Reduce costs, adjust structure, and focus more. "Focus is about clenching your fists and doing something more central. Liu Yonghao said.Text: "Chinese Entrepreneur" reporter Li YanyanEdited by Zhao Jiankai
Header diagram ** in the attempt library
There is probably nothing that will make Liu Yonghao unable to sleep.
Despite being 72 years old, this warm-hearted entrepreneur is still in good spirits and active in the industry. He has a regular schedule, sleeps every night with his head on a pillow, loves meat, loves rice, and insists on walking 10,000 steps a day.
The unprecedented "cold winter" of the aquaculture industry has lasted for nearly three years, as the chairman of New Hope Group and the industry's recognized "Dinghai Shenshen Needle", he has conveyed faith and confidence to the outside world. He was often asked if he would be anxious and unable to sleep, and he asked, "Why be anxious?" ”
At the moment, a series of adjustments are being made intensively. On the evening of December 15, New Hope announced that it intends to give 51% of the equity of its subsidiary Shandong Zhongxin Food Group (hereinafter referred to as "Zhongxin Food") to China Animal Husbandry Industry and Commerce Group, hereinafter referred to as "China Animal Husbandry Group"). The transaction totaled 2.7 billion yuan, and after the completion of the transaction, China Animal Husbandry Group became the controlling shareholder of Zhongxin Food.
*: New Hope Announcement It is reported that the actual controller of China Animal Husbandry Group is the first enterprise China Agricultural Development Group (hereinafter referred to as "China Agricultural Development Group"), which is directly managed by the State-owned Assets Supervision and Administration Commission. The acquisition of Zhongxin Food, formerly known as New Hope Liuhe's poultry industry BU, covers poultry breeding, poultry slaughtering, cooked product processing, poultry product sales, etc.
That is to say, Zhongmu, which has been deeply involved in the upstream for many years, has invested in a mature downstream industrial chain and made up for the shortcomings of "duck chips". In the past, the industry covered "from the farm to the table" of New Hope Liuhe, and in the future, it will focus more on the two core businesses of "feed" and "pig breeding", concentrate resources, and become more refined and stronger. The two "big guys" of agriculture and animal husbandry are holding hands in the cold winter, and it can be said that they take what they need.
In addition to introducing strategic investment and helping listed companies focus on their business, New Hope has also made adjustments to its own business layout. Also on the evening of December 15, New Hope announced that it planned to transfer 67% of the equity of its Deyang New Hope Liuhe Food *** (hereinafter referred to as "Deyang Food") to Hainan Shengchen Investment *** (hereinafter referred to as "Hainan Shengchen"), with a transaction price of 1.5 billion yuan.
According to public information, the actual controller of Hainan Shengchen's equity penetration is Liu Yonghao.
This means that food companies will move from New Hope Liuhe to the New Hope Group system. New Hope insiders revealed to "China Entrepreneur" that the classification of food companies into the group is to help New Hope Liuhe achieve its business focus strategy on the one hand, and on the other hand, for the food industry with more obvious C-end attributes, it can also get more resource support and development space.
It not only recouped the funds, but also conveyed the determination of strategic adjustment to the outside world - behind the rapid adjustment, New Hope started the battle of winter.
Some analysts believe that at present, the valuation of the food industry and poultry industry in the four major business sectors of New Hope Liuhe has been clear, and the feed development is stable and the scale is the first in the world, and the valuation of the pig sector is very low according to the overall valuation of the existing company, which means that the current stock price of New Hope Liuhe may be undervalued.
New Hope is about to go through its 41st year, and it has traversed countless cycles, but this time it is facing particularly turbulent storms.
Looking around the industry, there is overcapacity of pigs, and pork ** is still on the decline. Since the first half of 2021, the entire pig breeding industry has been losing money for nearly three years. This is an experience that New Hope has never experienced since its listing. According to the financial report, in the first three quarters of this year, New Hope's net profit attributable to the parent company fell by nearly 40% year-on-year. At the end of September this year, Liu Chang, chairman of New Hope Liuhe, sent an internal letter saying that the company was in an "unprecedented difficult environment" and that "this winter battle is a battle for survival".
