WH Group posts 7.2 per cent jump in 2021 profit on higher sales, but outlook clouded by Ukraine-Russia war
- Owner of US-pork giant Smithfield Foods reports profit of US$1.04 billion for 2021
- WH Group will try to maintain scale and profitability despite rising costs, says CEO Guo Lijun
WH Group warned on Monday that the Ukraine-Russia war will push costs up and affect its profitability, after the world’s biggest pork producer reported a 7.2 per cent jump in profit for last year on higher sales.
The company said it expected hog prices in the US to remain lower this year compared with last year, while in China it expects prices to remain low in the first half before trending higher in the second half. In Europe, however, it expects prices to remain high because of a range of factors, such as the African swine flu and rising feedstock prices because of the war.
Commodity and energy prices, which have risen considerably since Russia invaded its neighbour more than a month ago, have pushed food prices higher and could affect demand.
“Last year, we saw an impact from the African swine flu, Covid-19 pandemic and a number of abnormal fluctuations in the market,” said CEO Guo Lijun said during an earnings call on Monday.
Guo added that while the company faces challenges on many fronts because of higher commodity prices and rising costs, he was confident that “we will maintain our scale and profit level” this year.
Guo was named WH Group’s CEO in August last year following a family feud involving the company’s 81-year-old founder Wan Long, and his 52-year-old son Wan Hongjian, who was fired two months earlier for misconduct.
While the Russia-Ukraine war is likely to push operating costs higher, WH Group said it was taking action to control costs. However, it did not elaborate.
The Hong Kong-listed company, which owns US-pork giant Smithfield Foods, posted a 6.7 per cent increase in revenue to US$27.29 billion. Profit rose 7.2 per cent to US$1.04 billion.
Sales volume of packaged meat reached 3.32 million metric tons in 2021, 1.3 per cent higher compared with a year earlier, while pork volumes increased by 10.5 per cent to 4.362 million metric tons.
The higher sales volume was largely contributed by the US and European markets, which saw a 3.1 per cent and 12.7 per cent increase in sales of packaged meat, respectively, because of recovery in demand from Covid-19 as well as the company’s expansion into new product categories like fresh sausages and acquisitions of local brands.
In China, sales volume fell 1.6 per cent as the consumer market lacked growth momentum.
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The US accounts for over half of WH Group’s operation, while 40 per cent comes from China and the rest from Europe, according to WH Group.
It plans to scale up operations in all three regions, and has been actively acquiring packaged meat factories in Europe, such as Romania and Slovakia.
