Baiyang Industrial Investment Group, a key player in China’s tilapia sector, has taken a hit from its diversification strategy.
The company is predicting major losses for 2019 due to a write-down on investments in the IT space.
In a filing to investors, Baiyang projected a loss for the year of between CNY 180 million (USD 25.2 million, EUR 23.1 million) and CNY 240 million (USD 33.6 million, EUR 30.9 million), though the firm’s “original business” will make a profit of CNY 70 million (USD 9.8 million, EUR 9 million).
The loss is due to a complex goodwill write-down and share buyback clause on the company’s purchase of Huo Xing Shi Dai (also known as Modern Star), a firm running a chain of schools teaching multimedia design. Modern Star missed its performance targets, causing the move by Baiyang.
Investors appear to have soured on Baiyang’s strategy of diversifying away from seafood processing and aquaculture. The firm saw its share price go from CNY 19.54 (USD 2.73, EUR 2.51) on 13 March last year – and a high of CNY 25.60 (USD 3.58, EUR 3.29) – in early June 2018 to CNY 6.67 (USD 0.93, EUR 0.86) as of 13 March this year. It has since ground downwards to current trade at CNY 5.66 (USD 0.77, EUR 0.73).
Revenue at Baiyang rose by 32.3 percent in 2018 to CNY 3.16 billion (USD 442 million, EUR 406.3 million) in 2018, while profits slipped 59.5 percent. The company has been in aggressive expansion mode, growing revenues from CNY 1.78 billion (USD 249 million, EUR 228.9 million) in 2014 to CNY 3.16 billion (USD 442 million, EUR 406.3 million) last year. But its profits swung up from CNY 59 million (USD 8.3 million, EUR 7.6 million) in 2016 to CNY 113 million (USD 15.8 million, EUR 14.5 million) in 2017, only to come back to CNY 57 million (USD 8 million, EUR 7.3 million) in 2018.
The projected loss is the company’s first since it was listed on the Shenzhen Stock Exchange in 2012.
Baiyang Aquatic Group in 2015 changed its name to the Baiyang Industrial Investment Group Co as it started to invest in healthcare (and later education and graphics) companies. It has subsidiaries in the healthcare and pharmaceutical sectors, as well as in environmental and wastewater treatment contracting.