In the capital market, leading companies such as New Hope and Muyuan have also been repeatedly "sung down", and their stock prices have fallen to a historical low. Under the background of the downturn, on the evening of November 30, New Hope threw out a financing plan, planning to raise no more than 73500 million yuan, which is used for the digital and intelligent upgrading of pig farms and debt repayment, the latter accounting for about 2.2 billion yuan.
After the launch of the private placement plan, the secondary market reacted significantly, and New Hope's share price soared the next day, hitting a new low since February 2019. In the following days, the stock price recovered, and the market duality still exists. Some shareholders believe that the fixed increase in the current context is not conducive to the stability of the stock price, and some institutions have given an overweight rating, believing that the private placement has further strengthened the company's "safety cushion".
What's even more magical is that behind a series of business arrangements and adjustments that take the initiative to deal with the "cold winter", negative voices such as "Liu Yonghao admitted" are constantly fermenting. Liu Yonghao, the outstanding representative of China's first batch of private entrepreneurs and a typical figure of everlasting foundation, has fallen into an unprecedented whirlpool at the bottom of the cycle with the industry.
Private placement is a routine operation, and it just proves that listed companies have the confidence and conditions to use financial instruments, and contrarian financing is not only for long-term considerations, but also for the purpose of improving quality and reducing costs through transformation and upgrading. An unnamed New Hope executive described the storm as "caught off guard." "The current environment is something none of us have experienced, and the market under the influence of complex emotions may deviate from the judgment logic, which requires us to pay more attention to continuous communication with investors. ”
The executive revealed that two days before the announcement of the aforementioned announcement, Liu Chang led the executives to hold the "2024 Profit Pool Mining Work Conference". At the meeting, Liu Chang made it clear that he was currently in a "wartime state", and it was necessary to dig deep into the cash pool and fight food for all employees. "Our cash flow is safe, but no one knows how long this long winter will last, and businesses need to think long-term. Therefore, we have internally proposed to strengthen our ability to expand cash flow, reserve more grain for the winter, and be prepared for two to three years of hard life. ”
He said that during this period, New Hope will continue to reduce costs and increase efficiency, optimize tissues, and gain muscle.
The introduction of war investment, the restructuring of the business, and a larger business picture have unfolded in New Hope. On the occasion of this adjustment, Liu Yonghao accepted an exclusive interview with China Entrepreneur magazine, and responded to all topics of concern to the outside world, such as the original intention of introducing war investment and industrial sector adjustment, the controversy over private placement, how to get through the industry cycle and trough, and the company's future direction and measures.
The strength and influence of New Hope Group need no time to be repeated.
According to the official website, the group has the world's largest feed production capacity, China's leading poultry meat processing capacity, and is one of China's largest integrated meat, egg and milk merchants, with more than 100,000 employees working here. The founder, Liu Yonghao, is an "evergreen" among Chinese entrepreneurs, and New Hope is a perennial leader of China's private enterprises and one of the "world's top 500".
Liu Yonghao's confidence through the cycle comes from his confidence in the future and the strength of the enterprise, as well as the consideration and decision-making of "half a step faster". Even when a crisis comes, "we have a toolbox, we have room to maneuver." Liu Yonghao said.
Although the pig sector has suffered serious losses, the new hope of having a layout and diversified development in the industrial chain has more "baby" blessings in the trough period. This also makes the company more comfortable in dealing with crises than many companies.
Liu Yonghao said, for example, that New Hope Real Estate was passively developed due to the changes in the attributes of breeding land in the early days, and the moderate-scale standardized operation not only created good profits and cash flow, but also played an important role in stabilizing the agricultural and animal husbandry cycle. Even in today's real estate winter, New Hope Real Estate has not only "three green lines" for five consecutive years, but also remains profitable this year, with a net debt ratio of less than 30%.
Actively embracing the trough, "not lying flat", "not anxious", Liu Yonghao said that he did not delay anything recently. In these months, he has 1 to 3 hours spent on social responsibility related activities. The pressure is high, and social responsibility cannot be lost.
As of this year, the "Rural Revitalization Village Chief Class" initiated and practiced by New Hope has been held for three consecutive years. Every autumn, Liu Yonghao and Liu Chang will have in-depth exchanges with these village cadres, and organize top experts to give lectures to the village chiefs.
