Tight supply, rising prices drive strong 2013 profit for China’s top shrimp exporter

Published on
January 16, 2014

China's leading shrimp exporter is signaling strong profits for 2013. The country’s key shrimp exporter, Zhanjiang Guolian Aquatic (Guolian) made profits of CNY 130 (USD 21.5 million, EUR 15.8 million) to CNY 150 million (USD 25 million, EUR 18.2 million), according to a senior company executive, although no official announcement of results has yet been made.

Speaking to local press, Guo Wenliang, Guolian secretary has credited rising shrimp prices and the coming online of capital expansion projects. He predicted the firm could achieve “significant profitability” over the long term. He also pointed to the offloading of a 30 percent stake in one of its subsidiaries though didn’t detail the funds raised from this sale. The sale is said to have yielded Guolian CNY 75 million (USD 12.4 million, EUR 9.1 million).

In the first three quarters of 2013 Guolian had profits of CNY 22 million (USD 3.6 million, EUR 2.7 million), having lost CNY 91 million (USD 15 million, EUR 11 million) in 2012. “There was a shortage of shrimp and price rose in 2013…Guolian was able to capitalize thanks to our supply chain, and our margins improved,” said Wenliang. “Our investments started to come into play.”
Guo pointed to the acquisition of the SSC firm in the U.S., bought in 2012 to improve Guolian’s distribution network in a key market.

Guolian has planned to significantly ramp up its tilapia processing operations and has put much emphasis on cracking the domestic market. Established in late 2010, Guolian’s subsidiary Guangdong Guomei Aquatic Food Co., Ltd (it processes tilapia and prawns) was late going into operation due to equipment problems.

Wenliang also credited Guolian’s ability to overcome the U.S. anti-dumping tax that had threatened its business. Guolian’s investors were jolted when the U.S. Department of Commerce in January 2013 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.

Guolian has blamed a diversion of shrimp shipments from the EU to the stronger U.S. market by its Thai and South American competitors for weak 2012 results. A string of negative results had threatened Guolian’s future on the Shenzhen stock exchange. Chinese listed companies like Guolian are seen by many international investors and analysts as under-valued. This is partly due to the high level of government control over listings and valuations as well as frequent wariness over data provided by listed firms.

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