The business of China and Vietnam is in full swing, and the annual net profit of Bubong International (00043) is locked in 22.77% year-on-year growth.
Zhitong Financial APP, which conducts animal feed, breeding and food processing businesses in China and Vietnam, handed over its business performance for the past year on February 20, 2020. The results announcement shows that thanks to the good performance of China's farming and food business, coupled with the overall rise in pig prices in Vietnam, the profit margin of Vietnam's farming business has increased, and the fair value of biological assets has recorded positive net growth. In 2019, on the basis of a slight year-on-year increase in revenue of 3.75% to $6.96 billion, the company's profit attributable to shareholders reached $346 million, a sharp increase of 22.8%.
However, from the perspective of detailed performance data, Bobon International, which has a substantial increase in net profit, has a certain degree of drama in terms of business performance and expenses.
Profit growth composed of polarized data
In 2019, when the "pork" incident was fermented, Bobeng's international feed business was affected, but the breeding and food business was boosted.Zhitong Financial APP learned that feed accounts for the largest share of the company's revenue, but the overall pig stock fell sharply due to the "pork incident" in 2019, and the decline in pig feed demand affected the company's full-year performance. Among them, domestic pig feed sales fell sharply by 12.3% to 3.29 million tons in 2019, and pig feed income fell by 16.2% to US $1.525 billion. Coupled with the low efficiency of aquaculture due to cold water temperature, aquaculture income also decreased by 15.3% to US $277 million. Only poultry feed sales under the pork substitution effect increased by 14.8%, resulting in a year-on-year increase of 10.1% to US $995 million. Domestic feed business as a whole recorded 7.26% year-on-year decline to $3.159 billion. The reduction in the number of pig stocks in Vietnam has also led to a decline in demand for pig feed, resulting in a 3.5 per cent decline in overall feed sales to 1.7 million tons, but sales of other feed, including poultry and aquatic feed, have increased. the company's Vietnamese feed business still recorded revenue of 5.8 to 887 million US dollars.
On the other hand, the company's farming and food business have recorded varying degrees of increase in pig prices due to the surge in pig prices under the circumstances of shortage of supply. Among them, the revenue of aquaculture and food business in China recorded a year-on-year increase of 41.55% and 28.31% respectively, while that of aquaculture and food business in Vietnam recorded an increase of 8.89% and 32.24% respectively, eventually driving the company's revenue to achieve 3.75% year-on-year growth.
Aquaculture, food business is still driving the growth of gross profit margin, so that the scale of gross profit recorded a greater growth.Zhitong Financial APP learned that although the revenue of the feed business was affected, the gross profit margin remained solid, while the gross profit margin of the farming and food business in China and Vietnam all increased. The overall gross profit margin of the agriculture and animal husbandry and food business in China and Vietnam rose from 14.0% and 18.1% in 2018 to 15.9% and 20.2% in 2019, respectively, driving the overall gross profit margin by 2.1 percentage points year on year to 17.6%. As a result, gross profit rose 17.67 per cent year-on-year to $1.226 billion on the basis of a modest 3.75 per cent increase in revenue.
However, the sharp increase in a number of fees has led to the mediocre performance of pre-tax profits.Zhitong Financial APP learned that the company's sales and distribution costs, administrative and administrative expenses increased by 5.69%, 16.84% to US $300 million and US $366 million, respectively, while the financial cost increased by US $46.335 million due to a lease liability, bringing the overall expense to US $142 million, a substantial increase of 77.47% over the same period last year, and the increase in various expenses was greater than revenue growth. As a result, the company's pre-tax profit of $589 million increased by only 10.68% compared with the same period last year. In the end, only under the influence of a sharp reduction in deferred taxes, income taxes fell 12.79 per cent year-on-year to $122 million, fixed net profit growth at 19 per cent, and profits attributable to shareholders excluding non-controlling interests increased by 22.77 per cent year-on-year.
At present, Bubong International has locked in a large year-on-year increase in its full-year results, and what is more interesting is that the company's net profit fell by as much as 40.3% year-on-year when the company's third-quarter results were announced. this means that the company completed a magnificent reversal in its performance in the fourth quarter alone.
A reversal of growth completed in one quarter
When the third-quarter results were released, the results of Bobon International aroused the concern of more investors.Zhitong Financial APP learned that prior to the announcement, the first-third quarter of 2019 achieved revenue of 4.989 billion US dollars, up 0.32% from the same period last year; the net profit from home was 126 million US dollars,-40.30% from the same period last year; of which, the third-quarter income was 1.752 billion US dollars, down 2.88% from the same period last year; and the net profit from home dropped 58.01% to 43 million US dollars from the same period last year, which was much lower than market expectations. At that time, the trend of differentiation between feed business and aquaculture and food business had been formed. It is understood that due to the elimination of pig production capacity in China, which is a drag on the growth of feed sales, the company's feed business revenue in China in the third quarter was-11.39 to 792 million US dollars compared with the same period last year, further deepening the decline in the first half of the year. However, the increase in livestock and poultry prices led to a year-on-year increase of 41.8% to US $271 million in China's breeding and food business, which was higher than that in the first half of the year.
The change in the fair value of biological assets brought about by the surge in Vietnamese pork in the fourth quarter is the main reason why the company's performance growth has turned around.Zhitong Financial APP learned that Vietnamese pig prices were very weak at the end of the third quarter, and the farming business also performed poorly. The company's revenue from the Vietnamese farming and food business in the third quarter of 2019 was-7.39% to 466 million US dollars compared with the same period last year. However, Vietnamese pig prices soared in the last quarter, directly driving the average fattening pig price to about 46200 dong per kilogram in 2019, up 6.2 per cent from about 43500 dong per kilogram in 2018. Pig prices reached 80000 dong per kilogram at the end of the year, directly translating the net fair value of biological assets into a positive change of $106 million at the end of 2019, an increase of nearly $118 million from a negative value of $12.327 million in the third quarter of 2019.
At present, although the company has returned to positive performance growth in one quarter, the company does not have the funds to overreact to this "higher-than-expected" performance in the secondary market. at present, the sustainability of company performance growth has not been completely solved. in addition, the company said in its performance report that public health events during the Spring Festival have brought more uncertainties to the company's operating environment. And the company's current business has lagged behind due to the incident, a number of uncertain factors superimposed by Bubong International, it is not difficult to understand that the degree of financial attention is not high.
Source: Zhitong Finance and Economics