While caring about the cause of rural revitalization and fading out of the daily management of the company, Liu Yonghao is still planning for a longer-term future. Last month, he led a team to select 24 young outstanding management cadres and management trainees under the age of 30 from the group for a one-week training. Liu Yonghao inspected and studied Xi with young people, had in-depth exchanges, answered their questions, built consensus, and depicted the distance. Young people have always been the object of Liu Yonghao's most energy. "The organization needs to be renewed, and the future is in the young people. He said.
Digitalization, as the deep-water area of New Hope's transformation in recent years, has gradually blossomed and borne fruit. Last year, more than 200 core cadres from across the group participated in the four-month "Digital Transformation Strategy Acceleration Program" jointly sponsored by New Hope and Harvard Business School. This year, the digitalization project of the 7 major lighthouse projects has been implemented in various industrial chains of New Hope, and the organizational efficiency has been greatly improved.
In 1982, 31-year-old Liu Yonghao and his three elder brothers scraped together more than 1,000 yuan to start a business. Starting from raising dried quails, New Hope's industry extends from feed and breeding to food, with annual sales exceeding 270 billion yuan; By 2022, it will be exactly 40 years of ups and downs. Liu Yonghao is full of hope for the future, "We have to go through a new 40 years, and there will be the next 40 years, and the new hope will live to be 120 years old." ”
In the midst of the storm, the captain was firmly steering his ship. Thirty years after their business, they set the tone: "Out of the mountains and mountains, to the sea". On the 40th anniversary, it was proposed to "face the wind and waves and continue to sail". The agriculture and animal husbandry industry, where New Hope is rooted, is stable, rigid in demand, and has small profits and hard work. There are four seasons in a year, and it also has cycles. But it's down-to-earth, it's simple, it's always there, it's always renewable, it's always alive.
The following is an interview with Liu Yonghao by "Chinese Entrepreneur" (with deletion):
CE: What are New Hope's considerations for choosing "China Agricultural Development Group" to invest in the poultry sector? Why did you choose "feed" and "pig raising" as the group's main business?
Liu Yonghao:It should be said that we and China Agricultural Development is a two-way choice, China Agricultural Development subordinate to the animal husbandry of egg breeders, broiler breeders, breeding pigeons and breeding geese, etc., after we will have New Hope's own intellectual property rights of the "Zhongxin Duck" germplasm resources, to supplement the "duck chips", so that the layout of the seed industry is more perfect. In the past, China Animal Husbandry mainly cultivated the upstream of the industry, and this cooperation will also complement the downstream industrial chain.
New Hope Liuhe "settlement-style" breeding base. **Why did respondents choose China Agricultural Development? For us, we need to consider the industry and enterprises comprehensively, we do agriculture is the industry of the national economy and people's livelihood, if the partners also have experience in operating related industries, especially state-owned enterprises and central enterprises, we can better consider the strategic balance and food security security. Therefore, when we introduce strategic shareholders, we will tilt towards these two dimensions.
Overall, it's a win-win option. Previously, many people criticized New Hope Liuhe's business stall as too big, saying that your poultry, pigs, feed, and food, if any of these four pieces are taken out, you can be a listed company alone, and the industrial chain is too long. So we're also thinking about why we're always being questioned, and we're also reflecting. It is true that the company is too big, and there is a big business disease, and it needs to be adjusted.
Since pigs are losing money, do you want to continue to raise them? We discussed this matter internally, and later we chose feed and pig breeding as our core business. First, we have a large scale of feed, the world's No. 1 position is very stable, and feed can bring good cash flow; Second, pigs are a must for people's livelihood, we have also achieved the scale of the top three in the country, a number of breeding costs continue to decline, I believe that there will be opportunities in the future, and the transition of pigs from the first production to the second production has been the trend, we are optimistic about this field and the trend, third, the culture and management of the new hope Liuhe has advantages for this large-scale production and breeding, focusing on these two pieces can better play these advantages, and quickly see the results of reform.
CE: What is your vision for the development of the entire group behind the decision to adjust the food sector?
