Financial Services Association, April 26 (Reporters Liu Jian and Wang Ping An) Under the impact of the lowest pig cycle in history, Muyuan Co., Ltd. (002714.SZ)'s losses in 2023 continued into the first quarter of this year, and losses increased compared to the same period last year, but the company recently made some progress in reducing costs and increasing efficiency. A CIFA reporter learned from relevant company sources, “The company's cost of complete breeding in March (pigs) has been reduced to 15.1 yuan/kg. We have an estimate for this year's cost, and there should be a lot of room for reduction.”

This evening, Muyuan Co., Ltd. released its 2023 annual report. The company achieved operating income of 110.861 billion yuan in 2023, a year-on-year decrease of 11.19%, a net loss of 4.263 billion yuan, and a net profit of 13.266 billion yuan for the same period last year, which turned profit and loss over the same period last year.

Specifically, the company sold 63.816 million pigs last year, an increase of 4.27% over the previous year. The main reason for the loss was that the average price of pig sales fell sharply by about 20% year-on-year throughout the year. In fact, since December 2022, pig prices have entered a downward channel and remained low throughout the year. They only showed a phased rebound in the third quarter of last year, and continued to be weak after entering the first quarter of this year.

The company's loss pressure also continued into the first quarter of this year. According to the first quarter report released by the company on the same day, the company achieved operating income of 26.272 billion yuan in the first quarter of this year, up 8.57% from the previous year; net loss was 2,379 billion yuan, and net loss was 1,198 billion yuan for the same period last year.

A Finance Association reporter noticed that against the backdrop of the impact of the sluggish cycle, the company continued to reduce costs and increase efficiency. The average total cost of the company's commercial pigs in 2023 was about 15 yuan/kg, down 0.7 yuan/kg compared to 2022.

Furthermore, although the company's costs increased to a certain extent in January-February of this year, it has recently made progress in reducing costs again. “The company's full farming cost in January-February was 15.8 yuan/kg, and the cost in March has already been reduced to 15.1 yuan/kg. We have an estimate for this year's costs, and there should be a lot of room for reduction.”

Behind the current cycle downturn, companies such as*ST Zhengbang, Aonong Biotech, and Tianbang Food have successively experienced debt crises. Cost control and cash flow are also the key for the industry to determine how aquaculture companies move through the cycle. According to financial reports, the company's monetary capital at the end of the first quarter of 2024 exceeded 23 billion yuan, an increase of 3.6 billion yuan over the end of 2023; the net cash flow from the company's operating activities in 2023 was 9.893 billion yuan, and the first quarter of 2024 was 5,067 billion yuan, which continued to be positive. The aforementioned company source said, “We expect our capital expenditure level for the full year of 2024 to be around 10 billion dollars. Starting in 2021, we will intentionally control our annual capital expenditure. We have moved from the rapid development stage in the past to a stage of high-quality development.”

Looking ahead to the second half of the year, according to a person related to Muyuan Co., Ltd., “The average number of piglets kept in the first quarter of 2024 decreased by about 2% compared to the fourth quarter of 2023. Corresponding to the fact that fat pigs released in the third quarter of this year will also be reduced by 2% compared to the second quarter of this year. Combined with the impact of high summer temperatures on pig farming, there will be a relatively obvious change in the overall pig supply situation in the third quarter of this year. We think there is a strong certainty that pig prices in 2024 will be better than in 2023.”

In terms of breeding sows and distribution plans, the company's relevant person mentioned above said, “It is expected that by the end of April this year, the company's ability to breed sows will reach the level of 3.18 million. Compared with the end of March and the end of last year, there will be an increase. The company will now adopt a more stable strategy to make plans to breed sows and breed them. Second, the company expects to release 66 million to 72 million pigs this year.”