Thu 06/24/2021 23:10 PM
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Relevant Documents:
May 2021 production statistics
Fitch April 16 report
Q1 2021 Report
Annual report 2020

Guangdong-based hog and broiler producer Wens Foodstuff Group Co. Ltd.’s $250 million 3.258% notes due 2023 were indicated at 83 today, June 25, stabilizing after coming under pressure earlier this year due to the slump in pork prices and spread of the African swine fever in China. Continue reading for our Asia Core Credit team's reporting on Wens Foodstuff Group, and request a trial to access legal and financial analysis of hundreds of other performing, stressed and distressed credits in the region.

Wens primarily breeds and distributes chicken, pigs and related products. It also provides veterinary drugs and dairy products, according to its website.

The average price of pork was about RMB 23.9 ($3.69) per kilogram in June, down 95.3% from January, according to data from China’s Ministry of Agriculture and Rural Affairs. The spread of African swine fever in China is expected to stabilize pork prices given the reduced supply caused by the infection, two buysiders said.

May production statistics disclosed by Wens show that the number of pigs sold in the month went up 6.2% year over year to 956,700, but sales were down 37.8% year over year to RMB 2.158 billion as pork price was down 38.3% over a year earlier.

In addition, Wens has adopted an asset-light model and outsourced part of their production to local farmers, which may weaken the company’s control over swine fever prevention and increase production cost, the same buysiders said.

For full year 2020, the company recorded RMB 72.687 billion operating revenue from hog production and a margin of 19.3%, down 8.3% year over year. The sources attributed the decline in margin to higher mortality rates of pigs and increased operating cost resulting from the African swine fever.

Fitch revised the outlook of Wens in April to negative from stable while affirming the BBB+ rating of its outstanding bonds, citing uncertainty in hog production recovery. The slow recovery has led to low capacity utilization, the same sources said. Those factors combined would weaken cost positions and result in funds from operations, or FFO, net leverage remaining above 1x, according to Fitch.

The company’s sizable operating Ebitda generation, protein diversification, moderate leverage profile and robust debt coverage support would still support its triple B rating, Fitch added.

Q1’21 Results

During the first quarter of 2021, operating revenue was RMB 16.816 billion, down 3.6% from RMB 17.444 billion a year earlier. Operating cost was RMB 16.183 billion, up 5.3% from RMB 15.364 billion in the corresponding period last year.

Operating profit was RMB 573.2 million, down from RMB 1.873 billion a year earlier, representing a 69.3% decline from a year earlier.

Cash stood at RMB 3.31 billion as of the end of March, up from RMB 1.865 billion as of the end of 2020 as the company had preserved cash for daily operations.

Current assets totalled RMB 27.11 billion, versus current liabilities of RMB 20.427 billion. Non-current assets totalled RMB 63.616 billion, versus non-current liabilities of RMB 21.893 billion as of the end of March.

Operating activities generated a cash outflow of RMB 1.706 billion, reversing a cash inflow of RMB 1.109 billion a year earlier. The company spent RMB 2.757 billion in investing activities, narrowing an outflow of RMB 4.848 billion a year earlier.

Financing activities generated RMB 5.184 billion for the company during the quarter, compared with RMB 1.517 billion a year earlier.

Capital structure of Wens is below:























































































































































































Wens Foodstuff Group Co.


03/31/2021

EBITDA Multiple

(CNY in Millions)

Amount

US$ Amt.

Maturity

Rate

Book


Bank and Other Loans

16,616.6

2,556.4



Total Bank and Other Loans

16,616.6

2,556.4

1.3x

20 Wens 01

2,300.0

353.8

Jul-01-2025

3.770%

19 Wens 01

500.0

76.9

Sep-06-2024

3.800%

20 Wens Foodstuff MTN001

900.0

138.5

Aug-11-2023

4.000%

17 Wens 01

0.1

0.0

Mar-20-2022

3.100%

Total Onshore Bonds

3,700.1

569.2

1.6x

$250 Million 3.258% Senior Notes Due 2030

1,625.0

250.0

Oct-29-2030

3.258%

$350 Million 2.349% Senior Notes Due 2025

2,275.0

350.0

Oct-29-2025

2.349%

Total Offshore Bonds

3,900.0

600.0

1.9x

RMB 9.297Billion 0.2% Convertible

9,297.0

1,430.3

Mar-29-2027

0.200%

Total Onshore Convertible Bonds

9,297.0

1,430.3

2.6x

Total Debt

33,513.6

5,155.9

2.6x

Less: Cash and Equivalents

(12,606.7)

(1,939.5)

Net Debt

20,906.9

3,216.5

1.6x

Operating Metrics

US$ Amt.

LTM Reorg EBITDA

12,891.4

1,983.3


Liquidity

Plus: Cash and Equivalents

12,606.7

1,939.5

Total Liquidity

12,606.7

1,939.5

Credit Metrics

Gross Leverage

2.6x

Net Leverage

1.6x


Notes:
Source: Company filings, Wind; 2021 E EBITDA is used
US$ Translation: CNY/USD rate used for USD conversion is 6.5.


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