Genus, a leading global animal genetics company, has pubished the following trading update for the period from Jan. 1, 2023 to April 30, 2023, and a revised outlook for the 2023 fiscal year.
During the period under review Genus said it achieved good trading in its porcine business, with the exception of China, where the market conditions have been very challenging. Overall, in the four months to April 30, PIC achieved strong volume and royalty revenue growth, and good operating profit growth. North America, Latin America and Europe all delivered strong growth in operating profit, while Asia experienced a decline in operating profit due to the performance in China.
Since December 2022 the Chinese porcine market has been weak, reflecting the high supply of slaughter pigs following widespread African swine fever. Expectations of a recovery in the market grew during February 2023, when the pig price rose from a low of 14.1 RMB/kg to 15.9 RMB/kg on March 2. However, since then the pig price has fallen back below 15 RMB/kg and is currently 14.3 RMB/kg, with continued widespread ASF outbreaks and subdued demand. At these prices, producers are unprofitable, and many are not replacing and rebuilding their sow herds at the current time. Due to the volatile porcine market PIC China's trading has been weaker than the first half of the fiscal year, achieving lower revenues, with operating profit also impacted by costs associated with the clearance of inventory at two PIC farms that were infected by ASF in the period.
The bovine business saw better trading than in the first half of the fiscal year, with good volume and revenue growth in North America, Europe and Asia. Market conditions remained challenging in Brazil, however all regions achieved operating profit growth. ABS's revenue and profitability was better than prior year due to the growth achieved in sexed volumes as well as price increases.
Genus says it continues to make good progress towards its strategic objectives with an increase in R&D investments as planned, supporting the long-term growth prospects of the group. The porcine reproductive and respiratory syndrome virus-resistant pig program has made further positive progress. An important milestone was the final animal testing for the U.S. Food and Drug Administration, which was successfully completed this month. Genus now expects to complete final submissions to the FDA over the summer, slightly ahead of the previous timeline.
Market researchers are currently anticipating a recovery in the China porcine market in the summer as the supply decreases and consumer demand for pork continues to increase, but there is uncertainty as to the timing of when the demand for porcine genetics will improve.
Due to the challenging porcine market conditions in China, the firm now expects PIC China to be modestly lower in the second half of the year, which compares with a profit of £8.8 million delivered in the first half of the year. Consequently, the board anticipates that the group's profit before tax will now be lower than its previous expectations for the full year.
Despite this the board remains confident that due to the investments made PIC China remains well positioned to take advantage of the recovery and capture the growth opportunity as it develops, and that the group's strategy to commercialize the PRRSv-resistant pig is one of many opportunities ahead for Genus.
The group expects to announce its preliminary results for the year ending June 30 on Sept. 7, 2023.