Oriental Ocean is confronting the possibility of legal action from its shareholders after it recorded stunning losses and its CEO was accused of insider trading.
Strong demand and price growth for sea cucumbers had made Oriental Ocean popular with investors, but Shandong-based Oriental Ocean recently made the surprising revelation that it had recorded an annual loss of CNY 553 million (USD 77.4 million, EUR 71.8 million) for 2019. Revenue dropped 16.4 percent to CNY 600 million (USD 84 million, EUR 78 million), even though at the beginning of 2020, the company forecast a profit.
Oriental Ocean is blaming the loss on a change in accounting requirements surrounding the impairment of the firm’s older sea cucumber stock – sea cucumbers typically take five years to mature. Meanwhile, the Shenzhen Stock Exchange has issued a criticism of the company’s chairman and CEO, Che Dong, for the timing of his sale of company shares. The company’s share price has gone from CNY 4.70 (USD 0.65, EUR 0.61) to a current CNY 2.70 (USD 0.37, EUR 0.35) over the space of a year.
In a repeat of a similar move by disgruntled investors against scallop specialist Zoneco (which also produces sea cucumbers), the Shanghai-based Minglun Law Co has invited investors to contact it as part of a case it hopes to bring against Oriental Ocean for harming investors’ economic interests.
Sea cucumbers, a premium species in China, have been a trouble spot for Oriental Ocean over the past year, with the company recording losses of CNY 257 million (USD 35.9 million, EUR 33.4 million) in its sea cucumber division. It also recorded an annual loss of CNY 15.3 million (USD 2.1 million, EUR 2 million) in its collagen business.
Nor was salmon a bright spot for the company; Oriental Ocean’s salmon farming unit lost CNY 75.1 million (USD 10.5 million, EUR 9.7 million) in 2019. In a February letter to investors, the company blamed “fierce competition” from international salmon firms shipping into China for its losses.
Also in February, Oriental Ocean sold its pioneering land-based salmon farm to a new joint venture controlled by Qingdao Guoxin Development (Group) Co Ltd. The new firm, Qingdao Guoxin Oriental Recirculation Aquaculture Co, is 70 percent controlled by Guoxin, with Oriental Ocean holding the remaining 30 percent stake through a subsidiary.
