China seafood firm battling for online sales to rescue margins

Published on
April 17, 2014

Results for one of China’s leading listed seafood producers shows the effects of government anti-corruption measures are continuing to dog the sector and leading to excess supply in luxury products like sea cucumbers and ezo scallops.

Net profit of CNY 163 million (USD 26.2 million, EUR 19 million) was up only 1 percent year-on-year at Dalian Yi Qiao Marine Seeds Co., which has reported an income of CNY 533 million (USD 85.7 million, EUR 62 million) for 2013, an increase of 43.14 percent year-on-year. A dividend to shareholders at CNY 0.60 (USD 0.1, EUR 0.07) per share will disappoint would-be investors.

Yi Qiao (also spelt Yiqiao) is engaged in the cultivation, breeding and processing of marine products. The firm sells seeds to farmers of scallops and sea cucumber with a distribution chains focused on northern China for its processed and packaged sea cucumber products. 

Other experts have put their faith in the long-term health of Yiqiao and the high end of China’s seafood market. Yiqiao’s income will rise to CNY 698 million (USD 112.2 million, EUR 81.2 million) in 2014 and rise again to CNY 839 million (USD 134.9 million, EUR 98 million) in 2015, according to Dongguan Securities. It’s also predicting that profits at Yiqiao will climb to CNY 232 million (USD 37 million, EUR 27 million) in 2014 and up to CNY 268 million (USD 43.1 million, EUR 31.2 million) the following year. It’s basing those assertions on the company’s “leading position” in the sector and its “leading position in seafood breeding technology that allow it to control upstream supply.”

A far more gloomier note was sounded however by analyst Wang Peng at UBS Securities Shanghai office: Wang predicts Yiqiao margins will fall by 50 percent in the first quarter of 2014 due to continued problems with weak demand and inadequate distribution channels. “The repositioning and coordination of reseller and online channels is questionable,” said Wang. He points to a nearly 15 percent slump in retail prices of sea cucumber this Chinese New Year festival to CNY 153.3 per kilogram (kg), from CNY 179.8 (USD 29, EUR 21) per kg in 2012.  He also points to the price of sea cucumber seedlings in north China this spring: CNY 60 (USD 9.65, EUR 7) to CNY 70 (USD 11.25, EUR 8.15) per 500 grams, a dramatic drop on an average CNY 120 (USD 19.30, EUR 13.97) per 500 grams in 2011.

In announcing this year’s results company chairman Liu Dequn promised a strong performance in 2014, based upon rising online sales. He pointed to the company’s expansion of sales into three key online retailers: Yihaodian, Tianmao and Jindong. Strong sales will be vital if Yiqiao is to pay for major expansion in output in recent years. The firm has increased its sea cucumber fishing area by 143 percent in 2013 over 2012 acreage. In 2013 the company fishing area of 10,000 mu (15 mu to a hectare), yielded an average 260 kg per mu, with total production reaching 2,782 metric tons. That’s an increase of 133 percent compared to 2012. But in 2013 the average price of CNY 153 (USD 24.6, EUR 17.8) per kg fell by CNY 27 (USD 4.34, EUR 3.14) per kg, and the cost of production rose from CNY 102 (USD 16.4, EUR 11.87) per kg in 2012 up to CNY 110 (USD 17.69, EUR 12.8) per kg in 2013.

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