China Kangda Food posts significantly wider 1H21 net loss on higher animal feed, ocean freight costs

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China Kangda Food reported Tuesday a net loss of 39.8 million yuan for the first half, widening from a 1.6 million yuan net loss in the year-ago period, hurt by higher prices of raw materials, including animal feed ingredients, such as corn and soybean meal.

In addition, ocean freight for export increased, sending the gross profit margin down to 4.8 percent for the first half, compared with 8.5 percent for the year-earlier period, China Kangda Food said.

The company also posted a loss on disposal of 4.6 million yuan on an under-utilised or obsolete property, plant and equipment.

Revenue for the January-to-June period rose 3 percent on-year to 723.3 million yuan, amid a recovery in consumer demand, the rabbit meat producer said in a filing to SGX.

China Kangda Food primarily produces chilled and frozen rabbit and chicken meat, as well as processed foods such as instant soup, meatballs and other products including pet food and dehydrated vegetables. The company is one of the largest Chinese exporters of rabbit meat. It exports to more than 20 countries, including Japan, the UAE and certain European Union countries.

The chilled and frozen chicken meat segment posted first half revenue dropped 30.4 percent on-year to 158.54 million yuan.

“The cost of raw materials of animal feed ingredients such as corn and soybean meal increased significantly, and the market price of broilers
experienced great fluctuations. The company has actively adjusted its business strategy and reduced feeding and sales of broilers,” the statement said.

Rabbit meat sales rise

The chilled and frozen rabbit meat segment reported revenue jumped 47.6 percent on-year to 103.90 million yuan on the development of new customers.

The processed food segment reported first half revenue increased 17.7 percent on-year to 347.50 million yuan as some domestic fast-food chains, which had cancelled their processed food orders in the year-earlier period due to the Covid-19 outbreak, had seen a resumption of consumption.

The company did not declare an interim dividend, unchanged on-year.

Cautious outlook

China Kangda Food issued a cautiously upbeat outlook.

“Being a company focusing on consumer products industry, our business is always affected by economic growth, consumers’ preference, industry cycle and animal epidemics. In 2021, with the continuation of Covid-19 pandemic, re-emergence of trade protectionism and global recession, the whole consumer industry is facing complicated external environment and greater challenges,” the company said in the statement.

“Despite the challenges, with our products being consumer staples, the impact of all these uncertainties will be manageable,” it added. “To maintain the overall profitability and to enhance the competitiveness and resistance against market risk, the Group will focus on high value-added processed foods, safeguard the business relationship with the major customers and proactively explore new markets and new customers.”

China Kangda Food said it was confident the demand for rabbit meat would increase steadily, citing its higher protein and lower fat and calorie levels compared with other meats.