Rising prices for fish and shrimp in the domestic market as well as partial recovery in export markets have given China’s seafood firms much optimism about 2013 earnings. Huge investments in cultivation of luxury species like sea cucumber are however dragging on earnings, with sales of sea cucumber slipping due to an ongoing frugality campaign by China’s government. Prices of fish have increased this spring as consumers — worried about bird flu — switch to aquatic food products.
Clearly caught in a dilemma, Shandong Oriental Ocean reported revenues of CNY 123 million (USD 20 million, EUR 15 million) for the first quarter of 2013, down 8.4 percent year on year. Net profits rose 1.1 percent to CNY 7.06 million (USD 1.1 million; EUR 874,000) — a suggestion of an easing in margin pressure at the firm, which depends on both aquaculture and processing for its earnings.
Without citing figures Oriental Ocean said first quarter processing results were better than sales of sea cucumbers, which it said were hit by Beijing’s ongoing frugality drive. Oriental Ocean meanwhile sold 50 tons of salmon in the first quarter and plans to sell 200 tons of salmon in 2013, according to company general manager Li Cunming. He told analysts that the firm plans to raise sea cucumber output in 2013, delivering on earlier capacity commitments. Profit however, said Cunming, will depend on sea cucumber prices.
A key scallop and sea cucumber player, Zhangzidao Group Co saw its 2012 revenues of CNY 2.60 billion (USD 422 million, EUR 322 million) fall 11 percent year-over-year with net profit falling 179 percent in the same period to CNY 166 million (USD 27 million, EUR 21 million). The fall in profits is due to the firm raising its output: 80 percent of its 47 hectares is new and thus not contributing to revenues, according to company chairman Wu Hougang.
Clearly recognizing the dangers of over-reliance on aquaculture (and in particular of sea cucumber), Wu has said he’s keen to turn Zhangzidao into a “platform company” drawing earnings from warehousing and distribution of seafood: Zhangzidao claims to operate China’s largest cold storage warehouse.
Income from sea cucumbers at CNY 200 million (USD 33 million, EUR 25 million) represent a huge slice of revenue at Dalian Yiqiao which saw revenue hit CNY 372 million (USD 60 million, EUR 46 million) in 2012, up 78.6 percent year-over-year with net profit at CNY 161 million (USD 26 million, EUR 20 million) up 78.6 percent on the previous year. Margin on sea cucumbers in 2012 hit an all-time low according to Yiqiao — but still healthy at 43 percent, suggesting plenty of motivation to continue cultivation. Indeed, China’s agricultural ministry claims the country’s sea cucumber output will rise to 200,000 tons in 2016. About 170,800 tons of sea cucumber was sold in China in 2012.
Huachuang Securities has predicted a “boom” for aquatic goods given the outbreak of bird flu: it claims the price of fresh water fish in Southern China increased by 10 percent to 20 percent month-over-month in regions of China. The shrimp price index also increased by 50 percent since the end of March.
