Chinese seafood firm Tianma taps stock market boom to expand domestic market for eel
China’s booming stock market is being tapped by one of the country’s leading exporters of eel, which wants to expand its production capacity to tap domestic demand for premium seafood products.
Fujian Tianma Science and Technology Co. has announced it’s seeking to raise CNY 560 million (USD 84 million, EUR 72.8 million) on the Shanghai Stock Exchange for eel-breeding and -processing projects. Of the total, CNY 334 million (USD 50.1 million, EUR 43.4 million) of that to be spent on building the first phase of an “eel ecological breeding base” and CNY 209 million (USD 31.3 million, EUR 27.1 million) will be used for the construction of processing facilities.
In a letter to investors, Tianma said it wants to build a vertically integrated giant with "feed, breeding, and food processing" operations in order to cash in on growing domestic demand for premium seafood products like roasted eel.
Focused on China’s southeast coastal region – where it also sells feed to pig and poultry farms – Tianma is aiming to add 3,850 metric tons (MT) of extra farmed eel per year with the new investment. In a prospectus sent to potential investors this month, the firm said its plans are in sync with government and industry efforts to focus on quality over quantity.
Tianma reported net profits of RMB 276 million (USD 41.4 million, EUR 35.8 million) and CNY 309 million (USD 46.3 million, EUR 40.1 million) in 2018 and 2019 and claims a compound annual growth rate of 18.4 percent in the period from 2011 to 2019. In the first half of this year, the company achieved a net profit of CNY 56.65 million (USD 8.5 million, EUR 7.4 million), a year-on-year increase of 7.83 percent.
Tianma’s results contrast starkly with those of one of the biggest names in China’s fisheries industry, CNFC Overseas Fishery Co., which is flagging another loss this year due to the impact of COVID-19 and reduced government subsidies. The firm lost between CNY 53 million and CNY 58 million (USD 7.9 million and USD 8.7 million, EUR 6.9 million and EUR 7.5 million) in the third quarter due to weaker demand for tuna and squid, as well as a reduction in the annual government payouts it has come to rely on to turn a profit.
The disparity in results point to a continuing trend in China’s seafood industry toward premium production for domestic consumers over the traditional model of low-cost production and processing for the export market. One of the leading producers and exporters of eel, Tianma saw its share price jump 44 percent on the first day of trading in 2017. The firm told investors it was planning to expand into high-end aquafeed for species like bass, turbot and croaker. The move came in response to a gradual slide in recent years in pricing for freshwater species, Tianma Chairman Chen Qing Tang said at the time. He said his firm would position itself as a “high-tech feed company” for the seafood industry.”
China’s seafood output has flatlined in recent years, totaling 64.5 million MT in 2019, of which aquaculture contributed 50.5 million tons, as government has sought to tighten environmental regulations and steer producers into higher-value species and production. Following that outline, China has seen growth in production of premium species like crayfish, eel, and grouper, while farmers have invested in feed and technology to comply with increasingly strict regulations and to get an edge on competitors.
But big firms like Tianma may be best-placed to increase output due to their access to finance in the current bull run in the national stock market. China’s stock market broke its own historical records this week when it passed the value of USD 10 trillion (EUR 8.4 trillion), as investors responded to perceptions of an economy in recovery mode. Investor sentiment in China is high, according to a recent survey by the Beijing-based Cheung Kong business school, which pointed to rising willingness to on behalf of investors to put money into the market, with some pointing to the “ultimately positive” long-term impacts of the Sino-U.S. trade war for firms seeking to substitute imported technologies. A majority of those surveyed by Cheung Kong said they believe that both share prices and real estate prices will rise over the coming year, suggesting positive timing for firms seeking to raise funds.
For Tianma, the company stands to benefit from having access to an influx of capital, given its recent strong results and the company’s clear push for growth. In 2019, Tianma’s gross margins from feed, breeding, and processed product sales were 7.32 percent, 21.29 percent, and 5.25 percent, respectively, according to Tianma accounts. The totals suggest the company is getting strong prices for live and unprocessed eel sold into the domestic market. Tianma exports processed eel to the U.S., Japan, Russia, and Southeast Asia, where it has customers in the ethnic dining market. Japan’s catering sector relies on Chinese suppliers for 60 percent of its eel inputs.
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