By Gao Fu Mao, Contributing Editor reporting from Beijing, China
Published on Friday, February 03, 2017
Data from Chinese stock market filings shows the country’s big name seafood firms are struggling to generate significant growth from alternative business and that aquaculture remains surprisingly profitable, despite much publicly declared pessimism about aquaculture among Chinese industry figures.
Leading firm Zoneco is generating better margins from aquaculture than it is from its newer, much-hyped seafood import and distribution activities, while its new leisure division is taking significant losses.
China’s leading shrimp exporter Guolian Aquatic made CNY 890.4 million (USD 129.6 million, EUR 120.4 million) in revenue in the first six months of 2016, accounting for 90.1 percent of the firm’s total revenues. Some 94.6 percent of Guolian profits – CNY 104.21 million – came from the “processed products” division of the business.This division also provided the highest profit margins at 11.6 percent, compared to 6.9 percent margin for feed product sales and 1.4 percent margin on sales of seedlings. Guolian’s feed and seedlings businesses accounted for 8.1 percent and 1.7 percent of total revenues respectively, meaning the firm has a way to go in its ambitions to be a fully integrated operator with diversified revenue streams.
Meanwhile, data for Shandong Homey Aquaculture Development Co., an aquaculture player and long-time processor which has invested significantly in breeding sea cucumbers in a bid to grow its yields and profits, shows yields on aquaculture appear to be much higher than those from other seafood activities, such as processing.
While Homey’s aquaculture wing contributed CNY 234.3 million (USD 34.1 million, EUR 31.7 million), or 35.9 percent of revenues, in the first half of the year. Compared to 46.5 percent for processing and 17.4 percent for fisheries operations, the firm scored a 39.25 percent profit margin from aquaculture. That’s compared to an 8.78 percent profit margin on its processing operations, which contributed 46.5 percent of revenue.
Homey’s fisheries operations – including long-distance fishing in international waters – contributed a profit margin of only 1.49 percent. Fishing contributed 17.4 percent of revenue at CNY 87.8 million (USD 12.8 million, EUR 11.9 million). This relatively poor performance should be interesting to the numerous Chinese corporations, which have piled into “distance fishing” in recent years. It will also likely be noted by the government, which has subsidized fleets in hopes of growing China’s share of the international catch while conserving exhausted domestic sea resources.
Aquaculture, likewise, contributed the largest margins at Baiyang Investment Co., China’s top exporter of tilapia. Baiyang registered 15.7 percent of its profit margin from aquaculture – higher than feed (12.64 percent), which contributed the second-highest margin. Processing contributed the lowest profit margin at 8.68 percent, while the firm’s newer “biological by-products” division (it makes health- and beauty-related products out of aquatic byproducts and sea plants) contributed an 11.1 percent profit margin. Baiyang is hoping its new biological products wing would capitalize on growing Chinese consumer demand for personal care goods and cosmetics.
The biological products wing contributed revenue of CNY 125.4 million (USD 18.3 million, EUR 17 million) in the first half of 2016, which is small compared to the processing division, which contributed CNY 395.3 million (USD 57.5 million, EUR 53.5 million) or 46.05 percent of revenues, making it the biggest Baiyang division by revenue contribution. But the biggest percentage (46.42 percent) of the firm’s overall profits in the first six months of 2016 came from feed sales, which provided the second highest portion of company revenues at CNY 309.8 million (USD 45.1 million, EUR 41.9 million). Baiyang supplies aqua-feed to other firms and to aquaculture farmers across southern China.
Despite making much of its expansion in distribution and trading of seafood globally, aquaculture continues to offer the best margins for ST Zoneco (also known in Mandarin as Zhangzidao) which has in recent years added to its scallop-farming business with large distribution operations. The firm reported a 32.4 percent margin on its aquaculture business in the first six months of 2016, compared to a margin of 6.2 percent on its seafood trading business. Trading contributed the highest percentage of revenues, at CNY 489.6 million (USD 71.3 million, EUR 66.2 million) compared to processing which contributed CNY 411.3 million (USD 59.9 million, EUR 55.6 million) and aquaculture which contributed CNY 402.4 million (USD 58.6 million, EUR 54.4 million).
The figures may well surprise some, given the influx of large Chinese industrial conglomerates and e-commerce firms into seafood importing and trading in recent years, chasing higher margins. Zoneco, however, will be disappointed at two newer divisions – logistics and leisure fishing – which are losing the firm money. Zoneco reported a negative margin of six percent on its logistics business and a negative 113 percent margin on its leisure fishing wing, which charters boats to take wealthy tourists fishing. Logistics contributed revenue of CNY 25.2 million (USD 3.7 million, EUR 3.4 million) while the leisure wing contributed revenue of CNY 1.4 million (USD 203,700, EUR 189,300).