Genus shares hit an all-time high after the FTSE 250 animal genetics group upgraded its half-year profit outlook because of high demand for its pig and bull semen.
The company said on Monday that its pig division was enjoying tailwinds from China, where large pork producers were rebuilding their herds after they were decimated in recent years by African swine fever.
Stephen Wilson, chief executive said this had prompted “a huge wave of investments in modern facilities which need to be stocked”.
Genus uses techniques including DNA screening and gene editing to breed “genetically superior” livestock that it sells to customers in the form of breeding animals, semen and embryos.
The company’s shares jumped almost 6 per cent to a high of £45.56* on Monday after the trading update, marking a more than 40 per cent rise over the past year.
The company’s bovine business also benefited from high demand in Brazil, Russia, China and India.
Mr Wilson noted demand growth for its “sexed semen”, which allows cattle farmers to choose the gender of the animals with about 90 per cent accuracy, while its bull semen designed to provide high-performance beef cattle was also driving growth in the business.
Genus, which in November upgraded its forecast for the year to June 2021, said its adjusted pre-tax profit for the six months to December would be £47m-£49m, up from £36.6m the previous year, on revenues of £285m-£287m, up from £270.7m. The company is scheduled to release first-half results on February 25.
It said its second half was likely to be weaker than the first six months but it would be ahead of its previous profit growth expectations for the full fiscal year to June.
Analysts at Liberum, its house broker, said growth in the second half would be curbed by higher costs, particularly in research and development. They noted the “excellent first half”, with the company winning important customer contracts in China, but added that growth rates would fall as China’s pig market normalised. “These unique market conditions cannot last for ever and thus we model a degree of conservatism on this front,” they said.
Mr Wilson said he was seeing minimal impact from growing demand in alternative proteins, such as plant-based meat made from vegetable proteins and laboratory-grown cultured meat produced from animal cells, which are under the spotlight in certain markets.
Although demand for plant-based burgers and other meat substitutes have been high in some western markets, “80 per cent of the world would like to eat meat,” Mr Wilson said, while on a global level “there isn’t a significant change in dietary habits and desires”.
“Meat and dairy production in the world is pretty stable,” he added.
*This story has been updated to correct the Genus share price