CNFC Overseas Fishery Co. Ltd., the listed arm of China National Fisheries Co, is using a stock market bull run to raise over CNY 400 million (USD 60 million, EUR 52 million) cash for new tuna vessels and processing capacity.
The firm, which operates 250 fishing vessels globally, is raising the money through a non-public offering to 35 investors, including Huanong Investment Co – a unit of the company’s state-owned parent company – to further expand its fleet .
CNFC, which has in recent years relied on government subsidies to turn a profit, is planning to spend CNY 154 million (USD 23.1 million, EUR 20 million) on 11 new or renovated vessels, though the company has not clarified how many of those will be new-builds. Around CNY 170 million (USD 25.5 million, EUR 22.1 million) will be spent on adding new processing capacity, and CNY 138 million (USD 20.7 million, EUR 17.9 million) will be spent paying down debt. The company’s debt load with be reduced to a ratio of 30.5 percent (debt to assets), the company said.
China’s listed seafood firms have enjoyed a bull run in recent weeks as investors see restrictions on imported seafood as a big opportunity for firms like CNFC. Trading in its shares was suspended six times consecutively between mid-November and mid-December, with the shares jumping from CNY 6.02 (USD 0.92, EUR 0.76) to CNY 11.84 (USD 1.77, EUR 1.53) each at the end of trading on 9 December, up four percent in a day. Its share price dropped to CNY 8.88 (USD 1.33, EUR 1.15) on 14 December but clawed back losses to reach CNY 11.08 (USD 1.69, EUR 1.39) as of 22 December. Financial analysts had expected Chinese eafood stocks to benefit from greater access to rural customers provided by recently announced growth of e-commerce apps in China, but an article in the People’s Daily recently warned against their “irrational” expansion.
The surge has given the loss-making firm the courage to push forward with a non-public listing. CNFC made CNY 265 million (USD 39.7 million, EUR 34.4 million) in the first three quarters of 2020, down 40 percent year-on-year. Profits fell 549 percent year-on-year to a CNY 55.7 million (USD 8.4 million, EUR 7.2 million) loss. In the first half of the year, CNFC’s earnings from tuna reached CNY 116 million (USD 17.4 million, EUR 15.08 million), which accounted for 76 percent of overall company earnings, though the figure dropped 36.7 percent compared to the same period last year.
The company had projected a surge in demand off the Tokyo Olympics, according to its 2019 annual report, but the games were postponed until 2021 due to the coronavirus.
Photo courtesy of CNFC Overseas Fishery Co. Ltd.
