① Before the Spring Festival, Aonong Biotech's “six consecutive declines” recently had another “five days and three boards”, and the stock price of Aonong Biotech, which is at the “crossroads” of fate, has fluctuated drastically; ② Whether it will become the next Zhengbang to be saved or the next young eagle is sadly delisted, it is still difficult to predict how Aonong Biotech's path of restructuring will follow; ③ Currently, Aonong Biotech's pig storage is still not on the scale of two months.
Financial Services Association, March 20 (Reporters Zhang Chenjing and Wang Pingan) From a “six-day drop” before the Spring Festival to the recent “five-day three-board” doubling bottom. Behind the sharp rise and fall in the stock price of Aonong Biotech (603363.SH), it is this listed company and a number of pig companies with similar circumstances standing at the “crossroads” of fate.
Pig prices are still declining. The capital chain is tight or even broken, and most listed pig companies rely on external funding for “blood transfusions.” After Aonong Biotech sold a large amount of biological assets, the cash flow was worth nothing. By the end of February, its pig inventory had plummeted to 601,000 heads, which was lower than sales in the first two months of this year. Under the black hole of debt, Aonong Biotech's path of restructuring is long and uncertain. Whether it will become the next Zhengbang to be saved, or whether it will be the next young eagle to be sadly delisted from the market, is uncertain.
Deep in a debt “black hole”
In the abnormal fluctuation announcement and risk alert announcement in the past two days, Aonong Biotech stated that after self-inspection and written letters were sent to the controlling shareholder and actual controller, it was confirmed that there were no important matters or important information that should have been disclosed but not disclosed as of the disclosure date of this announcement.
Currently, the industry generally believes that large pig breeding companies with high leverage ratios, such as Tianbang Food and Aonong Biotech, continue to sell pig farming assets, making it difficult to maintain production capacity under financial pressure, and that inefficient production capacity will be cleared at an accelerated pace. This has also brought about a slight turning point in the industry's recovery.
In February of this year, Aonong Biotech was applied for pre-restructuring by creditors because it did not pay its maturing debts on time and clearly lacked solvency. Subsequently, the Zhangzhou Intermediate Court decided to start a pre-restructuring of the company and appointed Shanghai AllBright Law Firm as the temporary manager during the pre-restructuring period of the company.
Currently, Aonong Biotech's overdue thunderstorm debt has reached more than 1.9 billion yuan. As of February 25, 2024, Aonong Biotech's accumulated principal and interest on overdue debts at banks, financial leasing companies and other financial institutions was about 1997,300 yuan (after deducting the repaid portion), accounting for 78.79% of the company's most recent audited net assets. Furthermore, from November 2022 to March 1, 2024, Aonong Biotech accumulated a total of 3.157 billion yuan in lawsuits (arbitration).
Wanlian Securities Investment Officer Qu Fang told the Financial Federation reporter that during the enterprise restructuring and liquidation process, the order of debt settlement was as follows: wages and labor expenses owed by the enterprise, arrears in national taxes, debts owed to enterprises and other institutions. If there are collateral in banks or other loan institutions, they cannot be used as debt settlement assets.
The company is insolvent, and the risk of delisting has surged. Aonong Biotech expects net assets attributable to shareholders of listed companies to be -700 million yuan to -1 billion yuan at the end of the fiscal year 2023. Aonong Biotech has issued two announcements regarding the risk that the company's shares may be subject to delisting risk.
Not only is Aonong Biotech, but its holding holdings are also struggling to secure their net worth. Recently, the court ruled to accept the restructuring of the company's controlling shareholder. According to the announcement, the People's Court of Yangcheng District, Zhangzhou City, Fujian Province decided to accept the restructuring application of creditor Fujian Dazhou Construction Group Co., Ltd. against Zhangzhou Aonong Investment Co., Ltd., the controlling shareholder of Aonong Biotech.
Currently, almost all of the shares held by the controlling shareholder have been frozen. According to the company's latest announcement, Wu Youlin, Bai Rui Investment, and their co-actor Aonong Investment have a total of 362 million shares, accounting for 91.89% of their total shareholding and 41.62% of the company's total share capital.
The number of pigs kept in storage is less than two months
Currently, Aonong Biotech has entered the stage of selling pigs and shutting down pig farms to repay debts. Although this move can obtain cash flow for a short time, it means that it is almost difficult to break out of the current “debt black hole” by operating on its own in the later stages. It requires external blood transfusions and the “White Knight” to lend a helping hand.
