February 25, 2013 4:52 pm

Genus plans further China expansion

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Genus, the animal genetics group, has stepped up its expansion into China, outlining plans to open a raft of joint ventures to improve the country’s pork farming techniques.

China consumes almost half the world’s pork, and the Asian powerhouse’s increasing urbanisation has driven demand for plentiful, low-cost meat through more industrialised farming techniques.

Hampshire-based Genus – a leading provider of the bovine semen needed by both dairy and beef farmers, as well as tailored pig breeding stock for commercial pork farmers – on Monday revealed its second joint venture in China and highlighted its strategy of opening several more each year until 2016.

“These joint ventures allow us to grow our business in China,” said Karim Bitar, chief executive of the FTSE 250 company.

“We are on track to do two or three [joint ventures] per annum for the next three years. We are focused on the quality and strategic fit of the joint venture partners.”

The company’s latest joint venture – a partnership with Shennong Agricultural Group – involves a £2.7m investment for a 65 per cent stake in a 1,000-pig strong breeding farm in Yunnan Province.

The move broadens Genus’s foothold in the country that was initiated last year by the £8.7m joint venture with Besun Food Group to build a farm capable of holding 4,500 sows.

Mr Bitar, a former executive at pharmaceutical company Eli Lilly, said the success of its Besun joint venture – where its sows produce almost twice China’s average number of piglets per year – has prompted offers of further deals.

“That is a major accomplishment. The word is getting out,” he said of the Besun facility’s success.

The deals will be funded through the group’s cash flow, which has been impacted adversely by weather-related troubles at its South American cattle businesses.

Droughts in Brazil and floods in Argentina held Genus’s revenues relatively flat at £167.2m in the six months to December 31, while animal feed prices were £1m higher than the same period a year ago.

Pre-tax profit edged down £1.2m to £24.8m after an increase in the valuation of its beef and porcine biological assets was lower than previous years.

Diluted earnings per share fell back from 29.9p to 28.4p, and the interim dividend was increased from 4.5p to 5p.

Mr Bitar acknowledged that the UK’s horsemeat scandal would not benefit Genus financially but would heighten consumers’ concerns over the provenance of their meat.

“Genus continues to benefit from the long-term steady increase in demand for animal protein, which coupled with the company’s global footprint has driven a remarkably consistent financial performance,” said Jens Lindqvist, analyst at N+1 Singer.

Genus shares fell 1.7 per cent to £14.31.

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