Date
21 October 2018

Shuanghui puts frozen pork on front burner to heat up margins

Shuanghui International Holdings Ltd. (000858.CN), China’s largest meat processing firm, plans to beef up profit margins with a stronger focus on frozen pork, having completed its takeover of Smithfield Foods Inc., a top manager said in Hong Kong Thursday.

“As China urbanizes and the middle class emerges, demand for high-quality frozen pork will increase,” Wan Long, chairman and chief executive of Shuanghui, said.

In China, frozen pork is a high-end product that can generate higher margins, the company said. The company will produce 1.8 million metric tons of pork products this year, of which about half a million metric tons will be frozen pork. Shuanghui plans to boost total production to 2 million metric tons next year.

The company is building processing plants in Nanning, Zhengzhou and Wuxi, and will start work on ones in Shanghai and Shenyang next year.

Shuanghui completed its US$7.1 billion acquisition of Smithfield, the world’s biggest pork processor and hog producer, on Sept. 26. The deal is the largest acquisition to date of a US company by a Chinese firm.

The deal gives Smithfield access to Shuanghui’s mainland distribution channels, helping the US unit extend product offerings and increase sales channels in China, Smithfield chief executive Larry Pope said.

Shuanghui will increase Smithfield’s exports to China to boost its sales, and work with its US acquisition to develop premium products for the Chinese market, Shuanghui said in a statement.

The announcements come amid several media reports that Shuanghui will pursue a US$1 billion initial public offering in Hong Kong, reports that Wan rejected, saying the company has no plans to list.

Shuanghui secured US$4 billion in loans from a banking consortium to fund its acquisition of Smithfield Foods, according to some mainland media reports. The consortium comprises Bank of China Ltd., Rabobank Group, Banque de l’Indochine, DBS Bank, Natixis Group, Royal Bank of Scotland Group and Standard Chartered, as well as Industrial & Commercial Bank of China.

– Contact the reporter at [email protected]

SK

 

    Ayishah Ma is a financial reporter on Greater China issues.

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