Zhanjiang, Guangdong Province, China-based Guolian Aquatic lost CNY 269 million (USD 40.3 million, EUR 34.9 million) in 2020, even higher than the losses it projected from the COVID-19 pandemic, according to its most recent financial report.
High levels of unsold and discounted inventory have hurt the profitability of China-based shrimp exporter and seafood processor, according to Qiu Zheng, an analyst with the Weekly Securities Journal. The company’s costs are above the industry average and its write-downs of inventories are dragging on its overall profitability, Qiu said. He flagged Guolian’s operational expenses of CNY 3.64 billion (USD 546 million, EUR 473.2 million) in 2020, compared to expenses of CNY 1.21 billion (USD 181.5 million, EUR 157.3 million) at Fujian Haixin Food Co Ltd, a frozen seafood and snacks specialist that focuses on retail and catering.
Guolian recently announced it is hoping to raise almost CNY 1 billion (USD 150 million, EUR 130 million) to add more capacity to its production of convenience-oriented seafood, which it has focused on as a means to increase its sales. Guolian is planning to add to the capacity of its subsidiary Guomei Aquatic Products, which makes shrimp dumplings, roast fish, and pickled fish products from what it terms its “central kitchen” for clients including fast-food chains. Prepared, or “central kitchen” products account for 17 percent of sales at Guolian, in revenue terms, and the company wants to increase that percentage.
The capacity-building will bring Guolian’s annual output to 70,000 metric tons (MT), Qiu said. However, “inventory discount” losses are dragging down Guolian’s accounts. Those losses totaled CNY 820 million (USD 123 million, EUR 106 million) in 2018, CNY 574 million (USD 86.1 million, EUR 74.6 million) in 2019, and CNY 266 million (USD 39.9 million, EUR 34.5 million) in 2020, and Guolian said it has tacked on an additional CNY 111 million (USD 16.6 million, EUR 14.4 million) worth of inventory discounts in the first half of 2021.
While its losses still outpace its gains, Guolian’s revenues have been rising. Earlier this year, Guolian management touted a list of high-profile clients for its processed seafood. These included hot-pot chain Haidilao and fast food chains Xia Bu Xia Bu and Si Nian, as well as U.S.-owned chains with expansion plans in China including Hooter’s, Hard Rock, Denny’s, and Applebee’s. It also said it was in talks with Unilever about expanded cooperation. Guolian is also expanding output at Guolian (Yiyang) Foodstuffs Co., its crayfish-focused subsidiary in inland China, which is expanding its annual production totals to 15,300 MT of crayfish and 29,700 MT this year.
Guolian has long fought a battle for profitability; In 2013, the firm was issued a delisting warning by the Shenzhen Stock Exchange after two consecutive years of losses.
Photo courtesy of Guolian Aquatic
