Chinese seafood company uses grant to get back on top

Chinese seafood firm Zhangzidao appears to be back in favor with the government and the investment community after the firm received a grant from local authorities to breed new varieties of shellfish.

A grant of CNY 28 million (USD 4.48 million, EUR 4.12 million) was recently given to Zhangzidao (which is also known as Zoneco) by the government of Changhai County near the city of Dalian, where the company is based. This is part of what the firm and Changhai call the “Modern Ocean Farming Construction Project” that aims to produce new varieties of scallops, abalone and mussels.

Meanwhile the firm is being backed to return to profitability based on pledges of better management of its mariculture operations as well as a continued expansion into seafood imports and online sales. Zhangzidao is over the worst, according to one of China’s top securities firms in a recently published research report.

Zhangzidao’s scallop yields will increase from 31 kg to 37 kg per mu (15 mu = 1 hectare) and will increase further to 56 kg in 2016, predicts Shen Wan Hong Yuan Securities. The firm is also predicting a rebound in profits due to a Zhangzidao plan to reduce the span of its mariculture operations from a peak of 226,700 hectares to 160,000 hectares by 2016 with better management leading to increased yields. The firm, says analyst Zhao Jin Han, plans a “three plus one” model whereby its mariculture hectares are farmed for three years then rested for one year to ensure better quality water.

Zhangzidao in late 2014 controversially wrote off approximately CNY 763.25 million (USD 122.12, EUR 112.35 million) when it claimed that large numbers of its scallops were lost due to fluctuating sea temperatures. Anger and skepticism among investors led to over CNY 2 billion being wiped off the stock market value of Zhangzidao, which has long been China’s biggest listed seafood company by capitalization. The firm later produced a researcher from the prestigious Chinese Academy of Sciences who said that the stated fluctuations in seawater temperatures were indeed possible.

Having late last year propped up its share price through management and staff stock purchases, Zhangzidao will hope investors are convinced by its latest plans. The firm’s shares are currently suspended from trading, along with multiple other Chinese stocks, as part of a government effort to rectify the country’s recently volatile stock markets. Chinese seafood firms had boasted high price-to-earnings ratios in a stock market bull run that lasted almost a year prior to crashing in early July.


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