China Yurun Food Group Ltd. (1068), the nation’s second-largest meat-product supplier, fell to a more than five-year low in Hong Kong trading after its chairman and founder Zhu Yicai left active management of the company.
China Yurun declined 9.2 percent to HK$6.43 as of the mid- day break, headed for its lowest price since October 2006. The city’s benchmark Hang Seng Index dropped 1.4 percent.
The company appointed Chief Executive Officer Yu Zhangli as chairman and named Li Shibao as his replacement, the change coming less than ten days after it rejected allegations of accounting irregularities and contaminated products as “groundless.” Yu was named CEO in March after the company said first-quarter earnings suffered from a 2011 news report about illegal additives in some of its meat.
“We are cautious about its recovery progress and the impact on both fundamentals and sentiment of the leadership reshuffle,” said Jessie Guo, an analyst at Jefferies Hong Kong Ltd., who today cut her price target on the stock to HK$7.80 from HK$9, in a note to clients. “Regaining market confidence will still take time.”
Yu now becomes chairman, replacing Zhu Yicai, who also quit as an executive director and was appointed honorary chairman and senior adviser, Yurun said in a July 6 statement.
On June 28, the Nanjing-based meat processor fell 13 percent in Hong Kong trading to HK$6.51, the lowest since October 2006, amid speculation about its use of cash and loans. Yurun’s “large amount of cash on hand” raises questions because it also has low interest income and a high level of loans, Sean Zhang, an analyst at SWS Research Co., wrote in a note that day.
Yurun’s 2011 profit dropped 34 percent to HK$1.8 billion ($232 million), the company said on March 9. That missed the median estimate of HK$1.94 billion from 20 analysts surveyed by Bloomberg News. The company, which publishes earnings semi- annually, doesn’t provide quarterly numbers.
“The company failed to clear investors’ doubts in many aspects,” said Forrest Chan, an analyst at CCB International Securities in a phone interview today. “Yurun didn’t give any operational sales updates to us which makes it very hard for us to properly analyze the company.”
Zhu, who founded Yurun in 1993, stepped down as chairman because of “engagements and commitments in serving the community and his personal investments, which require more of his dedication,” Yurun said.
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