Top Chinese seafood firms report dismal third quarter

Published on
November 9, 2015

Leading Chinese shrimp exporter Zhanjiang Guolian Aquatic has stated its third-quarter profits tumbled 90 percent to CNY 300,000 (USD 47,200, EUR 43,775), a performance that underlines the current financial difficulties of China’s leading seafood firms.

Meanwhile the country’s leading tilapia player Baiyang Aquatic Group, has reported profits for the third quarter fell 20 percent to CNY 29 million (USD 4.6 million, EUR 4.2 million). Baiyang blamed its lower profits on higher inventories at the company.

The firm, however, rose in its overall third quarter revenues 11 percent to CNY 128.5 million (USD 20.2 million, EUR 18.8 million) thanks to strong sales for fish feed, according to its disclosure document sent to investors by Baiyang, which operates feed mills as well as aquaculture and processing operations. The company also claims its non-business revenues rose by 7 percent to CNY 7 million (USD 1.1 million, EUR 1 million) thanks to subsidies paid to it by the government. Baiyang also pointed out in its statement of results that it expected to receive further subsidies this year from the government, but is unable to put a timeline on which it will receive those subsidies, which were paid to help the firm “expand the scale of operations.”

These are worrying times for listed corporations like Baiyang and Guolian which have both invested significantly in expanding their production and distribution capacity, particularly for the domestic market. Many investors worry that China’s stock market has rebounded from a crash in August without any improvement in corporate earnings. The benchmark Shanghai Composite Index has surged 20 percent since August 26, even though the third quarter represents the eighth straight quarter of disappointing results for nearly 70 percent of Chinese listed companies monitored by the Bloomberg newswire.

Yet while foreign investors continue to sell off their Chinese stock holdings there is some consolation for Guolian that its shareholders include some of China’s state-owned banks including the Agricultural Bank of China, which has a 3.39 percent shareholding, and the China Construction Bank, which has a 2.31 percent shareholding. But the biggest stakeholders are Crown International Investment (15 percent) and Xinyu State Investment Management (34 percent).

China’s latest stock rally came about not because of an improvement in corporate earnings but rather following a strong-arm government campaign to prop up share prices, along with government loosening of interest rates and lending to seek to boost GDP growth that’s running at the lowest levels since China opened up its economy in the 1980s. While this has gotten retail investors back into buying stocks it hasn’t improved the very high price-to-earnings ratios of Chinese seafood corporations like Guolian. Earnings look set to remain weak in the face of weak global demand and slower (though still comparatively solid) economic growth at home.

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