With coronavirus restrictions denting consumption at what’s traditionally the year’s peak seafood sales period, investors in some of China’s biggest names have been digesting poor results for 2019. Baiyang Aquatic, Guolian, and Zoneco are among
Tilapia player Baiyang Industrial Investment Group has revised upwards its expected losses for 2019, while Guolian Aquatic Group has also reported weak results for last year, even though its revenues were up. Meanwhile, once the doyen of the seafood scene, Zoneco Aquatic (Zhangzidao) is facing a challenge to its chairman’s leadership by its biggest shareholder.
Crustacean specialist Guolian Aquatic is projecting a loss of between CNY 39 million and CNY 44 million (USD 5.85 million and USD 6.34 million, EUR 5.07 million and EUR 5.72 million) for 2019 due to higher costs in developing and promoting new products for the domestic market. The figures would represent a deterioration after full-year net profit remained static at CNY 144 million (USD 21.6 million, EUR 5.71 million) in 2017 and 2018. A key shrimp exporter, Guolian saw income rise 14 percent in the first six months of the year to CNY 2.5 billion (USD 362 million, EUR 324.9 million).
Over the past year, the U.S.-China trade war jolted many Chinese seafood companies into concentrating on the domestic market, yet the cost involved is plain to see in Guolian’s R&D spending, which rose 43 percent year-on-year in 2019 to CNY 53 million (USD 7.6 million, EUR 6.88 million) while the cost of servicing debt rose by 33 percent to CNY 31 million (USD 4.49 million, EUR 4.03 million). While Guolian will be hoping to see a boost this year from new capacity (such as its crayfish processing plant) coming online, China’s corporate sector in general is struggling with high leverage, which is in turn sapping appetite for investment.
For Baiyang Aquatic, a debt-funded M&A drive is the main reason it’s projecting losses between CNY 270 million and CNY 290 million (USD 38.92 million to USD 42.08 million, EUR 35.09 million to EUR 37.69 million) in 2019. This figure represents a major deterioration on previous projections; in a filing to investors, Baiyang – which invested in media and online businesses – projects a loss for the year of between CNY 180 million and CNY 240 million (USD 25.95 million and USD 33.6 million, EUR 23.4 million and EUR 31.2 million), though the firm’s “original business” will make a profit of CNY 70 million (USD 9.8 million, EUR 9.1 million).
For Zoneco, a potentially existential crisis looms. Beijing Ji Rong Yuan Tong Investment Management Co., which owns an eight percent stake in Zoneco through its Dao Yi Hao Securities Investment Fund, is claiming it has lost confidence in chairman Wu Hougang (who has a four percent stake) after the value of its investment dropped 75 percent due to the collapse in Zoneco’s share price. Zoneco’s financial results in recent years have become “too terrible to endure,” a Ji Rong Yuan executive said in a briefing to financial media recently.
One of the most promising consumer-facing players in frozen seafood, meanwhile, is blaming a bad e-commerce investment for a poor 2019. Haixin Foods Co. Ltd. is projecting an 83 percent fall in net profits for 2019 after its e-commerce subsidiary Shanghai Maocheng E-Commerce ran up losses of CNY 15 million to CNY 17 million (USD 2.1 million to USD 2.46 million, EUR 1.94 million to EUR 2.21 million). Haixin had seen revenues rise 18 percent in the first half of 2019 due to demand for frozen convenience seafood products. The company has sought to invest in new upmarket product ranges to sate China’s middle-income customers’ taste for hot pots and communal dining.
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