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Meat Processor's Shares Plummet After Suspension

by 5m Editor
20 April 2011, at 9:15am

CHINA - Henan Shuanghui Investment & Development Co, the listed unit of meat processor Shuanghui Group, resumed trading and plunged by the 10 per cent daily limit on Tuesday after a one-month suspension because of its tainted meat scandal.

The Shenzhen-listed company had been suspended from trading since March 16 after China Central Television reported that Jiyuan Shuanghui Food Co Ltd, a subsidiary of Shuanghui Group, purchased pigs fed with the banned substance clenbuterol.

Shuanghui spent 31 million yuan ($4.75 million) on product recalls and its revenue dropped by 1.34 billion yuan in March, the company said in a statement to the Shenzhen Stock Exchange on Monday.

The company said that its current daily supply of meat products hit 3,200 tons, a rebound to about 71 per cent of pre-scandal levels.

In the first quarter, Shuanghui's profit is expected to reach 265 million yuan to 270 million yuan, up 10 per cent to 12.5 per cent from the previous year, according to the statement.

However, analysts and consumers are not as optimistic as the company.

"The scandal may drag Shuanghui's sales down by 2 billion yuan to 4 billion yuan this year," said Tong Xun, an analyst at Shenyin & Wanguo Securities Co Ltd.

"Although Shuanghui made some efforts to restore its image by recalling products and making a public apology, it is still hard to lure consumers back. It will take a long time," said a senior analyst at Changjiang Securities, who declined to be identified.

Since resuming trading on Tuesday, Shuanghui's share price will continue to drop for some time, and it may take several months to rebound, he said.

According to an online survey by China's Web portal Sina.com, about 57.5 per cent of market watchers polled expect Shuanghui's share price to hit the 10 per cent daily decrease limit for at least five consecutive trading days, while 15.1 per cent of the respondents forecast a plunge lasting for three consecutive days.

The government has attached great importance to food safety, and it will intensify its supervision of the quality and safety of animal products, according to the Ministry of Agriculture.

The central government plans to launch a one-year investigation of illegal additives in pig feed.

The investigation will focus on monitoring the entire pork supply chain to ensure product safety, said the ministry in late March.

Further Reading

- Go to our previous news item on this story by clicking here.