Genus revealed a second pig joint venture in China, and said
it was looking for more, as the genetics group credited growth in Asia for
offsetting a drop in profits in its Latin American bovine business.
The animal breeding group said that it invested £2.7m into a
tie-up with Yunnan Shennong Agricultural Group, a major producer in the southern
province of Yunnan, which will support production of 2.5m slaughter pigs a
The joint venture - which will be managed by Genus, and be
stocked with pigs from its breeding programmes – represents a "significant
milestone in our strategy of growing our porcine business in China", said Karim
Bitar, the Genus chief executive.
The group in July unveiled a joint venture with Shaanxi Yangling BeSun Agricultural Group, to support the production of 10m slaughter
pigs per year, and in which Genus invested £8.7m in cash.
Monday's deal, while smaller, will see Genus take a 65%
stake, compared with the 49% holding it has in the BeSun tie-up.
And Mr Bitar heralded further such deals, saying group would
"pursue further opportunities for porcine joint ventures in this large and
China has a pig crop of 690m head a year, more than half the
world total, on US Department of Agriculture estimates.
Porcine vs dairy
The announcement came as Genus unveiled underlying pre-tax
profits of £23.1m for the last six months of 2012, a drop of 0.9% year on year,
on revenues flat at £167.2m.
Asian profits rose 13.1% to £6.9m, helped by 10.9% rise to
£28.6m in revenues, helped by "good volume growth" in China and the Philippines.
In the important Chinese and Russian markets "pig production
has remained profitable", despite lower pork prices, with prospects also
underpinned by the growth of large-scale pork ventures in favour of the small-scale,
backyard enterprises which have historically formed a large part of the
The Asian dairy market has also been "robust", except in
Australia, "where milk prices were significantly lower", with dry weather late
in 2012 hurting output too.
Indeed, Dairy Australia last week cut to 9.5bn litres its estimate
for growth in Australian milk production this season, a rise of 0.2%.
However, Genus flagged as a bigger setback the impact of "adverse
weather conditions in Argentina and Brazil, and weak demand in Mexico", on the
performance of its Latin American bovine operations.
The dry weather, which sent feed prices soaring, besides "flat"
milk prices "significantly affected demand" from dairy farmers, the group said.
While performance had "improved" late in 2012, "overall volume
and profits in Latin America were lower for the half year", a decline only in
part offset by better performances in Europe and North America.
The group's dairy and beef business for the Americas and Europe
sustained a 7.6% drop to £11.0m in operations profits, on revenues down 2.0% at
The overall result prompted Panmure Gordon analyst Graham Jones
to nudge higher his estimates for Genus earnings per share, and upgrade to
1250p from 1190p his target price for the group's stock, reflecting largely an
adjustment to tax rates.
However, he maintained a "sell" rating on the shares, saying
that looked "ahead of themselves" on a ratings perspective, in trading at 26
times forecast earnings for the year to June.
The shares closed 2.1% lower at 1425p in