Click on the image for details Yurun Food, once a leading domestic meat product company, is now in a precarious situation. According to the latest interim results, Yurun Food's revenue in the first half of the year was approximately HK$5.8 billion, a sharp decline of 35.4%, and it continued to record losses. The issue of overdue loans remains unresolved, raising concerns about its ability to continue as a going concern. The company has reduced its workforce by 2,000 employees. Management is currently seeking potential strategic investors or continuing to sell non-core assets to alleviate pressure. Meanwhile, Yurun Food is drifting further apart from its former rivals. Although also affected by industry factors, Shuanghui Development, which was once jointly known with Yurun as the two major meat giants in the north and south, saw a slight decline in performance in the first half of the year, but its total revenue of 24 billion yuan was several times that of Yurun. According to the announcement, after a 17% revenue decline and a loss of 2.3 billion yuan last year, Yurun Food's performance deteriorated rapidly in the first half of this year. Revenue during the period was only HK$5.8 billion, just one-third of the historical peak of HK$16.5 billion in the same period of 2011. The loss in the first half narrowed slightly to HK$550 million, but compared with the contraction in revenue, the deterioration in Yurun Food's operations has not significantly improved. In fact, the decline in pork prices in the first half of this year was undoubtedly a positive for slaughterhouses, but Yurun Food faced a new problem of declining sales. The reporter learned that from March to June this year, pig prices entered a downward channel again. By the end of June, the average national slaughter price was 14 yuan per kilogram, down about 20% from the end of last year. Yurun stated that although the pressure on production costs had eased slightly, sales pressure continued to increase. Data shows that Yurun's main business, chilled meat and frozen meat, declined significantly, with segment revenue of HK$4.75 billion, down nearly 40% from 2016. Low-temperature meat products business revenue also decreased by 6.3% compared with the same period last year. While performance declined, Yurun Food's financial pressure continued to increase. As of June 30, 2017, Yurun's cash balances plus time deposits, pledged deposits, and restricted bank deposits totaled approximately HK$210 million, a year-on-year decrease of 39% from HK$350 million in the same period. As of June 30, loans due for repayment amounted to HK$7.15 billion, of which HK$6.75 billion would mature within one year. Although Yurun believes that these loans can be renewed upon maturity, the issue of overdue loans that began last year has not been fully resolved. The announcement shows that as of June 30, 2017, approximately HK$700 million in loans had not been renewed or repaid by the end of the reporting period. Yurun stated that it has been discussing renewals with relevant banks, but this requires process and time. Some loans have already reached agreements with banks to extend repayment to the second half of 2017 or later. Overdue loans have no significant impact on the company's business operations. In difficulty, Yurun had to tighten its belt and focus on costs. In addition to strictly controlling capital expenditure, Yurun also cut staff and administrative expenses. The announcement shows that the total number of employees in the first half of this year decreased from 12,000 at the end of 2016 to 10,000, which may mean 2,000 people left or were laid off. It also saved HK$140 million in distribution and administrative expenses. The reporter noted that Yurun's performance has declined year after year in recent years. In 2011, Yurun Food's revenue was still HK$32.3 billion, but by 2016 it had fallen to only HK$13.7 billion. More than 20 years ago, founder Zhu Yicai built up the Yurun empire by acquiring more than 50 bankrupt or nearly bankrupt state-owned slaughterhouses and food factories, but now it is in jeopardy. The announcement shows that there may be significant uncertainty about Yurun Food's ability to continue as a going concern. The company is currently taking a series of measures to alleviate liquidity pressure, including negotiating loan renewals, cutting costs, accelerating collections, and continuing to seek potential strategic investors or sell non-core assets. However, Shen Meng, executive director of Chanson Capital, told Yicai that Yurun's problem is not the lack of a white knight, but the lack of a decision-maker who can make final decisions. After the founder was asked to cooperate with investigations, Yurun lost its reliance on normal business decisions, and the entire enterprise is in a state of "driverless." Although senior executives continue to maintain daily operations, the company lacks strategic support. Maintaining operations by following the old rules will not help reverse Yurun's current situation. Selling non-core assets alone cannot completely solve the problem. Yurun needs deep-seated reform. It is worth noting that when mentioning Yurun, one cannot avoid mentioning Shuanghui. As the two major meat giants in the north and south of China, they competed for the top spot for many years, but now their performances are vastly different. In the first half of this year, although affected by pork prices and consumption upgrades, Shuanghui Development's performance declined, with revenue down 6%, but it still recorded revenue of 24 billion yuan and net profit of 1.9 billion yuan. In 2016, Shuanghui's revenue was 51.8 billion yuan, with total profit of approximately 5.9 billion yuan. Zhu Danpeng, a food industry analyst at the China Brand Research Institute, told Yicai that from an external environment perspective, Yurun and Shuanghui face the same external environment. On the one hand, pig prices bring pressure to enterprises; on the other hand, with the popularization of Westernized lifestyles and the rapid development of logistics and specialty industries, beef and mutton are eroding the market share of pork consumption. "The decline in pork consumption is a common challenge for meat product enterprises. But in terms of top-level design, Shuanghui is clearly superior to Yurun." In Zhu Danpeng's view, on the one hand, the investigation of Yurun's founder has greatly affected Yurun's medium- and long-term strategy, government subsidies, and cooperation. On the other hand, while Yurun was busy diversifying, Shuanghui thought more deeply about its business, such as acquiring Smithfield Foods, the world's largest pork company; and having a more complete business layout, especially in the southern regions with strong consumption capacity, where Shuanghui's sales layout is far superior to Yurun's. In 2013, Shuanghui spent US$7.1 billion to acquire Smithfield Foods, gaining access to low-cost foreign pork sources. Although foreign pork prices have fluctuated recently, at least during the period of soaring domestic pig prices from 2015 to 2016, this investment was considered a guarantee for Shuanghui to counter the cycle and achieve stable performance growth. Source: Yicai, Author: Luan Li Click on the image for details The Third (CFIC) China FMCG + Internet Conference will be held in Chongqing in October 2017. At this conference, New Distribution has invited 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to participate. The theme of this conference: New Forces, New Ecosystem. We will invite well-known domestic B2B industry experts, mentors, and B2B platform founders to discuss the following topics:

********How can the FMCG industry leverage B2B to achieve new growth opportunities

********How to build the new supply chain behind new retail

********How can intra-city logistics help B2B achieve leapfrog development Highlights of this conference: The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"

B2B and investor project closed-door matchmaking meeting

********Conference site + exhibition center, dual internet technology exhibition

********Leaders from well-known enterprises in various fields such as Alibaba, EAS, Best Store Plus, GLP, Unilever, Haiding, and Yunmei will give on-site speeches and present pioneering views. October 17-18, 2017 Chongqing International Expo Center Registration is now open. Long press the QR code below or click "Read Original" to register. Early bird tickets before September 15 enjoy a 30% discount! Add friend and note "Conference Registration" Click the links below to review the highlights of the first and second FMCG + Internet conferences: 2016 "FMCG + Internet" Summit Forum 2017 (Second) China FMCG + Internet Conference Click the links below to review the highlights of the first and second FMCG + Internet conferences: 2016 "FMCG + Internet" Summit Forum -END-