(Yicai) Oct. 24 -- US rating agency Fitch Ratings has downgraded the long-term foreign-currency issuer default rating of Wens Foodstuff Group, one of China's largest pig farming companies, because of a downturn in the local pig breeding industry.

Fitch downgraded Wens Foodstuff's long-term rating to BB from BB+ with a negative outlook, the New York-based firm announced yesterday. The action reflects the prolonged industry oversupply, resulting in persistent low hog prices and weakening Wens Foodstuff's medium-term profitability, it pointed out.

Wens Foodstuff remains an industry giant, The Paper reported today, citing a source from the company. Despite the downgrade, Fitch recognized the company's cost control ability and its strength in coping with the downturn cycle, an executive of Wens Foodstuff added, noting that the Yunfu-based firm is the only listed Chinese breeder that issues US dollar-denominated debt and chooses to be publicly rated.

Hog prices have been below breakeven for most of this year, which Fitch expects to result in an annual earnings before interest, taxes, depreciation, and amortization loss for Wens Foodstuff, it said. The ratings also reflect the inherent heightened volatility in the pace and degree of a price rebound, it added.

"We believe Wens Foodstuff, as one of China's lowest-cost breeders, will be one of the first beneficiaries once the industry recovers," Fitch pointed out.

The negative outlook reflects the uncertainty in the pace of price normalization, according to Fitch. The agency will consider revising the outlook to stable if EBITDA recovers such that free cash flow can improve sustainably towards neutral, it said, noting Wens has demonstrated the ability to control costs amid high grain prices.

Shares of Wens Foodstuff [SHE: 300498] closed 1.7 percent higher at CNY17.72 (USD2.42) apiece today, after earlier jumping by as much as 2.2 percent. The wider Shenzhen market rose 0.6 percent.

Editor: Martin Kadiev