According to the company's latest monthly report on the release of pigs, from January to February 2024, Aonong Biotech sold 752,400 pigs, a year-on-year decrease of 18.13%. By the end of February, pig inventory had plummeted to only 601,000 heads, and its sales volume for the first two months of this year was even higher than the current inventory.
This inventory is comparable to Aonong Biotech's inventory situation in July 2020. At that time, Aonong Biotech released only 101,400 heads per month.
Pig farming is different from other industries. Due to the impact of the breeding cycle, the current number of pigs released is determined by the number of sows that can be raised in the first 10 months and the situation of outsourced piglets. Once sows are sold, it will take time for production capacity to recover and expand later.
According to the Financial Services Association reporter's previous frontline investigation, many pig farms under Aonong Biotech began clearing and shutting down in December of last year. Sows and fattening pigs were sold to repay debts, and even wages of some pig farm employees were in arrears. (For details, see the Financial Services Association report:
“If the equipment is sealed and sows carrying cubs are also sold, the lives of proud farmers are on the line? |In-depth investigation”). After the manuscript was published, Shanghang Aonong was in arrears in payment of wages. A few days ago, the relevant employee told the Financial Federation reporter: “The salary arrears on July 29th have been received. Now I no longer work under the Aonong system; all pig farms have been shut down.”
Aonong Biotech has also publicly stated that in order to ease financial pressure, the company began releasing pigs early in the second half of 2023. Fat pigs were underweight. In 2023, fat pigs weighed 97.97 kilograms, and took the initiative to shut down some inefficient pig farms, causing some shutdown losses.
Can we maintain the normal pace of pig production with current inventory levels? Will companies list fewer and fewer pigs in the future, or even “no pigs to sell”? The staff member of Aonong Biotech mentioned above said, “The inventory of 601,000 pigs includes sows, fattening pigs, and piglets. The current inventory does not mean that there will be fewer and fewer stocks in the future. The company is now making adjustments to the inventory according to market conditions, company plans, and actual conditions, such as optimizing inefficient production capacity to preserve efficient production capacity as much as possible.”
Is it the next Jeongkung? Or the next young eagle?
Since this year, pig prices have yet to pick up effectively. According to the latest monthly sales reports of listed pig companies, breeding losses continue to challenge the cash flow of various pig companies. The bottom of the current pig cycle lasted two years, which is rare in history. Three listed pig companies have already experienced capital cuts and have been forced to restructure.
According to industry development precedents, almost all of the causes of pig companies' high debt and capital breakdown stem from aggressive expansion. Listed pig companies that have experienced the same restructuring experience also include *ST Zhengbang (002157.SZ) and Young Eagle Farming and Animal Husbandry, which has already been delisted. Due to the entry of the Twin Group, *ST Zhengbang was finally successfully restructured, and the debt crisis was mitigated. However, young eagle farming and animal husbandry was not so lucky. Blind diversification caused the capital chain to break down, compounding the impact of the African swine fever epidemic, and a large number of pigs died, and eventually went delisted.
Currently, the future of these restructured pig companies is uncertain. Will they become the next country or the next young eagle?
Aonong Biotech stated in the announcement that during the pre-restructuring period, the company's operations will be carried out normally, and the company will cooperate with temporary managers and others to carry out pre-restructuring related work in accordance with the law. If the court decides that the company has entered into the restructuring process, the company will actively cooperate with the court and manager to carry out the restructuring work, fulfill the debtor's legal obligations in accordance with the law, actively discuss with all parties the possibility of resolving debt issues on the premise of balanced protection of the legitimate rights and interests of all parties, and at the same time actively seek shareholders' support to achieve the smooth progress of the restructuring work. The company's final restructuring plan will be based on the restructuring plan approved by the court ruling.
The staff member mentioned above told the Financial Federation reporter: “Now the court has appointed a manager to carry out the company restructuring work, and now it is in the debt filing process.”
Industry insiders told the Financial Federation reporter that in general, the restructuring process for listed companies may take several months to a year to complete. The details need to be taken into account. If the restructuring fails, it may enter a bankruptcy process, and it is still possible to save the company through debt restructuring and asset disposal.
It is worth mentioning that it will take time for pig production capacity to be reduced. A number of industry insiders told reporters that there may be an improvement in the second half of the year, but before the second quarter of this year, the pig industry will still face the dilemma of oversupply. Until then, listed pig companies will continue to be pressured by losses and cash flow.