Aquaculture replacing processing as profit driver

Published on
April 16, 2013

Processing for the export trade is proving less attractive than aquaculture for the domestic market, judging by the earnings of leading Chinese seafood suppliers.

A salmon and sea cucumber aquaculture company, Shenzhen-listed Shandong Oriental Ocean will report 2012 revenues of CNY 676 million (USD 109 million, EUR 84 million), down 10 percent year-over-year, with profit falling 3.85 percent to CNY 99 million (USD 16 million, EUR 13 million), predicted Everbright Securities, one of China’s leading securities houses, in a research note this week.

The firm’s results were driven by sea cucumber aquaculture that contributed CNY 228 million (USD 37 million, EUR 28 million), up 32 percent from the previous year. The contribution of Oriental Ocean’s processed aquatic products division by contrast fell 26 percent year-over-year to CNY 406 million (USD 50 million, EUR 66 million). Aquaculture replaced processing as the main profit base at Shandong Oriental Ocean, which looks set to increase its focus on aquaculture. The firm’s much-touted salmon sales amounted to 10 tons in 2012. The firm’s revenue from aquaculture reached CNY 256 million (USD 41 million, EUR 32 million) in 2012, yielding a gross margin of 57.14 percent, according to Everbright — which pointed out that Oriental Ocean will add 41.4 kilometers to its culturing area in 2013.

Export demand remains sluggish, judging by 2012 results announced this week by another seafood processor, DaLian TianBao Green Foods Co., Ltd. In 2012 the company reached revenues of CNY 1.77 billion (USD 275 million, EUR 211 million), up 20.8 percent year-over-year, while profits slid 4 percent to CNY 160 million (USD 26 million, EUR 20 million). The firm’s seafood sales decreased from 25,200 tons to 17,600 tons in 2012 while the average price of its aquatic products increased from CNY 39,700 (USD 6,396; EUR 4,901) per ton to CNY 52,000 (USD 8,422; EUR 6,452) per ton, lifting the firm’s gross margin from 17.1 percent to 19.2 percent.

Seafood processors have struggled with wages in China that have tripled in the past decade according to the Asian Development Bank. However, domestic demand has proven an alternative means of driving revenues. In their favor, major seafood firms have access to cheap lending from China’s state-run banks, as well as a growing suite of state subsidies designed to improve food security and lift incomes in China’s more remote and rural areas.

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