Zhangzidao sees profit slip in 2013, revenues flat
One of China’s largest and most ambitious seafood brands has announced a tepid full-year performance for 2013.
Zhangzidao Group Co. saw profits slip 8 percent year-on-year in 2013, to CNY 96.9 million (USD 15.5 million, EUR 11.2 million). Revenues were largely flat at CNY 2.6 billion (USD 415.3 million, EUR 299.7 million) (an increase of 0.48 percent year-on-year). This compares to CNY 2.9 billion (USD 463.3 million, EUR 334.3 million) earned in revenues in 2011 with profit that year at CNY 621 million (USD 99.2 million, EUR 71.6 million), according to company records.
The Shenzhen-listed group — which has been aggressive in expanding its distribution network in China as well as its selling and sourcing operations in the U.S. — has pointed to higher costs of finance to explain the results. The company last autumn sought CNY 2 billion (USD 319.5 million, EUR 231 million) in loans, including CNY 1.8 billion (USD 287.5 million, EUR 207.5 million) from the Industrial and Commercial Bank of China, China’s largest bank. The firm last year spent USD 100 million (EUR) on a massive multi-species cultivation and processing project in Korea.
Company chairman Wu Hougang has bet on the long-term demand for high-grade domestics and imported seafood in China and has spent big on building out a network of cold chain warehouses and trucks. The Dalian-based firm last week followed up with the signing of a strategic cooperation agreement with e-retailer Beijing Jingdong Century Trading Co. on online sales of seafood. That deal, announced with fanfare just before the annual results, appears to have appeased investors: the company's stock rose to CNY 14.5 (USD 2.32, EUR 1.67) early on Monday 28 April, up from CNY 12.5 (USD 2, EUR 1.44) a week before.
Leading Chinese scallop and sea cucumber player Zhangzidao Fishery Group blamed weather for dismal profits in the first half of 2013.
Operating revenues increased by 7.9 percent year-on-year to CNY 1.13 billion (USD 180.5, EUR 130.2 million) yet its profits decreased by 66.2 percent year-on-year to CNY 52.74 million (USD 8.4 million, EUR 6.1 million) due to lower unit yields of scallops in the first half of the year. While Zhangzidao has been hurt by the Chinese government’s frugality drive it and other fisheries companies in China have benefitted over the past year from demand for seafood among consumers turned off pork and poultry by disease and food safety scandals.
Engaged in hatching, farming, processing, and trading seafood, Zhangzidao claims to be active in ten countries and regions, including the United States, Australia, Japan, and South Korea. While it has pledged to build its import and distribution business focused on China’s domestic market, the Zhangzidao Group is also eager to build it cultivation operations overseas.
A network of 400 fully-owned stores and a network of distributors across the country set the firm up for fast expansion of imports.
Zhangzidao has sought to use its Portland-based U.S. subsidiary, ZF America (which traditionally handled the firm’s shipments of scallops and fish to U.S. clients) to bulk up imports of high-end shellfish and crustaceans into China. Approximately 25 percent of volume going through the Portland base is now made up of China-bound purchasing, according to the company’s annual report.
Importantly, Zhangzidao appears well placed to expand its imports given its scale and position as a listed company in China — this allows exporters supplying the firm to more easily secure export insurance.