Pig farming company expects to increase market share

A recovery in 2024 could improve the financial picture of the pig farming sector, with pig farming companies expecting to gain market share.

Remember, at the 2023 General Meeting of Shareholders, Mr. Truong Sy Ba, Chairman of the Board of Directors of BAF Vietnam Agricultural Joint Stock Company (code BAF) predicted that from the end of May to the beginning of June 2023, the price of live pigs will increase to about 60,000 to 65,000 VND/kg. In particular, the Company proposed a business plan based on the price of live pigs being 55,000 VND/kg.

However, in reality, in 2023, pork prices at times fell below the cost price of small households (about 52,000 - 54,000 VND/kg). By the time of the Lunar New Year 2024, the average pork price nationwide had only increased to 55,000 VND/kg. The increase was somewhat hindered by unofficial pork imports and weak demand from people when the economy gradually recovered in the third quarter of 2023.

In fact, the business results of large-scale manufacturing enterprises also did not show much improvement in the fourth quarter of 2023, as well as in the whole year.

In the fourth quarter of 2023, BAF Vietnam recorded a 24.7% decrease in revenue to VND 1,625 billion, with a loss of VND 29.46 billion in after-tax profit compared to the same period last year, a profit of VND 6.55 billion (a record loss since listing in 2021).

Accumulated in 2023, BAF Vietnam recorded a 25.9% decrease in revenue, to VND 5,250.4 billion, a 91.9% decrease in after-tax profit, to VND 23.38 billion, and only completed 7.8% of the profit plan of VND 301.43 billion.

At Vietnam Livestock Corporation (Vissan, code VSN), in the fourth quarter of 2023, revenue decreased by 22%, to VND 806.6 billion, profit decreased by 52.5%, to VND 18.98 billion. Accumulated for the whole year of 2023, revenue decreased by 13%, to VND 3,334.2 billion and profit after tax decreased by 22.3%, to VND 106.76 billion.

Thus, ending 2023 with pre-tax profit reaching VND 138.5 billion, Vissan has completed 100.4% of the adjusted plan to VND 138 billion, completing 76.1% of the profit plan of VND 182 billion that shareholders assigned to the Executive Board at the beginning of the year.

At Dabaco Vietnam Group Corporation (code DBC), in the fourth quarter of 2023, core profit (gross profit - financial expenses - sales expenses - business management expenses) continued to be negative VND 10.96 billion compared to the same period of negative VND 275.07 billion. The company only escaped losses and recorded a slight profit of VND 6.45 billion thanks to recording financial revenue and other profits.

Accumulated for the whole year of 2023, Dabaco Vietnam recorded a profit of VND 25.01 billion, an increase of 381.9% (low base in 2022) and only modestly completed 4.4% compared to the profit plan of VND 569 billion in 2023.

In general, the business situation in the fourth quarter and the whole year of 2023 of the pig farming enterprise group is less positive, especially in the fourth quarter of 2023 when some enterprises started reporting losses.

“According to our observations and assessments, we can expect pork prices to recover and remain above VND52,000/kg in 2024. We believe that supply will be difficult to increase rapidly due to the complicated developments of African swine fever, and many small households have stopped raising pigs after suffering losses for a long time. In addition, the gradual improvement in consumption demand as the economic situation becomes more positive will also support higher pork prices,” said an analyst from Bao Viet Securities Company about the recovery prospects in 2024.

The low price of live pigs has pushed small-scale producers into difficulty, reducing the number of small-scale livestock farmers with limited financial resources.

According to Bao Viet Securities Company, pork prices have been on a downward trend in the fourth quarter of 2023, causing many listed companies in the industry to report unsatisfactory business results. However, amid the difficulties, some companies have the opportunity to expand their market share for the following reasons.

Firstly, businesses often have lower farming costs than small households. According to BAF Vietnam's estimates, farming costs for households are around VND52,000 - 54,000/kg, while farming costs for businesses are only around VND47,000/kg.

Second, businesses have a better foundation to access capital sources than households, such as bank loans or raising capital through bonds and issuing shares. Therefore, in the context of pork prices falling below cost of capital, businesses can maintain operations longer, gaining market share from small households leaving the industry due to losses.

Similarly, VNDirect Securities Company commented that the current price of live pigs is 10.5% lower than the production cost of small-scale farmers, which makes many farmers hesitate to re-herd in the first 6 months of 2024.

Thus, although facing the same difficulties as small-scale livestock farmers, thanks to financial potential, large-scale livestock enterprises have the opportunity to gain more market share.

Source