Baiyang reports tepid profits in first half results

Published on
August 27, 2014

Baiyang Aquatic Group, China’s leading processor and exporter of tilapia has reported operating income of RMB 65.7 million (USD 10.7 million, EUR 8.1 million) in the first half of the year, an increase of 31.69 percent, while net profit attributable to shareholders totaled RMB 19.34 million (USD 3.1 million, EUR 2.2 million), an increase of 26.17 percent on the same period last year.

The growth rates look like an improvement on full-year results for 2013: China’s leading tilapia processor has reported RMB 134.9 million (USD 22 million, EUR 16.7 million) in revenues, up 15.2 percent year on year. Profits at Baiyang Aquatic however slipped 32.8 percent to RMB 56.8 million (USD 9.2 million, EUR 7 million) last year. China’s leading tilapia processor in volume terms, Baiyang Aquatic in 2012 saw its revenues jump 15.5 percent to RMB 1.2 billion (USD 195.3 million, EUR 148.2 million) while profits jumped 59 percent to RMB 84 million (USD 13.7 million, EUR 10.4 million).

Having come largely unscathed through a typhoon that lashed its home base of Guangxi province in southern China in late July, the company expects January-September net profit attributable to shareholders of listed companies at RMB 34.72 million (USD 5.7 million, EUR 4.3 million) to RMB 45.14 million (USD 7.3 million, EUR 5.6 million). The firm, which has added significant new processing capacity in the past two years, points to overall “business scale” to support its optimistic view on future revenue and profit growth.

Baiyang credited its revenues data on international and domestic food prices tilapia aquaculture feed prices caused by rising raw material prices. New capacity coming online helped ensure feed sales increased 5,827 metric tons (MT) during the six months, an increase of 14.1 percent while sales of seafood rose 1,415 MT, or 10.9 percent.

It’s worth noting that growth in revenue, profits and output at Baiyang are all trumped by growth in costs: Operating expenses at Baiyang rose 33 percent year on year in the first six months. But financial expenses during the period soared by 156.83 percent — a sign of the bank borrowings taken on board by Baiyang as it ramps up capacity.

Nonetheless, Chinese stock analysts seem to share the optimism suggested in the company’s report: commenting on Baiyang’s latest results for Ping An Securities Co, analysts Wang Junliang and Lu Xiaojing point out that China’s government has backed "national tilapia industry technology system" as one of five fish central to the country’s fisheries sector “and actively promote the development of tilapia in tilapia farming, processing… Due to the increasing number of marine fishing restrictions, the demand for farmed fish is mainly sustained growth.”

Wang and Lu believe Baiyang is positioned to capitalize on rising demand for aquaculture feed: feed sales were up 14.07 percent at Baiyang which has an 11 percent market share.

Likewise they see more room to boost production of tilapia, which accounts for “more than 10 percent of China’s overall food exports and this will keep growing.” While pointing to potential for further expansion of tilapia breeding in Guangxi and Hainan provinces, the analysts also predict Baiyang will “explore other aquatic species” and point to the “gradual development of the domestic market” for Baiyang as reasons to be optimistic about the firm’s future.

Headquartered on Chuangxin Xi Road in Nanning’s New & High-tech Development zone, the Shenzhen-listed Baiyang Aquatic Group manufactures and sells frozen Tilapia products and aquatic feeds but like many Chinese corporations it hedges its bets with investments in real estate and in lending to other corporates and real estate developers.

With a price (per share) to earnings ratio at an optimistic 36.09 this week and earnings per share of RMB 0.32 (USD 0.05, EUR 0.04), the RMB 2.06 billion (USD 335.4 million, EUR 254.4 million)-capitalized firm has pledged to remain China’s number one tilapia player. In its 2013 annual report the firm stated its long-term outlook is bright, predicting a long-term substitution of cod and other overfished species by tilapia. It points to the strength of tilapia in the make-up of China's total aquatic exports: at 403,600 tons frozen tilapia counted as the biggest single species of fish shipped from China in 2013.

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