TIDMAFG
RNS Number : 9182O
Aquatic Foods Group PLC
11 November 2016
Press Release 11 November 2016
Aquatic Foods Group Plc
("Aquatic Foods" or "AFG" or the "Group" or the "Company")
Trading update
Aquatic Foods Group Plc (AIM: AFG), a leading Chinese marine
foods and seafood processor and producer supplying to export and
local markets, is pleased to provide the following trading update
for the 9 month period ended 30 September 2016.
Financial Highlights
-- Unaudited revenue for the Group for the 9 months ended 30
September 2016 decreased by 5.0%, or RMB 33.8 million (cGBP4.0
million), to RMB 644.9 million (cGBP76.3 million) compared with the
corresponding period in 2015 (9M 2015: RMB 678.7 million, cGBP80.3
million). Q3 revenue improved by 5.1% compared with Q1 and 10.6%
compared with Q2 2016.
-- Despite the reduction in revenue, sales volume for the 9
months to 30 September 2016 was 3.0% higher than that in the same
period in 2015, reflecting the continued demand for our products,
although at lower average prices. Quarterly sales volumes during
2016 have remained fairly consistent at around 5,100 tonnes.
-- Unaudited gross margin which had started to decline from
August 2015 has stabilised and for the 9 months to 30 September
2016 was 24.5%, although still significantly lower than that in the
same period during 2015 (30.5%).
-- Unaudited gross profit for the 9 months ended 30 September
2016 was RMB 157.9 million (cGBP18.7 million), a decrease of RMB
48.8 million (cGBP5.8 million) or 23.6% compared with of the same
period in 2015 (9M 2015: RMB 206.7 million, cGBP24.5 million).
-- The unaudited net profit margin for the 9 months ended 30
September 2016 is expected to be around 10-11%, subject to foreign
exchange adjustment. The net profit margin for the calendar year
2015 was 14%.
-- Cash as at 30 September 2016 was approximately RMB 432
million, cGBP51 million (as at 30 June 2016: 417 million, cGBP49.3
million).
Note: Financial information above is converted into Sterling
Pounds for illustrative purposes, at 8.4537, being exchange rate
approximating to that ruling at 10 November 2016.
Product categories
Revenue breakdown 9 months 9 months Changes Year ended
by 30 September 30 September % 31 December
product category 2016 2015 2015
Unaudited Unaudited Audited
Currency: RMB'000
Fish 451,409 478,149 -5.6% 704,942
Sea Cucumbers 91,546 93,579 -2.2% 137,531
Cephalopods 33,898 33,043 2.6% 41,753
Shrimp & Shellfish 29,473 31,951 -7.8% 38,688
Others 38,556 41,943 -8.1% 55,833
---------------- ---------------- -------- --------------
Total 644,883 678,664 -5.0% 978,747
Sale volume breakdown 9 months 9 months Changes Year ended
by product category 30 September 30 September % 31 December
2016 2015 2015
Unaudited Unaudited
Thousand kilograms
Fish 13,191 12,808 3.0% 19,062
Sea Cucumbers 31 31 1.4% 49
Cephalopods 997 972 2.6% 1,116
Shrimp & Shellfish 780 752 3.7% 993
Others 448 441 1.5% 558
------------------- ------------------- -------- -------------
Total 15,448 15,003 3.0% 21,778
Gross Margin by Product 9 months 9 months Year ended
Category 30 September 30 September 31 December
2016 2015 2015
Unaudited Unaudited Audited
Fish 23% 29% 27%
Sea Cucumbers 30% 39% 36%
Cephalopods 25% 30% 29%
Shrimp & Shellfish 26% 31% 30%
Others 25% 29% 27%
-------------- -------------- -------------
Total 25% 31% 28%
Fish
Sales of fish products accounted for approximately 70% of the
Group's 9 months revenue (9M 2015: 70%), or 85% of Group's sales
volume (9M 2015: 85%).
The revenue generated from fish products decreased by
approximately 6% compared with 9M 2015, although volume increased
by 3%. This decrease in revenue is predominately due to the Group's
strategy price reduction in this difficult market environment to
remain competitive in order to protect current market share.
The lower average selling prices have resulted in a reduction in
gross profit margin of fish products to 23% (9M 2015: 29%).
Sea Cucumbers
Sales of sea cucumber products decreased slightly by 2%, whilst
volume increased by 1.4%, compared with 9M 2015.
Gross margin fell to 30% (9M 2015: 39%) as a result of augmented
cost especially raw material input cost.
Cephalopods
Sales of Cephalopods (principally squid and cuttlefish), though
only a modest proportion of total group sales of 5%, were the only
product category that has reported a revenue growth compared with
9M 2015.
