On the evening of October 29, the leading company in the hog farming industry, Muyuan Foods, revealed its third-quarter financial report for 2024, highlighting its robust growth amidst a fluctuating marketWith a market capitalization of approximately 235.4 billion yuan, Muyuan Foods has demonstrated remarkable resilience and adaptability in the face of economic challengesThe report reveals that from January to September of this year, the company generated a total revenue of 96.775 billion yuan, marking a year-on-year growth of 16.64%. More impressively, its net profit surged to 11.246 billion yuan, reflecting a staggering increase of 769.69%, while the net profit attributable to the parent company's shareholders reached 10.481 billion yuan, a growth of 668.90% compared to the previous year.

A significant aspect of Muyuan Foods' success can be attributed to its decreasing production costs

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By September, the complete cost of pig farming had dropped slightly below 13.7 yuan per kilogram, a reduction of 2 yuan per kilogram compared to the start of the yearThis trend of cost reduction suggests a continued competitive edge in the market, allowing the company to maintain high profit margins.

Moreover, as much as the firm is focused on increasing its profitability, it also prioritizes rewarding its investorsThe announcement includes a proposal to distribute a cash dividend of 8.31 yuan for every 10 shares held, culminating in a total payout of 4.5 billion yuan, which constitutes 40.06% of the company's net profits from January to September 2024. Such a proactive approach in returning funds to shareholders reflects the company's commitment to fostering strong investor relationships and confidence in its growth trajectory.

In the third quarter alone, Muyuan Foods reported a net profit exceeding 10 billion yuan, specifically reaching 10.221 billion yuan

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This marks only the third instance in the company's history where it has surpassed the 10 billion yuan profit threshold in a single quarter, after doing so in the third quarter of 2020 and the fourth quarter of 2022. Analyzing the factors behind this success, it is evident that the increase in both the volume and average selling price of live pigs contributed significantly to overall performance improvementsFurthermore, the company achieved a remarkable growth in sales, reaching the sale of 50.144 million pigs during the first three quarters, with the third quarter alone accounting for 17.756 million pigs, reflecting a year-on-year increase of 6.04%.

On the sales front, the numbers were equally impressive, with the company maintaining a well-balanced increase in both quantity and pricingThe average selling price of commodity pigs during the summer months (July to September) remained elevated, illustrating a profitable gap between sales revenue and production costs

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For instance, the selling prices during these months were recorded at 18.3 yuan/kg, 19.71 yuan/kg, and 18.65 yuan/kg respectively, which are significantly higher than the breeding costs.

Contributing to this remarkable turnaround in performance is not only the favorable market conditions but also Muyuan's relentless focus on cutting costsAs per reports, the complete cost of hog farming has been on a continuous decline since the beginning of the yearThe initiative to lower costs by decreasing from 15.8 yuan/kg at the start of the year to less than 13.7 yuan/kg by September indicates a more than 10% drop in operational expensesThis achievement can be largely attributed to improvements in production efficiency and meticulous management practices, as stated by Muyuan's Secretary of the Board, Qin Jun.

In addition, the announcement disclosed that Muyuan Foods generated a net cash flow of 29.178 billion yuan from operating activities in the first three quarters

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The company's debt-to-asset ratio stood at 58.38%, showing a decrease of 3.43 percentage points from the previous quarter, suggesting sound financial management and stability.

As for the dividends, the distribution strategy reflects the company's commitment to maintaining a high payout ratio, ensuring that at least 40% of profits are returned to shareholdersHistorically, since the company went public, the total amount returned to shareholders via dividends and share buybacks approaches 17 billion yuan, showcasing a consistent pattern of sharing profit with investorsIn the latest financial year alone, the company distributed nearly 4 billion yuan in dividends, achieving a payout ratio of over 30% of its attributable net profit.

Furthermore, Muyuan’s proactive approach to financing continues to benefit its growth strategyEarlier in October, the company signed a contract to secure a loan of 2.4 billion yuan at a low annualized interest rate of 2.25%. This financial maneuver is set to enhance the capital structure while reducing overall financing costs

Additionally, the company also announced a plan to allocate approximately 3 to 4 billion yuan towards share repurchases, aimed at implementing employee stock ownership or equity incentive plans.

In summary, the entire hog farming industry in China is entering a phase of recovery, characterized by rising pig prices and declining operational costsOther industry players, such as Wens Foodstuff Group, achieved revenues of 75.384 billion yuan in the first three quarters, growing by 16.53%, and a net profit increase of 241.47%, signaling a similar upward trend across the sectorAdditionally, Jin Xin Nong and Da Bei Nong also posted significant profit increases, signifying that the overall industry is progressively adapting to market changes.

Experts have indicated that the previous price rises are expected to stabilize while cost reduction strategies will become paramount as the industry adapts to the reality of thin profit margins