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Chinese pork deal sends Atria shares to six-year high

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Shares in Atria Group hit their highest in nearly six years after the protein producer revealed its first contract to supply pork to China, the world's top importer, in what it called a "historic moment".

Shares in the Finnish-based group touched E12.60 in early deals in Helsinki, their highest since April 2010, before easing to close at E12.29, a gain of 3.0% on the day.

The headway extended to 33% gains in the shares since Atria in October revealed it had obtained a licence for one of its pork processing plants to export to China.

Although Atria has declined yet to reveal estimates for the financial impact of its expansion into China, Juha Gröhn, the company's chief executive, termed the deal "a historic moment" for the group.

More deals ahead?

Atria said that its initial contract with Chinese buyers was for some 3,000 tonnes of frozen pork products over 2017, with the first delivery due in early May.

The deal covers "all types of products derived from a pig carcass", the group said, with China renowned as a strong buyer of the so-called "fifth quarter" products, such as trotters, ears and offal for which European demand is limited.

Mr Gröhn added that talks with customers over further deals were "progressing well", saying that the initial deal was a "promising start to long-term co-operation".

He said in October that "expanding export opportunities to markets such as China will play a part in underpinning organic growth", at a time of "unusually fierce" price competition in Atria's core Nordic markets.

Big potential

China's pork imports in 2017 will total 2.30m tonnes, according to the US Department of Agriculture – a drop of 100,000 tonnes on last year's record high, but still by far the world's biggest, with Japan ranked as the second-largest buyer with imports of 1.32m tonnes.

Volumes of 2.30m tonnes would also be well above the levels of below 800,000 tonnes which prevailed until 2016, when a downturn in domestic production, provoked by weak domestic prices and the decline in backyard output, lifted the need for extra imports.

The European Union has been accounting for some 70% of exports to China, although in the main from Germany, Spain and Denmark.

Atria's announcement comes as a US Department of Agriculture report said that Chinese pork imports would remain large, thanks to the high cost of domestic production, and the fact that official hog herd figures may be significantly overstated.

By Mike Verdin

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