Results first-take: FY21 earnings went below our expectations; net earnings grew 7.2% y-o-y to USD1,043m
- Revenue grew 6.7% y-o-y to USD27.3bn, mainly due to the increase in revenue from packaged meat, slightly above our and market expectations.
- Net earnings rose 7.2% y-o-y to USD1,043m, c.8% below our expectations, mainly due to lower-than-expected gross profit and higher-than expected tax expenses, partially offset by lower-than-expected minority interest profits.
- Final DPS of HK$0.14 was declared (FY21 interim: HK$0.05), representing a total payout ratio of c.33%. Our current rating is BUY with TP of HK$6.30. More to follow on the company’s results briefing at 7:30pm today (28 Mar).
What’s New
- Revenue rose 6.7% y-o-y to USD27.3m. China sales declined by 3% y-o-y, While North America (US & Mexico)/European operations reported sales recovery of 15%/8% y-o-y.
- In China, sales volume decreased by 1.6% in packaged meat with stagnant market demand. China packaged meat operating profit rose 7.9% y-o-y thanks to weaker raw material (pork) prices despite the increase in compensation and market expenses. Fresh pork segment has seen 57% y-o-y processing volume growth in FY21 while operating loss amounted to USD53m as a results of significant price decline of fresh and imported pork.
- In North America, with the recovery of key channels (e.g., food services) and the increase in pork price in the US, sales volume/revenue grew 3%/19% y-o-y for packaged meat segment while operating profit surged 55% y-o-y. In the meantime, processing volume of fresh pork declined slightly by 1% with tightened hog supplies. Pork segment has also seen a 94% y-o-y increase in operating profit to USD64m, mainly due to the reduction of COVID-19 related expenses.
- In Europe, packaged meat revenue and volume continued to expand with 13%/11% y-o-y growth in sales volume/revenue for packaged meat while revenue from pork segment saw a slight decline with lower pork prices despite the 5% y-o-y increase in processing volume.
- Net earnings rose 7.2% y-o-y to USD1,043m, c.8% below our expectations, mainly due to lower-than-expected gross profit and higher-than expected tax expenses, partially offset by lower-than-expected minority interest profits.
- The Company declared FY21 final DPS of HK$0.05 (FY21 interim: HK$0.05). Total payout ratio for FY21 was c.33%.
- Looking ahead, with potential recovery of China pork prices in 2H22, profitability in China pork segments should see sequential improvement. US operations should continue to enjoy the relatively high pork prices in pork segment and benefit from the ongoing economy recovery for packaged meats. In the meantime, packaged meat should continue expand in Europe.
- Our current rating is BUY with TP of HK$6.30. More to follow after the company’s results briefing at 7:30pm today (28 Mar).