Liu Yonghao:New Hope started as a feed maker, and people have the impression that we are far away from the end consumer, although our beautiful ham sausage has a history of more than 20 years, and is about one of the oldest single product brands. Ten years ago, we proposed to be closer to consumers, and began to make efforts in the middle and lower reaches in the form of partnerships and building a new ecology.
The food sector has developed well in the system of New Hope Liuhe, and the advantage is that it can get the support of the company on the upstream raw material side, but the disadvantage is still in the characteristics of the industry and the management required.
As I mentioned earlier, the management and logic of making consumer goods and making feed and pig raising are different, one to b, one to c, the required talents, mechanisms, operation and management goals, market concepts, etc. are different.
The breeding industry has been losing money for almost three consecutive years, and New Hope Liuhe is under great pressure as a listed company, and adjustment is necessary. The decisions of focusing on the business and optimizing the management are also made after careful consideration. Taking the food business from Liuhe to the group can help Liuhe focus on strategy and return funds on the one hand, and can also give better play to their management advantages.
Of course, some people are worried that we are not the largest shareholder in the poultry industry, and the food business will be transferred to the group, which will affect the management and operation. I can tell you that our culture is not going to change. In the long run, such an arrangement is strategically beneficial to all parties and is more conducive to New Hope Liuhe to obtain more cash flow to survive the winter.
CE: Did you expect the recent private placement plan to cause fluctuations in the secondary market?
Liu Yonghao:During the trough period of the industry, everyone competes for confidence, endurance, cost, management, and anti-risk ability, and the core is your financial support, so that you can withstand the winter. Business and organizational change is one thing, and on the other hand, we have a platform for listed companies, through which appropriate financing of the capital market is extremely important to ensure that we can survive the cycle and grow.
In fact, many financial institutions and professionals believe that at this time, if there are active financial means and the support of capital forces, it is the greatest benefit for enterprises. Because it just proves that in extreme situations you have a better chance of surviving, and you are more resilient than others. When facing cyclical fluctuations, we have more confidence in our hearts, because we have more quilts and grain and grass to protect against the cold winter.
Making good use of the power of the capital market is a positive and healthy way for the company. Recently, some people think that there is no big problem with you, so you are doing the fixed increase, but there are also many people who say that you see New Hope because the fixed increase is more stable and reliable, and their advantages in the industry are stronger, which I think makes sense.
CE: Focusing on the main business is the key word of New Hope at this stage. For industrial development, how to grasp the scale of diversification and specialization?
Liu Yonghao:We have a lot of babies, and when you are stressed, you can take them out. And by working with others, they can generate greater value, which helps us focus on our main business. First, make our energy more focused and specialize in the main business. Second, with the help of these treasures, help us get through the cycle, and the trough period depends on how thick everyone's quilt is, so we can do some layout and structural adjustment.
Our listed company has been developing for many years, and the diverse means of the capital market are also the confidence to support us to survive in the trough period. In addition, everyone's confidence is relatively sufficient, and our own workforce is relatively stable, and we take the initiative to adjust the structure, optimize the personnel structure, and sink to the front line, which is not necessarily a bad thing for these employees.
The industries we do are relatively diverse, whether they are good or not, I think, there are good and bad. At this time, the company has more toolbox, and it can support our sustainable development by taking it out, which is good;The bad thing is that you have too many things to worry about, and if you want to do a very good job, you don't have enough energy, and right now, it's our period of change and adjustment.
Enterprise development is a dynamic process, need to change according to the market at any time, adjust and adapt, you can hardly say that one way is good, the other way is not good, survive, live long, live well, the value of the society is the most important.
CE: This round of "pig cycle" continues to this day, is there any sign of bottoming?When will the inflection point come?
Liu Yonghao:Now the industry is indeed in a stage of relatively high pressure. Everyone knows that the pig cycle usually passed in 3 years and 4 years before, but this year, the bottom of the pig cycle has lasted for nearly three years, and almost all farmers, regardless of raising pigs, chickens, and cattle, have suffered a certain degree of loss. Whether it is the pressure of farmers' friends or the pressure of related agricultural enterprises, this is a reality.
