“Since the company experienced a major public opinion event in March this year, it has reflected on its media relationship management business…”
At the beginning of December, Muyuan Foods Co.Ltd(002714) said in an investigation by the agency.
This year, for the company, there were constant storms.
On the one hand, the prosperity of the industry fell sharply and turned into a loss in the third quarter, resulting in the adjustment of China credit rating outlook to negative; on the other hand, the high amount of debt is consistent with the doubts of market parties on the company’s finance.
At the beginning of this month, Muyuan Foods Co.Ltd(002714) even broke the news that the commercial tickets of 31 companies continued to be overdue. Although the company quickly completed the cashing because “the company did not receive the effective prompt payment application of some holders in time, or the clearing method selected by the holders did not meet the bank’s requirements”, the doubts of all parties did not disappear.
It was not until December 22 that the shareholders’ meeting of the listed company gave a relatively formal reply when considering the proposal of applying for credit line from financial institutions and borrowing from affiliated shareholders.
“It’s normal to question whether it’s a financial problem or a cash flow problem concerned by the market. In the face of factors such as the industry at the bottom of the cycle, it’s also a reality that the company’s cash flow is tight…” Qin Yinglin, chairman of Muyuan Foods Co.Ltd(002714) once ranked among China’s top ten richest men, replied.
Qin Jun, Secretary of the board of directors of the company, also said, “the company’s finance can stand the inspection, and the authenticity is beyond doubt.”
Perhaps, the above response had an effect. In the early trading of Muyuan Foods Co.Ltd(002714) on December 23, it once soared by more than 6%.
pig prices fall and cash flow is tight
There are two core reasons for the credit rating adjustment of zhongchengxin before. One is the continuous decline of pig price, Muyuan Foods Co.Ltd(002714) operating loss and profitability in the third quarter. The other is that Muyuan Foods Co.Ltd(002714) the company has a large investment scale in recent two years, the debt continues to rise, and the monetary capital is not enough to cover the short-term maturing debt.
After the “super pig cycle” in 2019 and 2020, this year is a year for the rational return of pig prices.
The average price of pigs collected by wind in 22 provinces and cities shows that the price at the beginning of the year was 35.41 yuan / kg, but so far the price is only 17.5 yuan / kg. Especially in the third quarter of this year, the expected rebound in the industry did not come as scheduled, but fell to 12.2 yuan / kg from the lowest of 16 yuan / kg in July.
Among the hundreds of commodities tracked by Baichuan Yingfu, pigs also recently ranked last in the list with a decline of more than 50% in the whole year.
Pig prices are falling, but the cost is rigid, and there is little room for decline.
The 21st Century Business Herald reporter learned during his visit to pig enterprises that the fattening cost of purchased piglets is about 14 yuan / kg, and the cost of self breeding and autotrophic type is more than 16 yuan / kg, or even higher.
The reason is that the price of piglets has fallen sharply this year, and the cost of piglets from birth to weaning in self breeding and autotrophic enterprises is higher than that of fattening purchased piglets.
On the contrary, Muyuan Foods Co.Ltd(002714) is a typical example of self breeding of Chinese pigs. The industry also generally feedback that its cost control is better than that of its peers.
In November this year, the complete cost of commercial pigs given by Muyuan Foods Co.Ltd(002714) also reached about 14.7 yuan / kg, while the complete cost of Wens Foodstuff Group Co.Ltd(300498) in the current month was 17.6 yuan / kg, and it was as high as 22 yuan / kg in the third quarter of this year.
Another feed enterprise listed on the new third board fed back that the cost of breeding enterprises changed significantly before and after African swine fever. “The feed cost is about 70%, and the cost of epidemic prevention has increased significantly in the past two years.”
The information disclosed by Qin Yinglin at the shareholders’ meeting also shows that “the investment and operation cost of pig house air filtration has reached 46 yuan / head” and “the investment and operation cost of pig drinking water purification project is about 10 yuan / head”.
From this point of view, Muyuan Foods Co.Ltd(002714) has limited room for cost reduction, but its product price can only be reduced with the market.
