TIDMAFG
RNS Number : 0185Z
Aquatic Foods Group PLC
23 May 2016
Press Release 23 May 2016
Aquatic Foods Group Plc
("Aquatic Foods", the "Company" or the "Group")
Q1 Trading Update
Aquatic Foods Group Plc (AIM: AFG), a leading Chinese marine
foods and seafood processor and producer, supplying to export and
local markets, today announces the following trading update for the
three months ended 31 March 2016.
The problems facing the Chinese economy continue to put pressure
upon pricing and in particular the gross margin achieved by the
Group on its products, but there is evidence that this has now
stabilized with Q1 2016 gross margins being comparable with those
achieved in Q4 2015. Revenues were also lower during Q1 2016
compared with Q1 2015 although the volumes processed have increased
reflecting a reduction in higher price per kilo products which has
contributed to the fall in margins.
Despite these pressures the Group continues to trade profitably
and is actively pursuing new sales opportunities.
Highlights:
-- Unaudited aggregate revenues for the Group for Q1 2016 were
RMB 214.8 million, (cGBP22.5m), 7% lower compared to the comparable
period in 2015.
-- Despite the reduction in revenues, volumes were up by 17%
reflecting the continued demand for our products, although at lower
average prices.
-- Gross margins remained steady compared with Q4 2015 at 24%
overall, although this is lower than the 31% achieved in the
comparable period in 2015. Export revenues remained relatively
steady at 6% of total sales compared with 7% in the corresponding
period in 2015.
-- Unaudited gross profit for Q1 2016 were RMB 52.3 million
(cGBP5.5m), 28% lower than the RMB 72.6 million achieved in Q1
2015.
-- US $850,000 purchase contract signed with Peterhead based
Northbay Pelagic for 615 metric tonnes of Atlantic Mackerel to
satisfy increasing demand within the local Chinese market for UK
fish products
Revenue breakdown by product category
Three months Three months Growth (%)
31 March 2016 31 March
Unaudited (RMB 2015
000s) Unaudited (RMB
000s)
Fish 135,591 145,827 (7)
Sea Cucumbers 31,623 30,456 4
Cephalopods 16,171 16,569 (2)
Shrimp & Shellfish 14,977 17,887 (16)
Others 16,438 19,815 (17)
Total 214,800 230,555 (7)
*The illustrative exchange rate as at 20 May 2016 is 1GBP: 9.53
RMB
Gross Profit margin by Product Category
Three months Three months Three months
31 March 31 March 31 December
2016 Unaudited 2015 2015 Unaudited
Unaudited
Fish 23% 29% 23%
Sea Cucumbers 30% 44% 30%
Cephalopods 25% 28% 26%
Shrimp & Shellfish 26% 32% 26%
Others 25% 31% 24%
Total 24% 31% 25%
Quarterly volumes processed by Product Category
Three months Three months
31 March 31 March
2016 Unaudited 2015
Unaudited
(KG 000s) (KG 000s)
Fish 4,134 3,786
Sea Cucumbers 12 9
Cephalopods 494 491
Shrimp & Shellfish 382 420
Others 168 187
Total 5,190 4,893
Fish
The revenue generated from fish products decreased 7% on the
previous year but still remains the Group's largest product
category, representing 63% of sales for the three months ended 31
March 2016.
This fall in revenue was despite volumes increasing by 9% on Q1
2015 reflecting the falling average price per kilo which has
contributed to the reduced gross margin of 23%.
The decrease in revenue generated from fish is predominantly due
to the Company's strategy of reducing its selling prices to remain
competitive in order to protect its current market share.
As a result of increasing popularity of British and Scottish
fish products, sales of mackerel in the period in China increased
by 10% on the previous year. To help satisfy this demand, the
Company signed a US $850,000 purchase contract with Peterhead based
supplier Northbay Pelagic in February 2016 for the supply of 615
metric tonnes of Atlantic Mackerel per annum. In anticipation of
the continual popularity of such products in China, Aquatic Foods
Group is currently negotiating with other UK based fish suppliers
in order to secure future additional supply.
