Genus profits hit by Chinese weakness, but revenues top estimates

3rd Sep 2014 08:35

Animal genetics group Genus said a "challenging year" had meant results fell short of its own growth objectives, even though they beat analyst expectations.Revenues rose 8% in actual exchange rates (12% at constant rates) to £372.2m in the 12 months to 30 June, with the divisions ABS (dairy and beef cattle) and PIC (pig) growing by double-digit constant-currency percentages. This came in ahead of broker N+1 Singer's estimate of £367.3m.However, profits in Asia were sharply lower against strong comparatives. The company said results were driven lower by tough conditions in China, "where we invested in capacity and porcine market conditions were poor".Adjusted annual profit before tax totalled £39.3m, down 8% on the year before at actual exchange rates but broadly in line with forecasts. On a constant-currency basis, profits were flat.The company explained that its performance was also hit by the strength of sterling, given that it earns much of its profit in US dollars and other currencies.Meanwhile, results were hampered by the previously-announced porcine epidemic diarrhoea virus (PEDv), which affected over half the swine herds in North America and Mexico, as well as herds in Canada, South Korea and Japan.Genus explained that PEDv leads to severe mortality rates in young piglets and has led to a 5-10% decline in weekly US pig slaughter since March. This decline is expected to accelerate in the second half of the 2014 calendar year."Although we face some continuing headwinds, we expect to perform in line with expectations in 2015," said chief executive Karim Bitar.He said that the board is "cautiously optimistic" that recent challenges are "starting to abate".The stock was up 1.6% at 1,153p in early deals on Wednesday.Helping sentiment on Wednesday was Genus' announcement of a new agreement in China with Riverstone Farm, representing its first commercial "multiplier" in the country.Under the multiyear deal, Genus PIC will exclusively stock and sustain Riverstone's new pig production project in China, with a total anticipated herd size of 24,000 sows."These results add to confidence levels that Genus is poised for earnings recovery," said broker Liberum.Shares were up 0.7% to 1,143p at 08:35 on Wednesday.BC