China hog supplier Zhengbang faces restructuring

Debt-laden Jiangxi Zhengbang Technology Co Ltd, formerly China’s No.2 hog producer, said on Monday that a court will start restructuring one of its breeding businesses as it struggles to restore cashflow, Reuters reported.

Zhengbang, which embarked on an ambitious expansion during 2020 and 2021, was left with huge debts after hog prices fell last year, and had to seek help from local government entities to cover some of its feed costs.

Last week, it said in three stock exchange filings that creditors had applied to local courts for reorganisation of some of its business units, including the listed company. Zhengbang added that it was uncertain whether it would reach an agreement with creditors to avoid entering the bankruptcy liquidation process.

One of the units, Jiangxi Zhengbang Breeding, has started the reorganisation process, the company said in a statement to the Shenzhen Stock Exchange on Monday.

A reorganisation of the firm, or potential liquidation, will be closely watched by the world’s largest pork industry and its suppliers at home and abroad.

Zhengbang produced almost 15 million hogs for slaughter in 2021, a 56% increase from the year before, and was one of the largest integrated players in China’s rapidly modernising pig industry.

However, it struggled with disease outbreaks and its size left it vulnerable when hog prices plunged in the second half of 2021.

Zhengbang reported a nine-month loss of 7.6 billion yuan ($1.05 billion) on Sunday, including a 3.4 billion yuan loss for the third quarter.

It said income had contracted 75% in the third quarter to 3.3 billion yuan, even as hog prices rallied during the period and its peers reported profits.

In July, media reports suggested it was not feeding some of its pigs because of its cashflow problems.

The company said in response that there was “occasional interruption of feed supply in a few areas, caused by low hog prices, COVID and the company’s tight liquidity.”

It said that the “temporary feed cut” would not affect normal production.

Zhengbang’s shares fell 4.1% on Monday to 3.51 yuan.

($1 = 7.2613 Chinese yuan)