Genus cuts full-year profit outlook

Animal genetics company Genus cut its full-year profit outlook on Tuesday as it pointed to "very challenging" market conditions in the porcine business in China.

The porcine genetics business in China is now expected to be modestly loss-making in the second half of the year, versus a profit of £8.8m in the first half. As a result, full-year pre-tax profit is set to be lower than the company previously expected.

Genus noted that market researchers are currently expecting a recovery in the China porcine market in the summer as the supply decreases and consumer demand for pork continues to increase, but said there is uncertainty as to the timing of when the demand for porcine genetics will improve.

In an update for the four months to 30 April, Genus said that with the exception of China, it achieved "good trading" in its porcine business, with strong volume and royalty revenue growth, and good operating profit growth.

North America, Latin America and Europe all delivered strong growth in operating profit, it said, while Asia saw a drop in operating profit due to the performance in China.

"Since December 2022 the Chinese porcine market has been weak, reflecting high supply of slaughter pigs following widespread African Swine Fever (‘ASF')," it said.

Expectations of a recovery in the market grew in February, when the pig price rose. However, since then the pig price has fallen back below 15 RMB/kg, with continued widespread ASF outbreaks and subdued demand.

"At these prices, producers are unprofitable, and many are not replacing and rebuilding their sow herds at the current time. Due to the volatile porcine market PIC China's trading has been weaker than the first half of the fiscal year, achieving lower revenues, with operating profit also impacted by costs associated with the clearance of inventory at two PIC farms that were infected by ASF in the period."

At 0815 BST, the shares were down 10% at 2,308p.