(Yicai Global) March 11 -- A duck meat processor in China's Shandong province is reeling from the novel coronavirus epidemic because the number of live fowl it has on order continues to mount as product sales dwindle.

The nature of the industry does not allow stoppages or production delays, Li, head of the large meat packing company, told Yicai Global.

The company is committed to buying a certain number of live ducks from breeders as soon as they are mature. The firm also runs several duck breeding bases of its own and it must slaughter the fowl as soon as they are fully grown.

However, at the same time as there is a glut of ducks upstream, orders have dried up. Many of the firm's main outlets, such as cooked food firms, first-tier suppliers, supermarkets and farmers' markets, remain closed amid the Covid-19 virus outbreak. With orders at an all-time low, the meat products are just being warehoused, Li added.

The factory has 4,000 more tons of unsold inventory than before the Chinese New Year holiday, Li said. That is equivalent to more than CNY40 million (USD5.8 million) of missing funds, he added.

Gloomy Outlook

The company is looking at losses of CNY35 million in the first quarter which will put great pressure on cash flow, Li said. "Not only the first quarter, but also the first half of this year look gloomy."

In the first two months of this year, the firm lost CNY30 million (USD4.3 million). This time last year it made a profit of CNY20 million, Li said.

"Wages have not changed compared to last year, but the cost of employment has risen," he said. "We must provide employees with meals, protective gear and disinfection equipment, which cost a lot." The plant employs around 3,000 workers.

Nothing Left to Leverage

The firm needs a huge amount of money to operate, Li said. It is hard to apply for loans because banks want collateral and we have mortgaged everything we have, he added. Loans of under CNY5 million (USD720,000) are not enough, but banks cannot trust the firm enough to grant it larger amounts of unsecured debt.

There has been help from the local government and financial institutions, he said. One state-owned bank, for example, extended a CNY10 million low-interest loan in a single day after learning that the business was in difficulty.

It is also working out how to apply for tax reductions and exemptions from the provincial government, he added. These are more likely to ease the pressure than bank loans.

Only once the epidemic is fully under control and hotels, shops and markets are back in full swing can business return to normal, Li added.

Editor: Tang Shihua, Kim Taylor