Sales of cephalopods products increased by approximately 3% both
by value and by volume compared with 9M 2015. Nevertheless, gross
profit declined by 15% primarily due to rising costs. Gross margin
declined to 25% (9M 2015: 30%).
Shrimp and Shellfish
Sales value decreased by approximately 8% whilst volume
decreased by approximately 4% compared with 9M 2015, reflecting the
general price pressure in the current market. As a result, gross
profit margins were down to approximately 26% (9M 2015: 31%).
Others
These are primarily sales of gift boxes. Sales decreased by 8%
and gross profit were down to 25% (9M 2015: 29%).
Cash and working capital
The cash position of the Group remains solid. The Group was able
to convert most of its net profit into cash. The working capital
requirement of the Group remains fairly stable. In the 9 months
ended 30 September 2016, the decrease in trade and other
receivables is comparable with the decrease in trade and other
payables. Unaudited cash balance at 30 September 2016 was RMB 432
million, the majority of which is held in the PRC with
approximately GBP2.7 million held predominantly in Hong Kong.
Market environment, Outlook and Strategy
The Group's operating environment remains challenging and the
Board expects these difficult conditions to continue in the near
term. While market growth in China has slowed in the past year, the
Group has increased its marketing and advertising efforts in order
to maintain its market position in China. The Group entered into a
new advertising arrangement and incurred new advertising expenses
of RMB 9.0 million during the 9 months ended 30 September 2016
aimed at further promotion of the "Zhenhaitang" brand
The Group is also actively looking for overseas business
development opportunities as well as working to increase its sales
to supermarkets in the PRC.
Whilst the Board is mindful of the potential challenges that lie
ahead, the Board believes that such a demanding business
environment also present consolidation opportunities. AFG's strong
cash position allows the Group to take advantage of this difficult
time to grow via merger and acquisitions. Accordingly the Group
will review potential acquisition opportunities as well as the
continued potential for organic expansion into a new site. In
addition the Group continues to review growth and improvement
opportunities in production capacity and efficiency through
increasing process automation.
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. With a history in servicing demanding export markets,
AFG has developed a reputation for adopting the highest standards
for quality, safety and sustainability. The Group will leverage on
this strength and continue to focus on "Zhenhaitang" brand
building.
Li Xianzhi, Chief Executive Officer of Aquatic Foods Group Plc,
commented: "The fall in revenue and gross margins reflects the
pressure imposed by the macroeconomic conditions in China. However
the Board is satisfied that the Company remains profitable which
demonstrates the strength and resilience of our business model. The
Group has been prudently preserving its cash to ensure that it is
in the best position to sustain difficult trading periods as well
as ensuring that the Group is fully prepared to take advantages of
this to grow when M&A opportunities present themselves.
The Board is pleased with the Group's resilience during the
challenging economic environment, and we would like thank our
employees and shareholders for their continued support."
-S -
For further information:
Aquatic Foods Group Plc Tel: +44 (0)7706 814 895
Po Ling Low, Finance Director pllow@kanwa.cn
SP Angel Corporate Finance LLP Tel: +44 (0) 20 3470 0470
Nominated Adviser and Broker www.spangel.co.uk
Stuart Gledhill / Robert Wooldridge
Media enquiries:
Abchurch Tel: +44 (0) 20 7398 7700
Julian Bosdet / Dr. Jenny Lee / www.abchurch-group.com
George Robinson
AquaticFoods@abchurchgroup.com
Notes to Editors:
Aquatic Foods Group is a leading marine foods and seafood
processor and supplier based in China. The Group initially built
its business through focusing on the export market (principally
Japan under the "Kanwa Foods" brand), and subsequently established
the "Zhenhaitang" brand in 2007 in mainland China to take advantage
of the growing market driven by growing disposable income within
the Chinese middle-classes and a more health conscious consumer
base.
The Group benefits from excellent food safety procedures
developed over many years which have helped the Group to build a
strong track record of supplying its products into overseas
markets. This track record has enhanced the perception of the
quality and reliability of the Group's products in China and has
allowed the Group to expand significantly into local markets as
demand for seafood products has increased. In a market that has
seen regular public health scares relating to food safety, the
Group considers that its adherence to these standards to be a key
strength. The Group has obtained the following key standards:
- ISO 9001 Quality Management System certification
- HACCP Food Safety System certification
- BRC certification; and
- Marine Stewardship Council certification
Aquatic Foods works with a network of distributors to
effectively market its products in China. The Group has continued
to grow its distributor relationships and now distributes its
products in 16 provinces, municipalities and autonomous regions in
China through 50 regional distributors. These distributors in turn
sell the Group's products to sub-distributors and retailers,
including supermarket chains and hypermarkets.
Further information can be viewed at www.aquatic-foods.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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