Financial Association News October 29th (Reporters Zhang Chenjing, Wang Ping'an): With the rebound in hog prices, Muyuan Foods, the "pork king" (002714.SZ), has ushered in the third consecutive quarter with a non-recurring net profit exceeding one hundred billion.

The company's net profit in the first three quarters increased more than 6 times year-on-year. The performance growth is due to the simultaneous rise in hog prices and a sharp decline in breeding costs. At the performance exchange meeting held tonight for the third quarter, the board secretary Qin Jun revealed that the company's previously proposed "average 600 yuan per head" cost reduction target has now been achieved by half, with the actual achievement being one-third after deducting the impact of fodder prices. There is still a lot of room for further cost reduction.

Looking ahead, Qin Jun further stated that there is no need to be overly pessimistic about hog prices in the first half of 2025. The company believes that through measures such as cost reduction and efficiency improvement, when hog prices fluctuate within a normal range, the company can achieve profitability, generate cash flow, and further repair its balance sheet.

With both volume and price rising, the non-recurring net profit in the third quarter exceeded one hundred billion.

Since the beginning of this year, with the continuous rise in hog prices and the decrease in breeding costs, Muyuan Foods turned losses into profits in the first three quarters. Among them, the non-recurring net profit in the third quarter was 10.342 billion yuan, becoming the third consecutive quarter to achieve a non-recurring net profit of over one hundred billion, following the third quarter of 2020 and the fourth quarter of 2022.

According to Muyuan Foods' third-quarter report, from January to September this year, Muyuan Foods achieved revenue of 96.775 billion yuan, a year-on-year increase of 16.64%; and achieved a net profit attributable to shareholders of the listed company of 10.481 billion yuan, a year-on-year increase of 668.90%.

Regarding the performance growth, Muyuan Foods stated that during the reporting period, the company's number of slaughtered hogs, the average sale price of hogs, all increased compared to the same period last year, while the cost of hog farming decreased compared to the same period last year.

In addition to the improvement in industry prosperity, further cost reduction in breeding is one of the important factors contributing to a substantial increase in performance. Muyuan Foods introduced that in September, the cost was slightly lower than 13.7 yuan/kg, a decrease of 2 yuan/kg compared to the beginning of this year's 15.8 yuan/kg. Among them, the feed price decline contributed around 50%, while the improvement in production performance and the decrease in period expenses each contributed around 50%. The company plans to reduce the total cost of hog farming to 13 yuan/kg by the end of the year. The company further stated that the subsequent cost reduction will mainly come from the improvement in production efficiency and refined management. The company is confident in achieving the cost target of 13 yuan/kg by the end of the year.

The company's slaughter business is still in a loss-making state. Personnel from Muyuan Foods mentioned during a conference call, 'In the first three quarters of 2024, the company slaughtered a total of 7.97 million hogs, with a capacity utilization rate of 37%, resulting in a loss of around 0.65 billion yuan. The company has been continuously improving the operating quality of the slaughter meat business this year, with a significant narrowing of losses in the third quarter and a continuous improvement in operating conditions. The next step for the slaughter meat business will focus on enhancing operational capabilities, expanding customer base and sales channels, aiming to quickly turn losses into profits.'

A third-quarter dividend of 4.5 billion yuan, with the annual dividend ratio increased to 40%.

The company also announced its third-quarter dividend plan tonight, proposing to distribute a cash dividend of 8.31 yuan for every 10 shares to all shareholders, with a total dividend amount of 4.5 billion yuan, accounting for 40.06% of the company's net income for the first three quarters. At the same time, the company is adjusting the portion of profits distributed annually in cash from no less than 20% of the distributable profits realized in the current year to 40%.

It is worth noting that the company's total liabilities and asset-liability ratio are both declining. As of the end of the third quarter of 2024, the company's asset-liability ratio was 58.38%, a 3 percentage point decrease from the end of the second quarter. The company previously disclosed in the semi-annual report, 'With the slowing down of construction speed in recent years, the use of cash after profitability will definitely first be used to reduce leverage.'

Qin Jun expressed his outlook for 2025: 'For the first half of 2025, there is no need to be overly pessimistic about hog prices. The company believes that by implementing measures such as cost reduction, it can profit within a normal range of hog prices and generate cash flow, while further repairing the balance sheet.'