Leading Chinese shrimp exporter Zhanjiang Guolian Aquatic is flagging a major drop in revenue for the first half of 2015, which the company is blaming on the cost of adjusting to the domestic market.
Guolian has reported a massive decline of 296.96 to 322.21 percent, or CNY 39 million (USD 6.3 million, EUR 5.7 million) to CNY 44 million (USD 7.1 million, EUR 6.5 million) in money terms, over the same period last year in a note to investors. Guolian is also predicting CNY 19.8 million (USD 3.2 million, EUR 2.9 million) in profit for the first six months of the year according to company figures, which have yet to be audited.
The loss has been blamed by the company on a large investment in e-commerce infrastructure for the domestic market as well as tightened screening of its exports in the first quarter by authorities in the United States, the company’s key market. Uncertainty has been eased by the return in mid-February 2015 of Guolian to what it terms “U.S. green card clearance,” meaning its shipments of shrimp and tilapia into the United States no longer face “automatic detention” testing.
Though it remains China’s top shrimp exporter Guolian has proven an erratic performer for investors in recent years. The firm faced delisting from the Shenzhen stock exchange after it lost money in both 2011 and 2012. Guolian also blamed restructuring for a 2014 dip in profits at the firm. Earnings last year hit CNY 140 million (USD 22.6 million, EUR 20.6 million) to CNY 190 million (USD 30.6 million, EUR 27.9 million), a result blamed on restructuring of subsidiaries.
However the firm later revised its 2014 figures upwards by 485.65 percent to show net profits up from CNY 83 million (USD 13.4 million, EUR 12.2 million) to CNY 250 million (USD 40.3 million, EUR 36.7 million) – this was due to a sale of one of the company’s real estate interests rather than any jump in seafood sales. The firm has also pointed to improvement in “high-end aquaculture feed sales” from 46,000 metric tons (MT) to 70,000 MT in 2014, according to Huang Fu Sheng, an analyst at CSC Securities.
Guolian is ultimately in a period of transition which will see it exit the lower-end exports in favor of domestic sales of its own and imported seafood. “Guolian wants to focus on overseas procurement while strengthening the domestic market building and brand promotion,” explained Huang.
Keen to insulate his firm against volatile western economies and currency fluctuation, Guolian’s CEO Li Zhong has set a very ambitious goal of rising domestic sales to between 40 and 50 percent of overall sales by the end of 2015 and has enlisted Chinese pop stars for endorsement campaigns.
Guolian has sought to expand its online sales operations and logistics to capture growing domestic demand. With a market capitalization of RMB 3.4 billion (USD 547.5 million, EUR 499.5 million) and a staff of 4,000 Guolian’s efforts to build the domestic market will have a big impact on how the firm develops.
The firm’s “Long Ba” line of frozen shrimp products has been successful but there appears to be much more potential given China’s frozen food market is growing at 30 percent per year according to data from retail market research group Fung (Hong Kong) and Kantor. Despite this, Chinese average per capita consumption of frozen foods remains only 5 percent of the U.S. average and 10 percent of the EU average.
