Yurun to Make Statement on Drop to Six-Year Low: Hong Kong Mover

China Yurun Food Group Ltd. (1068) said it will make a statement today after the market closes in Hong Kong regarding its drop to the lowest in almost six years.

China’s second-largest meat-product supplier fell 13 percent to HK$6.51, the lowest since October 2006, at the close of trade in Hong Kong. The benchmark Hang Seng Index fell 0.8 percent.

The company’s “large amount of cash on hand” raises questions because the company also has low interest income and a high level of bank loans, Sean Zhang, an analyst at SWS Research Co., wrote in a note to clients today. Yurun reported HK$5.1 billion in cash on hand and bank loans of HK$5.9 billion, Zhang wrote.

“Yurun requires cash for daily operations including hog purchases,” Winny Yip, a spokeswoman for the company, said by phone today. “Terms for bank loans were agreed upon in the past.”

Yip said the company would make an announcement about the share price move after the market closes today in Hong Kong.

Yurun said in its annual report that it was under “enormous pressure” after the National Business Daily reported in September reported that meat sold by one of the company’s units contained clenbuterol, an illegal additive.

The company’s first-quarter profit was “far from reaching normal levels,” Chairman Zhu Yicai told reporters in March.

Net income dropped 34 percent from a year earlier in 2011, the company reported in March, while gross profit margin fell 5.8 percentage points to 8.6 percent from a year earlier.

To contact the reporters on this story: Marco Lui in Hong Kong at mlui11@bloomberg.net; Billy Chan in Hong Kong at bchan101@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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