*: The inflection point of the visual Chinese pig cycle is not something we can achieve, this is the law of the market, and it is related to the consumption pattern and industrial progress. It turned out that many people expected that the situation would be better in the second half of this year, but they did not expect that the pig price in the fourth quarter of this year was also one of the lowest ranges in history. Aquaculture is the main livelihood of farmers and the core of agriculture and animal husbandry, we hope that the market will enter a recovery period as soon as possible, and we also hope that the state will introduce some policies and measures to help and support pig farmers.
It is precisely because we can't be accurate ** that we want to make more reserves and have a stronger sense of crisis, so that if a more extreme situation comes, we will be better prepared and can survive the winter for a longer time.
CE: What is the reason for the prolongation of the pig cycle this time?
Liu Yonghao:One of the reasons why the pig cycle is so long, and it is significantly longer than before, is that there are more sows that can reproduce. Second, there used to be a lot of small households, but now large households are gradually rising, and there are more listed companies in large households, and their financial strength is relatively strong. At this time, everyone wants to be able to raise more to meet the new growth period. Under this new pattern, I hope that the state or industry-related organizations can organize the same industry to sit down and talk, do something around the supply-side structural adjustment, and slow down the fluctuation of the cycle.
The experience of the past few years has also made us reflect and think, as an enterprise, we still have to stick to confidence, stabilize the scale, not blindly expand, and more importantly, reduce costs, adjust the structure, and focus more. What about the market ** cycle, we can't do anything, what we have to do is how to meet and embrace the bottom of this cycle. Embracing the bottom is more valuable than hating the bottom, and at the bottom, we are firmly grounded, and the probability of success in the future is greater, and of course it is less likely to fall.
CE: Under the baptism of the cycle, will the pig industry move towards a state of "low-profit and sustainable" development?
Liu Yonghao:The development of the market will definitely move towards small profits, and windfall profits are not sustainable. Especially like the agricultural breeding industry, because it is related to our people, it is also a fully competitive industry, the characteristic is that the profit is relatively low, because the production capacity is relatively saturated, everyone wants to fill the production capacity, the production of more products, but the market can not digest so much. If the consumption is not active enough, the two factors will be superimposed, the ** will go down, the bottom of the pig cycle will be lengthened, and the pig enterprise will lose money.
This industry has indeed reached a new stage of transformation and upgrading. At this time, the relevant ** departments have introduced some policies, how to help them better transform?In the transition from small-scale and medium-scale to large-scale pig farming, how to develop some norms to help him, to support it, to reduce this cycle fluctuations, to meet the needs of consumers, to balance prices, these considerations are indeed more important now.
CE: What is your mindset about New Hope's losses and troughs?
Liu Yonghao:I often say internally that an enterprise can't resist the industry cycle, and some things are like this, and you have a few ways. What's the use of being anxious?It is often easy to mess up, often do not rest well, and often do not have good mobilization measures and capabilities, so we should not be anxious, no matter whether it is good or bad, we should not be anxious.
I'm basically not anxious myself. In the past, when we were earning tens of billions of profits a year, I ate the same pot meat, went to work the same, slept the same, when the enterprise was under pressure and faced with the loss of the pig cycle, I was the same with young people, the same as training, and the public welfare undertakings of rural revitalization.
CE: Combined with the experience of the past two years, what is the key for New Hope to be able to go through the cycle?
Liu Yonghao:The most important thing is not to be conservative, let alone mess around. The more low the period, the more we must embrace change and constantly renew. First of all, how to focus on the main business and do better the business that we should do, can do well, and can generate valueSome ancillary, less important industries have also made some adjustments accordingly. "Focus is about clenching your fists and doing something more central.
Second, renew the organizational management system, optimize personnel allocation, vigorously train young people, and promote young people. Because, first, young people are more energetic and passionate;Second, they are more willing to be motivated and have a deeper understanding of new things, especially digital technology. Third, we are willing to sink to the front line, reduce costs and increase efficiency, and have more room for growth.
In addition, incentives and assessments can also make some changes, which are more closely linked to performance. At the same time, to reduce costs, for example, our more than 600 companies, each company originally had a few cashier accountants, now we are concentrated in the group's financial sharing center, hundreds of people do thousands of people's work, all with digital means, not only liberate productivity, but also improve the security of capital control, but also save costs.
