HKFoods and Atria: Export licenses for poultry to China strengthen the earnings potential
Translation: Original published in Finnish on 10/31/2024 at 7:00 am EET
The export potential to the significant Chinese market supports the overall margin level of poultry production and enables an increase in production volumes in the long term. We do not change our forecasts but estimate that the annual earnings impact could, in a positive scenario, reach millions of euros in the long term. However, increasing export volumes may take several years and, on the other hand, there are also political risks involved.
Export licenses were confirmed during a political visit
Both Atria and HKFoods announced on Wednesday that they had received an export license to export poultry to China. The aim of obtaining the licenses was already known, but due to the bureaucracy and politics involved in the authorization process, it was challenging to assess when the export licenses would be granted. The granting took place during Finland's President Alexander Stubb’s visit to China. Atria and HKFoods have already exported pork to China. For China, imports are also about politics aimed at influencing foreign policy and China’s own export opportunities. For example, EU tariffs on electric cars have led China to threaten to impose restrictions or tariffs on pork produced in the EU, which could have a negative impact on the European meat industry.
Exports provide more tools to improve the earnings level
We estimate that if successful, the annual earnings impact of Chinese exports could be in the order of millions of euros for both companies in the long term. The Chinese export channel enables more efficient management of the meat balance and an improvement in the overall margin level of poultry production, as especially certain bone-in parts such as wings and toes provide a better price in China compared to the European export market. In terms of pork, Finland has exported mainly products for which there is no domestic demand to China. Poultry is a growing segment in China and we see a wider export potential compared to pork, but this naturally requires companies to, e.g., strengthen their brand and quality image among local customer companies. The companies already have customers in China through pork exports, e.g., in the restaurant segment and the food industry. HKFoods announced that it will start exporting already at the end of 2024 and Atria at the beginning of 2025.