Summary of Key Points
Wens Group's 2026 interim report showed a loss of over 4.3 billion yuan, marking the first interim loss since 2024 and the first time in 2021 that both revenue and profit have declined. The main reason is the sharp drop in pig prices in the first half of the year (a decrease of nearly 30% year-on-year, at one point falling to a level not seen in nearly two decades), which has led to significant losses in its pig farming business. The loss in the second quarter more than tripled quarter-on-quarter (3.3 billion yuan in losses per quarter), and the company's debt level also increased significantly. However, pig prices have rebounded by nearly 26% in the third quarter, and the industry is waiting for a reversal in the cycle, but the turning point for profitability still depends on the recovery of demand and the reduction of overcapacity.
Detailed Analysis
1. Performance Shift from Profit to Loss: Pig Prices Drop to "Rock Bottom" Levels
Wens Group's revenue in the first half of the year was 46.7 billion yuan (a 6% decrease year-on-year), with a net loss of 4.366 billion yuan (compared to a profit of 3.4 billion yuan in the same period last year), mainly due to the poor performance of its pig farming business.
- Pig Prices Plummeted: The average price of pigs in the first half of the year was 10.5 yuan per kilogram, a 29.6% decrease from last year, and in mid-April, it dropped to 8.77 yuan per kilogram (less than 4.4 yuan per half kilogram), far below the industry's average cost.
- Pig Farming Business in Serious Losses: Despite selling 17.8 million pigs, revenue decreased by 18.6%, and the gross profit margin was -9% (compared to 20% last year), meaning that the company lost money on each pig sold, pushing the overall profit into the negative.
2. Second Quarter Losses Doubled: Pig Prices at Lowest Level in Nearly Two Decades
The loss in the first quarter was 1 billion yuan, and in the second quarter, it increased to 3.3 billion yuan, a more than two-fold increase in losses.
- Even Worse Situation in the Second Quarter: Pig prices hit a bottom in April, and the entire industry fell into deep losses (the price ratio of pigs to feed was less than 5:1, indicating that the cost of feed exceeded the revenue from selling pigs). As a leading pig farmer with large-scale operations, Wens Group suffered even more.
- Comparison with Other Businesses: The chicken farming business was profitable in the first half of the year (633 million chickens were sold, with revenue increasing by 15% and a gross profit margin of 5.5%), but the pig farming business accounted for too large a proportion of total revenue (nearly 60%), and the profits from chicken farming were not enough to offset the losses.
3. Debt Soars: Borrowing to Survive, but Not in Financial Trouble for Now
As of the end of June, Wens Group's debt-to-asset ratio rose from 50.57% at the beginning of the year to 58.94%, indicating a significant increase in debt.
- Changes in Debt Structure: Short-term loans increased from 0.75 billion yuan to 4.5 billion yuan, long-term loans increased from 8.8 billion yuan to 7.5 billion yuan, and there is nearly 10 billion yuan in debt that is about to mature (mainly from convertible bonds issued previously).
- Company's Financial Stability: The company has 6.5 billion yuan in cash, can borrow another 30 billion yuan from banks, and has a bond issuance capacity of 10 billion yuan, so it does not currently face a risk of a broken capital chain.
4. Pig Prices Rebound in the Third Quarter: A Reversal in the Cycle is Still to Come
Since July, pig prices have risen by 11%, rebounding by nearly 26% from the low point in April and are now around 11 yuan per kilogram.
- Reasons for the Rebound: The peak consumption season has arrived (for school celebrations and pre-school purchases), and leading companies have voluntarily reduced pig sales, alleviating some of the supply pressure.
- Profitability Turning Point Not Yet Reached: The current inventory of breeding sows is still slightly higher than the normal level (37.8 million vs. the target of 37.5 million), indicating that supply remains ample. Additionally, consumption has not been strong during this season (compared to previous years' peak prices during the Spring Festival and the Golden September and Silver October periods), so the current price rebound is only reducing losses, not yet leading to profitability.
5. Industry-wide Challenges: Surviving the Bottom of the Cycle
Wens Group's losses are not isolated; the entire pig farming industry is experiencing difficulties at the bottom of the cycle.
- Accelerated Capacity Reduction: The inventory of breeding sows nationwide decreased by 6.5% in the second quarter, and policies are also promoting capacity reduction (the target is to reduce from 39 million to 37.5 million sows), but it will take time to see the effects.
- Future Outlook: Companies may start to profit if pig prices can sustainably rise above 12 yuan per kilogram. The fourth quarter is a traditional peak consumption season, and if demand increases and overcapacity continues to be reduced, the industry could see a reversal in the cycle next year, but for now, patience is required.
Conclusion
Wens Group's interim report reflects the challenges at the bottom of the pig cycle: sharp price drops have led to losses, and although debt has increased, the company's financial stability remains. The rebound in pig prices in the third quarter brings hope, but the turning point for profitability is still uncertain. For individual investors, opportunities may arise after overcapacity is reduced and prices continue to rise; however, for now, it is important to monitor changes in consumer demand and supply. For the industry as a whole, this period of adjustment may eliminate some smaller and medium-sized farmers, while leading companies with financial strength may survive, but they will still face significant performance pressures in the short term.