Chinese shrimp processor facing delisting

One of China’s leading shrimp exporters faces a potentially disastrous delisting if it fails to turn a profit this year. Guangdong-based Zhanjiang Guolian Aquatic Products Co Ltd, forecast a net loss of CNY 220 million (USD 36 million, EUR 28 million) for 2012.

According to Shenzhen Stock Exchange rules — in place since last May — listed companies will be delisted if they make a loss for three consecutive years. Guolian lost money in both 2011 and 2012, making 2013 a crunch year for the firm, which lately became the focus of a U.S. anti-dumping investigation.

The firm is now hoping that domestic sales will rescue Guolian. A major supplier to U.S. shrimp markets, the firm says it’s now focused on improving its domestic distribution network for prawns, in particular through supermarkets and restaurants here. Guolian used cash raised on the Shenzhen Stock Exchange in 2010 to build out its fries and feed processing facilities as well as its culturing and distribution network for domestic sales of shrimps and tilapia.

Company general manager Chen Han Chen Han told Chinese media recently that Guolian profits have been hit by Chinese renminbi appreciation and the firm’s misjudgments of the shrimp market in 2012. “In the second half of 2012, the cost price of shrimp improved a lot because of typhoon and shrimp diseases, but Guolian had already accepted lots of orders before that so we took a hit,” explained Han. “Also the appreciation of the Chinese renminbi has hurt us because 70 percent to 80 percent of our shrimp business is in exports of processed-shrimp products.”

“There are great pressures but we are trying our best to pull through,” said Han. “We made changes in several departments such as marketing and management, and I believe that we will turn the situation around.”

Chen has asked investors to give the firm breathing space, saying most of the projects the company invested are in their preliminary stages and will each gradually start to turn a profit.

Established in late 2010, Guolian’s subsidiary Guangdong Guomei Aquatic Food Co., Ltd — which processes tilapia and prawns — was late into operation due to equipment problems. The CNY 180 million (USD 29 million, EUR 23 million) investment however remains loss making, according to Chen Han.

Guolian’s investors were jolted when the U.S. Department of Commerce in January announced an investigation into subsidized imports of shrimp from China — and Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam — following protests by the United States Gulf Shrimp Industry Alliance. Guolian was one of the firms named in the investigation.

Secretary of Guolian board Guo Wenliang said the company — which enjoyed zero-tariff access to the U.S. market — hopes that any eventual duty on the firm may still leave it better positioned than competitors.

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