Financial Services Association, April 30 (Reporter Liu Jian) The bottom of the pig cycle is a nightmare that every listed pig company is unwilling to face. After three consecutive years of significant losses and being insolvent, Aonong Biotech (603363.SH), which is in the pre-restructuring period, was subject to a delisting risk warning, and this will also become the second listed pig company to be listed by *ST since the current pig cycle.

On the evening of April 29, Aonong Biotech, which is mired in a black hole of debt, revealed its 2023 annual report. During the reporting period, the company achieved operating income of 19.458 billion yuan, a year-on-year decrease of 9.97%, achieving a net loss of 3,651 billion yuan to mother, a loss of 1,038 billion yuan for the same period last year, and the loss increased year-on-year.

This is also the third consecutive year of large losses for the company. In 2021-2023, the company recorded losses of 1.52 billion yuan, 1,038 billion yuan and 3,651 billion yuan respectively, with a total loss of 6.209 billion yuan, far exceeding the total profit of the company since its listing.

The Financial Services Association reporter noticed that the drastic expansion of the “crash” sluggish pig cycle may be a major factor in the company's losses. The number of pigs released by the company during the reporting period was 5.859 million, an increase of 12.91% over the same period last year. In 2018, the number of pigs released by the company was only 420,000, and the compound annual growth rate over 6 years was 69.40%, which is significantly higher than other listed pig companies.

Low prices and volume increases, “selling much more,” and the gross margin of the company's breeding business decreased by 32.4 percentage points during the reporting period. The company also revealed in its financial report, “There were many months during the reporting period when pig prices were low, which had a major impact on the company's operating capital; in order to ease financial pressure, the company released pigs early in the second half of the year, and fat pigs were underweight; at the same time, they actively shut down some inefficient pig farms, causing some shutdown losses, leading to large losses in the pig breeding business. Affected by the above factors, the company experienced large losses in its operations.”

The Financial Services Association reporter also noticed that behind the huge losses is the debt black hole that the company is currently facing. During the reporting period, the company's total assets were RMB 13.625 billion, down 27.00% from the same period last year; total liabilities were RMB 14.128 billion, down 7.22% from the same period of the previous year; the balance ratio was 103.69%; and owners' equity attributable to the parent company was RMB 963 million, a decrease of 138.43% over the same period last year. Moreover, the monetary capital on the account was only 208 million yuan.

Behind debt pressure, the company's ability to operate is worrying, and production capacity has been drastically reduced. A CIFA reporter noticed that during the reporting period, the company's inventory, productive biological assets, and usage rights assets were drastically reduced to 1,328 billion yuan, 2,463 billion yuan, and 1,615 billion yuan respectively, with year-on-year decreases of 59.62%, 77.80%, and 34.19%, respectively. The company stated that it was mainly due to the voluntary shutdown of some pig farms, leading to a decline in pig storage, proposed reduction in the scale of pig farming, elimination of some productive biological assets, and early termination of leasing contracts for some leased pig farms.

It should be noted that the pressure on the company's performance continued into the first quarter of this year. Perhaps due to reduced production capacity, the company released a report for the first quarter of 2024 on the same day. During the reporting period, it achieved revenue of 2,408 billion yuan, a year-on-year decrease of 50.02%, but still recorded a loss of 292 million yuan.

Behind a series of financial crises, the previous *ST rumor also came to fruition. The company issued an announcement on the same day stating that the company's net assets attributable to shareholders of listed companies at the end of the 2023 audited period were negative, touching upon the situation stipulated in the “Shanghai Stock Exchange Stock Listing Rules”, and the company's shares will be subject to a delisting risk warning. Due to the company's continuous losses for the past three years and Rongcheng Certified Public Accountants issued an unqualified audit report on the company's 2023 financial report with an emphasis on matters relating to the company's ability to operate continuously, touching upon the circumstances stipulated in the “Shanghai Stock Exchange Stock Listing Rules”, the company's stock trading will be subject to other risk warnings. After implementation, A-share will be abbreviated as “*ST Aonong”. Trading of the company's shares was suspended for one day from the opening of the market on April 30, and trading will resume on May 6, 2024.

Looking at it now, Aonong Biotech, which has entered the “ICU,” urgently needs a recovery in the pig market to repair its performance. Production capacity in the pig industry has continued to decline since the second half of last year. The market is expected to enter a profit period in the second half of this year, but it is still unknown whether Aonong Biotech, which has drastically reduced production capacity, is mired in a debt crisis, and its ability to operate sustainably is in doubt.