Guolian primed for a profitable future
Leading Chinese shrimp exporter Guolian Aquatic Group is in for a big year following a massive jump in domestic sales.
Zhao Shang Securities, one of China’s leading brokerages, is predicting a 70 percent year-on-year jump in the company’s sales in China in 2016, compared to a corresponding 30 percent rise in export sales.
Based in the southern city of Zhanjiang, Guolian relies on exports for 70 percent of its revenue, with 50 percent of that figure coming from sales to the United States. While the bulk of the company’s business is centered on shrimp, a quarter of the firm’s overall sales come from tilapia.
Guolian’s revenue growth in 2016 will be as high as 30 percent, according to Zhao Shang, which it attributes to improved product mix in the Chinese domestic markets as well as U.S. dollar appreciation against the renminbi boosting export earnings. As proof of strong revenues at the firm this year, a Zhao Shang document details how Guolian’s export tax rebates – a good barometer of export revenues – in the first half of this year totaled CNY 56 million (USD 8.1 million, EUR 7.6 million), an increase of 47.4 percent year on year.
If Zhong Shang’s projections are accurate, strong profitability projected for Guolian will please investors. The securities firm is predicting Guolian’s net profit will hit CNY 100 million (USD 14.5 million, EUR 13.6 million) in 2016, CNY 150 million (USD 21.8 million, EUR 20.4 million) in 2017 and CNY 230 million (USD 33.4 million, EUR 31.3 million) in 2018.
This would represent a major improvement on 2015, when net profits totaled CNY 22.7 million (USD 3.3 million, EUR 3.1 million). However, 2015 was a tough year for aquaculture, with a string of bad weather events that damaged aquaculture operations in southern China.
Guolian’s bottom line may also be helped by significant investments in new product development, marketing and online sales channels in recent years. Guolian has signed key supply deals with fast food firms this year, guaranteeing solid revenue streams on relatively high-margin value-added product.
Guolian’s revamped approach to its domestic market is also helping its sales. According to a 2016 report published by management consultancy firm McKinsey, Chinese consumers are rapidly becoming more sophisticated and confident in future growth in household incomes, allowing them to shift up to premium products. Increasing focus on the domestic market has also helped Guolian and other Chinese firms to insulate themselves from weaker overseas demand and currency volatility.
Overall, the financial performance of Chinese seafood firms is partly dictated by cycles in freshwater seafood prices – one reason why larger firms like Guolian have sought to integrate their operations, farming fish and shrimp while also looking for new value-added products to improve their sales margins.