Some of China’s largest seafood processing firms are seeking to raise cash this summer, among them loss-making shrimp specialist Zhanjiang Guolian Aquatic Co Ltd which plans to sell 8.8 million shares at CNY 6 (USD 0.98, EUR 0.75) a share. Justifying its cash quest, the firm has pointed to the positives of the bird flu outbreak that has resulted in prawn prices increasing 50 percent in the first quarter on the previous quarter.
Guolian has assured investors that its new tilapia subsidiary will turn profitable this year while it expects profits from its feed sales to rise 13 percent year-over-year. Based in the maritime city of Zhanjiang, Guolian claims its overseas orders were up 10 to 15 percent — despite the anti-dumping charges brought by the U.S. shrimp industry against Guolian and other importers. A nod perhaps to the EU market, the firm made much recently of supplying shrimp for the five-star dinner enjoyed by visiting French president Francois Hollande in Shanghai.
Guolian and other seafood firms in China are also hoping to benefit from renewed interest among venture capital firms in China’s food industry, given rising demand among a growing middle class for quality, safe food products. A breeder and vendor of prawn, tilapia fry, aquafeed and processed products, Guolian counts the United States as a major market but has also recently boosted its logistics and marketing efforts in mainland China.
Key Guolian investors include venture capital firm iD Tech Ventures (a unit of the Taiwan-based Acer IT and technology group) that invested CNY 10 million (USD 1.63 million, EUR 1.26 million) in 2007. Agriculture and food have been key targets for venture capital firms in China in recent years — tech firm Legend Holdings (which owns PC brand Lenovo) recently launched the agri-focused venture capital Joyvio Group outfit with CNY 1 billion (USD 163 million, EUR 125.7 million) in purchases of fruit and food processors in China and abroad. However, venture capital investors have also been put off investing in smaller private Chinese firms due to an embargo on stock listings enforced by government in the past year.
Cushioning of company results by government subsidies has caused investors to question seafood company earnings. Media reports on another leading listed Chinese seafood player, Dalian Yiqiao Marine Seeds Co. Government subsidies played a big part in ensuring the company in 2012 saw net profits up 60.42 percent, while operating income increased 152.77 percent compared to the previous period. Yiqiao, from 2009 to 2012 reported that its net profit to operating income ratio rose 7 percent, 38.3 percent, 55 percent and 87 percent respectively over the four years.
China’s hunger for domestic salmon meanwhile is being cited as a cause for optimism by Shandong Oriental Ocean Sci-Tech Co: the firm promises to vigorously promote its farmed salmon sales in 2013, having secured 34 national patents for its salmon aquaculture technology. The firm’s salmon unit will doubtlessly find it hard to replicate the 57 percent margins it reported on its cultivated sea cucumbers — though a recent visit to the firm by top Communist Party official Zhang Dejiang suggests the firm has central government interest or backing in its efforts.
One of the most watched firms in the sector, the Zhangzidao Group has had mixed results recently with Zhangzi leaning heavily on domestic sales to pay off expensive capacity expansion. A Zhangzidao Frozen Product Promotion Conference held on 22 May in Dalian showcased 20 new packaged frozen products including frozen scallop, frozen half-shell oyster and frozen Arctic Shrimps, to retailers from around the country — CNY 7 million (USD 1.14 million/EUR 878,959) in new orders were signed at the conference, according to the firm, which has pledged to expand its overseas sourcing operations and domestic cold chain logistics networks. A key producer of scallops, Zhangzidao has expanded several marine aquaculture facilities in its home base near Dalian on the northeast coast: among its plans are a 200 cubic meters of artificial reef in Changhai County (near Dalian), and “reconstruct” 6,600 hectares of seabed.
It may be that seafood companies are taking their cue from government policy that broadly supports capacity expansion by seafood firms. The central government’s 12th Five Year Development Plan for Fisheries (2012-2015) targets output of 1.3 million tons annually by the end of the plan, up from 1.1 million tons in 2010. It also calls for reconstruction and standardizing of 1.3 million hectares of aquaculture ponds to boost productivity and pledges to license all aquaculture facilities by 2015.
