Report fouls shares of China poultry supplier

What's Down: China's biggest poultry supplier said profits will be hurt by a report that some of its chicken was not properly inspected.

China's biggest poultry supplier said profits would be hurt by a report that some of its chicken was not properly inspected, as Yum Brands and McDonald's said they had stopped buying meat from the company.

Sales and profit would sustain a "certain amount of impact", New Hope Liuhe said in a statement to Shenzhen's stock exchange.

A state television broadcast reported on December 18 that Liuhe and other suppliers were not properly inspecting chicken bought from farmers for antibiotics and hormones.

In its statement, Liuhe said it had shut the deep-freeze plant in the city of Pingdu that was cited in the report and was cooperating with a government probe.

The company also apologised for the negligence of its workers and said it would "ensure a comprehensive test system is in place".

The poultry supplier's shares fell 0.1 per cent to 12.36 yuan as of the 11.30am trading break in Shenzhen, compared with a 1.1 per cent gain for China's benchmark Shanghai Composite Index. Liuhe's stock has dropped more than 26 per cent this year.

Yum, which operates the KFC and Pizza Hut chains in China, said on Friday that it had stopped buying from Liuhe's Lingyi factory in 2011 after checks on samples from the supplier found problems with the chicken.

The Shanghai food and drug regulator said on December 20 that tests conducted by a third-party agency during 2010 and 2011 found eight batches of chicken supplied to Yum by Liuhe had levels of antibiotics that did not meet prescribed standards.

The Louisville, Kentucky-based company, which received 44 per cent of its revenue from China last year, said it had stopped all supplies from Liuhe in August.

McDonald's said that it stopped deliveries from Liuhe the day before Yum did.