In the third quarter of this year, the average sales price of the company’s commercial pigs was 13.48 yuan / kg, and the company’s cost had not fallen to the above November level at that time. This is very normal for a company with more than 95% of its revenue from pigs. Even the loss of 800 million yuan in a single quarter is not much.
On the one hand, the weakening of the company’s ability to obtain cash is more important, and has a “supplementary” effect on Muyuan Foods Co.Ltd(002714) .
In the third quarter of this year, Muyuan Foods Co.Ltd(002714) cash inflow from operating activities was 15.967 billion yuan and outflow was 15.872 billion yuan, with a net amount of 95 million yuan. In the first and second quarters of this year, the net cash flow of the company was 4.756 billion yuan and 8.442 billion yuan respectively.
It can be seen that with the unexpected decline of pig price in the third quarter, Muyuan Foods Co.Ltd(002714) operating ability and cash acquisition ability have been significantly affected.
counter cyclical expansion and surge in financial burden
In 2019 and 2020, the high point of pig price exceeded 40 yuan / kg and 35 yuan / kg respectively, much higher than the high point of 21 yuan / kg from 2006 to 2018.
For this magnificent market, a person from a pig breeding enterprise in Sichuan commented that “once in a millennium, of course, the higher the rise, the harder the fall.” Therefore, in this year’s business strategy adjustment, they significantly lowered the established listing goal.
This is not a single case. Wens Foodstuff Group Co.Ltd(300498) in the past two years, although limited by some objective reasons such as the epidemic situation, the sales of live pigs did not rise but fell. From 2018 to 2020, they were 22.297 million, 18.5166 million and 9.5455 million respectively.
In contrast, Muyuan Foods Co.Ltd(002714) chose counter cyclical expansion, which is particularly obvious this year.
By comparing the above data, it can be seen that the sales volume of pigs changed little in 2018 and 2019, maintained between 10-11 million, increased to 18.115 million in 2020, and significantly increased to 35.239 million in the first 11 months of this year.
Muyuan Foods Co.Ltd(002714) has replaced Wens Foodstuff Group Co.Ltd(300498) as a new leader in pig breeding industry. Especially this year, on the premise of a higher base, the growth rate of the company’s pig sales is higher than that in 2020.
The growth of the number of live pigs is inseparable from the continuous expansion of production capacity.
It is also before and after the pig slaughter in 2020 that Muyuan Foods Co.Ltd(002714) fixed assets increased significantly. Before the fourth quarter of 2019, the company’s fixed assets were only 15.6 billion yuan, which increased significantly to 58.5 billion yuan by the end of 2020 and had risen to 89 billion yuan by the end of the third quarter of this year.
Among them, since the third quarter of 2020, the construction in progress has always maintained the level of more than 14 billion yuan. Among them, the second and third quarters of this year decreased slightly compared with 16 billion yuan in the first quarter, but the investment intensity is still high.
According to this trend, in the future, with the completion and transfer in of more projects under construction, the scale of the company’s fixed assets will continue to expand.
If Muyuan Foods Co.Ltd(002714) is compared to a family, it means that less money is earned this year, but more investment and consumption than last year. How can money be relaxed with one increase and one decrease?
Reflected in the financial statements is the reduction of short-term available funds of listed companies.
In the first three quarters of 2020, Muyuan Foods Co.Ltd(002714) cash and cash equivalents increased by 11.9 billion yuan, and decreased by 5.456 billion yuan in the first three quarters of this year. Meanwhile, the balance of cash and cash equivalents at the end of the third quarter of 2021 decreased significantly to 8.453 billion yuan, compared with 21.89 billion yuan in the same period of last year.
“In the past two years, the company’s investment scale is large and its debt continues to rise. By the end of September 2021, the company’s total debt has increased to 65.826 billion yuan, including 34.291 billion yuan of short-term debt and 9.95 billion yuan of monetary capital, facing certain capital pressure.” Zhongxin credit rating adjustment pointed out.
Simple conversion, the short-term debt repayment fund gap exceeded 20 billion yuan. Since the storm of “performance being questioned and counterfeited” in the first half of this year, Qin Yinglin also went to the CSRC for regulatory talks in May this year, and the company’s financing process was once blocked in the first half of this year.
