United Food vs People's Food - 15th June 2007

Shortage of live pigs and rising cost
The current shortage of live pigs in China, due to disease and supply control by farmers (rising cost of rearing without passing cost to customers resulted in margin erosion), seemingly bode well for Unifood. For news on the shortage of live pigs can be found online, one of them is given here.

People's Food vs United Food
People's Food's core business focuses and does very well in processing live pigs into fresh, frozen and processed meat products. United Food, on the other hand, struggles to stick a hand in everything (nicely labelled as "vertical integration"). They are involved in pig rearing, animal feed, meat processing, soya bean processing, health care products etc.

Possible recovery?
Due to the surge in price of the live pigs, People's Food is expected to be affected. They duly issued a business update. On the other hand, if the farmers does react in the way the report depicted, the first to benefit should be United Food's two business segments;

1. Pig rearing
2. Animal feed

Reservations
Will this result in better quarters ahead for United Food? I do hope so but I am still sceptical. Their Fresh, Chilled and Frozen Pork segment also faced the brunt from the escalating cost of live pigs. Their Q1 2007 results quoted 61.16% lower pre-tax profit compared to Q1 2006. Going forward, I wonder whether the above 2 segments can offset the expected plunge in this segment.

Inspired by a Chinese article at Zaobao and another article posted on Shareinvestor forum.