Chinese pork group Zhongpin has seen its first-quarter profits drop almost 30% drop despite a 31% jump in sales.
Net income fell 27.8% to US$12.2m in the three-months to the end of March. Earnigns per share fell 29.8% to $0.33, from $0.47 in the comparable period of last year.
However, sales rose by 31% in the quarter, climbing to $374.1m, the group added.
Commenting on the result, chairman and CEO Xianfu Zhu said the competitive nature of the consolidating Chinese pork sector and the battle to gain market share meant that pork meat prices did not increase as quickly in the period as hog prices, resulting in poorer margins.
"Further, substantial promotion costs were required to be competitive in both keeping and gaining market share. As expected, we incurred higher expenses in promotion, marketing, and operations to build market share and prepare the company for increasing success in the future," he added.
Nevertheless, Zhongpin maintained its 2012 EPS guidance of $1.36-1.92, with net margin expected to fall in a range of 3.3-4.2%.
Zhongpin's board is considering a non-binding proposal from Xianfu to acquire all of the outstanding shares not owned by him. In a separate announcement today (10 May), the board said it had appointed Barclays as its financial advisor on the offer. The board said its evaluation of the offer is ongoing.
