wens reported a gross profit margin of 12.82% in Q3, down 3.51 percentage points year-on-year, while the net profit margin decreased by 1.65 percentage points to 7.15%.
As earnings decline, Wens' net cash flow from operating activities dropped significantly by 35.9% to 8.199 billion yuan in the first three quarters. Despite declining revenues, the company's cash payments for goods, labor, and employee-related expenses surged. Concurrently, accounts receivable rose from 545 million yuan the previous year to 958 million yuan by the end of Q3, with inventories increasing from 19.31 billion yuan to 21.265 billion yuan. Other receivables reached 1.35 billion yuan, primarily for farmer loans and deposits.
In recent years, Wens has focused on reducing leverage, with its debt-to-asset ratio dropping from 61.41% in 2023 to 49.41% in Q3 2025, while interest-bearing liabilities have also decreased. However, the company still faces considerable repayment pressure, with cash reserves plummeting by 41.61% year-on-year to 2.148 billion yuan and short-term interest-bearing debts remaining at 5.622 billion yuan, resulting in a cash-to-short-term debt ratio of only 0.38.
From a structural perspective, bank loans are declining, yet bond financing is increasing. In April 2025, Wens started planning to issue corporate bonds to raise up to 5 billion yuan, primarily for working capital replenishment, project investments, and debt repayment.
Last year, massive debt led to a financial expense of 1.035 billion yuan, amounting to 11% of net profit, significantly eroding profitability.
Wens’ financing has primarily targeted capacity expansion. In the first three quarters, cash outflows for acquiring fixed, intangible, and other long-term assets reached 7.534 billion yuan, an increase of nearly 15% year-on-year. The company’s fixed assets totaled 34.736 billion yuan, with construction in progress valued at 3.37 billion yuan.
Management has indicated expectations for annual fixed asset investments in the range of 3 billion to 5 billion yuan over the next few years, primarily for upgrading the equipment and facilities of livestock and poultry farms as well as for daily operations.
As of mid-2025, Wens has reported 20 ongoing projects, including chicken, duck, and pig farms, as well as feed factories. For pig companies, financing for capacity expansion is akin to betting on rising pig prices, significantly extending the pig cycle amidst widespread capacity expansion across the industry.
With plunging pig prices, leading enterprises maintain profitability through cost reduction. It is important to note that one of the main reasons for the decrease in breeding costs is the lower prices of feed raw materials. Since October 2023, the prices of corn, wheat, and soybean meal have begun fluctuating downwards, easing cost pressures for breeding enterprises.
However, if fluctuations in feed raw material prices occur due to uncontrollable factors such as yield, weather, or market conditions, there could be a risk of performance declines or even losses in Wens’ pig farming operations.
The decline in Wens' Q3 performance serves as a wake-up call, leaving the timing for any potential recovery in earnings uncertain.
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