The latest results filed by a flagship Chinese fishing firm show the company losing money, while still betting big on tuna.
CNFC Overseas Fishery Co Ltd, the listed arm of China National Fisheries Co, is projecting a loss of between CNY 43 million (USD 6.02 million, EUR 5.59 million) and CNY 55 million (USD 7.7 million EUR 7.15 million) for the first six months of 2020. That’s compared to a loss of CNY 45.4 million (USD 6.35 million, EUR 5.90 million) in the same period last year.
A slowdown in sales due to COVID-19 and a related drop in prices for its products is being cited as the main reason for the drop by CNFC. The company earlier this year blamed “reduced subsidies for renovations of vessels” as a key reason for poor 2019 results.
CNFC, which has a large Chinese and international client base for squid and tuna, says it’s seeking to continue its focus on tuna and “further expanding” its self-operated distribution business for premium imported seafood in China. Chinese government policy has encouraged the building of a giant tuna fleet, with special incentives to “bring home” the catch for processing and value-adding in China.
Generous government support has enabled firms like CNFC to build and run their fleets, even if the companies aren’t turning in profits. Under China’s current supports regime – in place since 2016 – there’s a subsidy of CNY 40 million (USD 5.6 million, EUR 5.2 million) available for the construction of new tuna vessels of greater than 65 meters in length, with CNY 13.3 million (USD 1.86 million, EUR 1.72 million) available for tuna reefer of at least 40 meters in length.
Despite all the aid, however, profitability remains modest at CNFC, considering the company claims to have a fleet of over 250 vessels and a multinational processing business. The results mirror those of five years ago, questioning the success of the state-owned firm’s expansion plans. Profits in 2014 fell 64 percent to CNY 20.09 million (USD 3.21 million, USD 3.01 million), with the state-controlled giant blaming a 14 percent fall in prices for its fish that year for the slump.
“We aim to be world class,” CNFC said in its circular sent to investors this week.
It’s not clear what the long-term outlook for CNFC looks like. With it dependency on subsidies, CNFC lacks the financial muscle of conglomerates like New Hope Liuhe, Guangdong Haid, and the Tongwei Group, which have all entered the aquaculture and mariculture spaces with a background in niches such as nutrition, antibiotics, and combined aquaculture-solar.
China’s government paid out CNY 72.8 billion (USD 10.1 billion, EUR 8.8 billion) in diesel fuel subsidies to firms like CNFC in 2018, accounting for 81.66 percent of the total subsidy funds according to official documents.
Photo courtesy of CNFC