Therefore, the difficult period is a good time for us to change.
CE: 2023 is coming to an end, what are the key words of New Hope this year?
Liu Yonghao:2023 is coming to an end, and this year is not easy, but we must have confidence, cope with the cycle, embrace the cycle, and lay out the future. The state has very clearly encouraged and supported the development of private enterprises, which has given everyone confidence. In addition, the state also attaches great importance to promoting and encouraging the development of our agriculture and food industry, because this is a people's livelihood industry, which is related to the benefits of the people and farmers.
On the other hand, the pig cycle entered the bottom of relative depth. There is no way for a company to change the cycle. What to do?Instead of being anxious, embrace it, embrace the uncertainty, embrace the bottom. For example, in the trough period, we need to sharpen the knife faster and sharper, such as how to reduce costs in management and how to make more use of digital capabilities.
In addition, there is another benefit of the trough period, which makes us more soberly see what we should do and what we should not do, and focus more on the main business and what we should do at the strategic level. When you respond positively, it's possible to do better. When the bottom gradually passes, you have an advantage. We need to turn stress into an opportunity and awaken inner strength. We must dare to make up our minds and adjust and adjust.
CE: How do you plan for the transformation and upgrading of enterprises and the cultivation of new growth points?
Liu Yonghao:The key to our transformation is to focus more on our main business and be more technological.
First of all, the organization is younger and flatter. In the past two years, we have made a lot of adjustments, and the personnel of the headquarters have been sinking, and those who have adapted well have been promoted. We have made a lot of personnel adjustments at our headquarters, and we have pushed closer to the market, gone deep into the front line, and let the management cadres who can hear the artillery fire command the battle, and this is the organizational change, which is important.
Second, comb through the portal and see what the warehouse has in store.
We have more than 40 years of this system, more inventory, more industrial structure, we have the world's first feed, in China's top food processing, and the emerging development of cold chain logistics, as well as condiment unicorn "Sichuan Wazi" and so on, there are also listed companies in the chemical field, a single product is the national sales champion. Some of these businesses are what we have to do, our strengths, and our main business, but there are also some that we can choose to cooperate with others or make some other adjustments.
New Hope's fresh life cold chain logistics. **Thirdly, the respondents are armed with science and technology, improve the level of intelligence and digitalization, reduce costs, improve efficiency, and enhance the ability to resist risks. We have made a lot of breakthroughs in breeding, food saving, intelligence, digitalization, etc., and we have not stopped the investment and development of science and technology during the trough period, such as the digital lighthouse project I mentioned earlier, which has played a significant role in improving our organization and industrial efficiency.
In addition, we also have an advantage, that is, we have been developing for more than 40 years, and in the past many years, 10% of the time, our profits are relatively good, and the foundation is relatively thick. Personally, in our major companies, there is no collateral for equity, I have not made guarantees with any person or institution, and we do not have much foreign debt, so it will be easier for us to adjust. In addition, financial institutions trust us and have a higher rating.
CE: What are your expectations for 2024?
Liu Yonghao:In the new year, we are full of hope.
First of all, we already have a considerable sales volume, and this year, despite the pressure, sales are still growing. Our team of more than 100,000 employees, after being honed at the bottom, is more resilient and mature, and has found some new ways to solve difficulties, which will bring us a new pattern and hope in 2024. At the same time, we are actively adjusting, and after the adjustment of the main business is in place, 2024 will be more calm.
Third, for the cycle fluctuations, the pig cycle has been at a low point for three consecutive years, and the pig and food industry is a people's livelihood industry, there must be a peak if there is a trough, and the general pattern of ordinary people's consumption of meat, eggs and milk will never change, and this industry will always exist. It has been 3 years since the bottom, and from the perspective of the historical growth curve, the probability of going up in the next two years is greater.
2024, for the individual, for the society, for the country, I think it is a year full of vitality, this year we are all more hard, have made a lot of efforts and changes, do not lie flat, do not be anxious, do not keep the old, to change, to renew, to struggle, I believe that those who work hard are easier to get through the trough and embark on a new sunny road.