Yurun halts share slide over tainted-meat reports
The Hong Kong share price of the China Yurun Food Group broke its seven-day slide yesterday after the mainland meat supplier said only one of its 590 slaughtered hogs was found to contain an illegal additive that poisoned several hundred consumers in Shanghai five years ago.
The poisoning incident took place in September 2006, when more than 330 people were reported to have eaten pork tainted with clenbuterol, a drug used to reduce fat in animals.
In March this year, the Ministry of Agriculture launched a one-year crackdown on illegal additives in pig feed, after the Shuanghui Group, the mainland's largest meat producer, was found to be selling clenbuterol-contaminated pork.
Mainland media recently reported that Yurun's pigs were contaminated with the chemical, a charge the Nanjing-based company denied.
Nevertheless, its share price slid from HK$18.64 on September 1 to HK$13.94 on Thursday. Yesterday, after the company's statement, the stock rose 1.5 per cent to HK$14.16.
'The company's admission of clenbuterol in one of its pigs will have a major negative impact on its future sales. Yurun's announcement will not immediately dispel market suspicions towards the company,' SinoPac said in a report published yesterday. SinoPac cut its forecast for Yurun's full-year revenue by 10 to 30 per cent and lowered its forecast net profit by 16.4 to 30 per cent.
Sales at Shenzhen-listed Shuanghui fell 16.7 per cent in the first half, after the March revelation that it had been selling clenbuterol-tainted pork, SinoPac noted.
'Towards the end of the first half, there were certain untrue negative media reports on the company,' Yurun said in its recent interim report. 'The board took a stern view towards the allegations. Recent sales of the downstream processed meat products of the company were not as satisfactory as expected. The board could not rule out it was caused by a series of negative reports.'
As early as June 30, Yurun said it was 'highly concerned about certain untrue reports' regarding food safety, pig farming, project delays and questions on its profit margin.
On July 4, it refuted news reports alleging Yurun made 'problematic meat'. It said it had co-operated with a government investigation into its meat production. On August 14, Yurun rebutted what it called an untrue report that alleged irregularities in the company's land use and in its slaughtering facilities.