British livestock genetics firm Genus Plc reported better-than-expected annual earnings on Tuesday, helped by a surge in demand from China's pig farmers who are rebuilding a herd devastated by disease.
Genus shares hit a record high as the company turned in 17% higher earnings per share for the year ending June at 85.4 pence, versus estimates ranging between 76.2 and 79 pence from analysts at Liberum Capital, Jefferies and Investec.
Operating profit, including joint ventures but excluding gene editing, rose 12% to 81.2 million pounds ($106.38 million).
Its revenue increased 13% to 551.4 million pounds, with revenue from the porcine genetics segment up 17%, thanks to strong volume growth in China.
Genus, which produces breeding livestock through genetic improvement, previously had around 2% of the Chinese market, but it doubled its supply chain in China over the year by allowing trusted customers to 'multiply' its genetics.
China's breeding herd shrank by around half after deadly hog disease African swine fever killed millions of pigs in the country during 2018 and 2019. The industry has since embarked on a huge restocking effort.
The rebuild is being led by large, more professional companies who are more likely to buy quality genetics, Genus CEO Stephen Wilson told Reuters in an interview.
The top 50 producers now own around 40% of the market in China, the world's top pork producer, versus 10% two years ago in a promising turn for Genus, Wilson added.
The company is aiming to have more than 100,000 so-called great-grandparent and grandparent breeding stock next fiscal year, Wilson said, referring to the number of females on its farms and customer farms that are producing parent animals.
"I could easily envisage wanting to double that again."
Genus' revenues come from breeding stock sales and royalties.
Wilson added that although the herd is recovering rapidly, female pigs normally destined for slaughter are being retained for breeding because of the dearth of sows and currently make up at least half of the herd. But productivity from such pigs is only around two thirds of a sow bred to be a mother, he said.
"Over time, all those will need to be replaced," he said, adding this will create demand for Genus even when high pig prices begin to fall as the herd recovers.
Genus shares hit a record 3,780 pence, and are currently trading at 3,716 or up 4.441%. ($1 = 0.7633 pounds) (Reporting by Dominique Patton; Editing by Himani Sarkar)
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