In April this year, a reporter from the engineering construction direction of Shandong reported that the Muyuan Foods Co.Ltd(002714) subsidiary had defaulted on the project payment, but the listed company did not give a positive response at that time.
After entering the second half of the year, the capital pressure continued, coupled with the “mending knife” of the decline in pig prices in the third quarter, Muyuan Foods Co.Ltd(002714) equity and bond financing came out together.
First, on the evening of August and November this year, Muyuan Foods Co.Ltd(002714) announced that it planned to publicly issue convertible corporate bonds and planned to raise a total of no more than 9.55 billion yuan to restart financing; On October 18, the company announced again that it planned to issue non-public shares to the controlling shareholder muyuan industrial group, and the amount of funds raised would not exceed 6 billion yuan.
the “inflection point” of pig price is late
The above exposed capital problems were not prominent last year, because at that time, the pig price was at a high level of more than 30 yuan / kg, and the company “spent more money and made more money”.
However, the basis for making money this year has disappeared, and the key pig price that determines the level of profitability and cash acquisition ability is far from reaching the bottom.
Although there are views in the industry that, combined with the historical trend and loss cycle, the pig price is expected to reach the bottom in 2022. For example, Wens Foodstuff Group Co.Ltd(300498) points out that “it is optimistic that the pig price may enter the upward channel of the next cycle after the second half of 2022.”
Uncertainties also exist.
First of all, after the African swine fever, the changes of industry supply pattern, cost level and the implementation of collection and storage mechanism have become variables that affect the operation of pig prices in the future, and can not fully refer to the historical price range.
Secondly, the premise of the arrival of a new cycle requires the industry to sustain losses for a long time to stimulate the spontaneous clearing of production capacity.
“The time of large-scale loss this year is only two months. The duration is too short, and the production capacity has not decreased significantly.” The aforementioned feed enterprise said.
According to this logic, if the loss lasts too short, the node where the pig price bottoms will be delayed accordingly. In the face of the current situation of low pig prices, Muyuan Foods Co.Ltd(002714) and other breeding enterprises lack effective solutions.
It is difficult to open source, so we can only save money.
Cost reduction is the mainstream choice of the current pig breeding industry, but the space for reduction is limited and the cycle is long.
In November this year, after Muyuan Foods Co.Ltd(002714) reduced the full cost of commercial pigs to about 14.7 yuan / kg, the company expects that the monthly cost can be reduced to less than 14.5 yuan / kg by the end of 2021, and gives “the full cost of 13 yuan / kg in the stage” as the goal of the cost side in 2022.
It should be noted that 14.5 yuan / kg is very close to the current cost level of outsourcing piglet fattening, and the difficulty of cost reduction will increase significantly.
As for the hedging scheme in the derivatives market, there are some objective factors that cannot be solved.
On January 8 this year, pig futures were listed. The initial total position was about 20000 hands, which has increased significantly to 112000 hands so far.
Development is not fast. But for large-scale breeding enterprises, the market scale is still slightly insufficient.
During the recent research visit, some breeding enterprises fed back to the 21st Century Business Herald reporter that “the current market lacks enough competitors. For example, sometimes they sell at a certain price, but no one will undertake it.”
In essence, this is the problem of the capacity and trading activity of the pig futures market, the lack of enough speculative trading groups that can undertake the risk transfer needs of industrial investors, and the lack of market depth and thickness.
It is also understood that Muyuan Foods Co.Ltd(002714) has hedged pig futures and completed the first delivery.
However, limited by the above objective factors, it is doomed that large-scale risk hedging can not be carried out in combination with daily operation at this stage, and the number of warehouse receipt registration and delivery is also very limited.
To sum up, there is no effective means for pig breeding enterprises to resist the downturn of pig prices. On the contrary, small and medium-sized farmers will have more choices.
If Muyuan Foods Co.Ltd(002714) production capacity is expanded and capital expenditure intensity is not reduced, it can obtain greater market share in the future, but it will face the risk of selling more and losing more.
(21st Century Business Herald)
