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Chinese processor earnings drop in 'challenging' year

Aquatic Foods says it will 'take advantage of this difficult time to grow via merger and acquisitions' in China and overseas.

London-listed Chinese processor Aquatic Foods Group reported lower earnings in the year ended Dec. 31, as a "challenging" trading environment in China took its toll.

Unaudited gross profit for the year amounted to CNY 224.6 million (€30.2 million/$32.5 million), which was down 19.9 percent from CNY 280 million (€37.7 million/$40.6 million) reported in the last financial year.

Revenue ended up at CNY 927.8 million (€124.9 million/$134.4 million), down 5.2 percent from the CNY 927.7 million (€124.8 million/$134.4 million) in 2015, despite a fourth quarter revenue improvement compared to the previous quarters. 

Sales volumes were up marginally by 1.3 percent from 21,778 to 22,056 metric tons but a 5.2 percent drop in prices resulted in the decrease in turnover.

The unaudited net profit margin for the year is expected to be around 10-11 percent, subject to foreign exchange adjustment. The net profit margin for 2015 was 14 percent.

Aquatic Foods described the year as challenging, marked by the slowest economic growth in China since 1990. 

Consumer spending was "cautious" whilst enterprises have been heavily discounting selling prices in order to protect market share. 

On the cost side, a weaker Chinese yuan, coupled with rising labor and packaging costs further impacted the group's profitability.

2017 will remain challenging and the board expects to these difficult conditions to continue in the near term.

Aquatic Foods said it is focusing on investments in marketing and advertising, on building up its e-commerce platform and on developing sales to Chinese supermarkets.

It is also actively seeking further overseas business development opportunities.

"The market environment in 2017 continues to present challenges with turnover in January 2017 at a similar level to that of 2016," said Li Xianzhi, chief executive officer of Aquatic Foods.

"Notwithstanding this backdrop, the board is satisfied with the company's continued profitability which demonstrates the strength and resilience of our business model," he said.

"The group has been preserving its cash prudently to ensure that it is in the best position to sustain difficult trading periods."

Cash as at Dec. 31, 2016, was approximately CNY 375 million (€50.5 million/$54.3 million). This will allow the group to "take advantage of this difficult time to grow via merger and acquisitions" in China and overseas, it said.  

In the longer term, the board believe the demand for pre-processed and ready to eat products will continue to increase in China, whilst more concerns will also be placed on food hygiene and safety. 

The group intends to leverage this strength and continue to focus on building its 'Zhenhaitang' brand.

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