Sea Cucumbers
The revenues from Sea Cucumber products have increased by 4%,
however average prices of the product are lower than the comparable
period in 2015 leading to a reduction in gross profit margin to
30%.
Cephalopods
The sales of Cephalopods (principally squid and cuttlefish) for
the three months ended 31 March 2016 were down slightly by 2%
compared to the same period in 2015. Gross profit margins were down
from 28% to 25%.
Shrimp and Shellfish
Sales have decreased from 8% to 7% of the Group's revenue for
the three months ended 31 March 2016. Whilst the gross profit
margins for the three months ended 31 March 2016 were down to 26%,
reflecting highly competitive market pricing globally and in the
PRC.
Other revenue
This includes gift boxes. Revenues have decreased by 17% for the
three months ended 31 March 2016, whilst the gross profit margins
for this period also decreased to 25%.
Export markets
The revenue from exports remained relatively steady for the
three months ended 31 March 2016 were RMB 14 million (cGBP1.5m),
representing 6% of revenue. The Group looks to continue its
successful links into the international market, capitalising
further on its partnership with Yihe, distributor to Walmart and
other US supermarkets, under a sales contract announced in
September 2015. The Company continues to actively pursue further
potential opportunities into export markets.
Appointment of new Finance Director
The Company continues its search for a replacement Finance
Director, following the departure of Sean Lim in February 2016. The
Company has been making good progress in finding a suitable
candidate to replace Mr. Lim, who has continued to provide
assistance to the Company, and will make further announcements
regarding this in due course.
Cash and working capital
The cash position of The Company remains solid (unaudited cash
balance of RMB 334.5m (GBP35.1m) as at 31 March 2016, the majority
of which is held in the PRC with the remaining funds located in the
UK and Hong Kong in order to more easily meet international
payments. The Group continues to actively manage its trade debtor
balances and has not been required to provide for any bad debts at
the present time. The reduction in cash from the year end position
is largely as a result of the timing of working capital
outflows.
Market environment and Outlook
The trading environment in the PRC remains challenging and the
Board expects it to continue throughout H1 2016. To mitigate this,
the Company has increased its marketing and advertising efforts in
order to preserve its market position in China. The Group intends
for this to combine with its strategy of specifically targeting
increased sales to supermarkets in the PRC.
While market growth in China has slowed in the past year, the
Group will take the opportunity to review internal processes and
strategies in preparation for a time when the market returns to
full strength. This includes monitoring the success of increased
advertising as well as continuing to finalise expansion plans,
including additional processing and cold storage capacity given the
increase in processing volumes. With this in place, the Board
believes that the Company will be in the strongest position
possible to take advantage of a revived trading environment.
The Group expects to report its audited results for the full
year ended 31 December 2015 in the next few weeks.
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
challenging market conditions may continue further into 2016,
however we will continue with our commitment to grow the
"Zhenhaitang" brand in the PRC and to expand our processing
capabilities and distributor network. This will ensure that the
Company is fully prepared to benefit from future opportunities once
the macroeconomic environment improves. In the meantime, the Board
believes that through increased promotional and brand awareness
activities that our sales within the PRC will improve as well as
internationally by attracting new distributors. 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."
- Ends -
For further information:
Aquatic Foods Group Plc Tel: +44 (0) 20 7398
7714
Dr Wang Shaodong, Non-Executive Chairman www.aquatic-foods.com
SP Angel Corporate Finance LLP
Nominated Adviser and Broker Tel: +44 (0) 20 3470
0470
Stuart Gledhill / David Facey www.spangel.co.uk
Media enquiries:
Abchurch Communications Limited
Jamie Hooper / Canace Wong Tel: +44 (0) 20 7398
7700
AquaticFoods@abchurch-group.com www.abchurch-group.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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