TIDMAFG
RNS Number : 8504F
Aquatic Foods Group PLC
22 May 2017
Press Release 22 May 2017
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 quarter ended 31 March 2017.
Financial Highlights
-- Unaudited Group's revenue and sales volume for quarter ended
31 March 2017 were RMB 216.0 million (c. GBP24.2 million) and 5.1
million tonnes respectively, which remained consistent with that of
1Q 2016 (1Q 2016: Revenue 214.8m, c. GBP24.1; Sales volume 5.1
million tonnes).
-- Unaudited cost of sales for quarter ended 31 March 2017
increased by RMB 5.6m, or 3.4%, to RMB 168.1m (c. GBP18.8 million)
compared with the corresponding period last year (1Q16: RMB 162.5,
c. GBP18.2 million). This was mainly driven by rising raw material
cost, labour cost and packaging costs.
-- As a result of rising input cost, unaudited gross profit for
quarter ended 31 March 2017 was down by RMB 4.4 million, or 8.4%,
to RMB 47.9 million (c. GBP5.4 million) compared with the same
period in 2016 (1Q 2016: RMB 52.3, c. GBP5.9 million).
-- Unaudited gross margin for the quarter was 22.2%. Gross
margin fluctuated around the 24% level in 2016 but started to dip
to below 23% in December 2017. In addition to rising cost factor,
the decline in margin between December 2016 and February 2017 was
also due to price reductions and promotions before and during
Chinese New Year in order to drive sales.
-- The unaudited net profit margin for quarter ended 31 March
2017 is expected to be around 6%, subject to any foreign exchange
adjustment (1Q 2016: approximately 10%). The unaudited net profit
margin for the 2016 was around 10-11%.
-- Cash as at 31 March 2017 was approximately RMB 485 million,
cGBP54 million (as at 31 December 2016: 377 million, cGBP42
million) in part reflecting favourable working capital
movements.
Note: Financial information above is converted into Sterling
Pounds for illustrative purposes, at 8.930, being the exchange rate
approximating to that ruling at 17 May 2017.
Product categories
Revenue breakdown Quarter Quarter Changes
by ended ended 31 %
product category 31 March March 2016
2017 Unaudited
Unaudited
Currency: RMB'000
Fish 142,053 135,591 4.8%
Sea Cucumbers 33,251 31,623 5.1%
Cephalopods 15,450 16,171 -4.5%
Shrimp & Shellfish 12,826 14,977 -14.4%
Others 12,408 16,438 -24.5%
---------------- ---------------- --------
Total 215,989 214,800 0.6%
Sale volume breakdown Quarter Quarter Changes
by product category ended ended 31 %
31 March March 2016
2017 Unaudited
Unaudited
Thousand kilograms
Fish 4,222 4,134 2.1%
Sea Cucumbers 12 12 1.3%
Cephalopods 483 494 -2.2%
Shrimp & Shellfish 322 382 -15.7%
Others 156 168 -7.4%
------------------- ------------------- --------
Total 5,195 5,190 0.1%
Gross Margin Quarter Quarter
by Product Category ended ended 31
31 March March 2016
2017 Unaudited
Unaudited
Fish 21.0% 23.0%
Sea Cucumbers 28.4% 29.9%
Cephalopods 19.3% 25.0%
Shrimp & Shellfish 23.1% 26.0%
Others 23.1% 25.1%
----------- ------------
Total 22.2% 24.4%
Fish
Sales of fish products accounted for approximately 66% of the
Group's 3 months revenue (1Q 2016: 63%), or 81% of Group's sales
volume (1Q 2016: 80%).
The revenue generated from fish products increased by
approximately 4.8% compared with 1Q 2016, whereas volume increased
by approximately 2.1%. There was a slight improvement in average
unit price for fish products. However this was mainly due to change
in sales mix, which also resulted in a higher cost of sales for
fish products. The market environment remains competitive, pressure
on selling price remains high and it was difficult to pass on
increasing input costs to end customers.
As a result of the above, gross profit margin of fish products
for the quarter decrease to 21% (3M 2016: 23%).
Sea Cucumbers
Sales of sea cucumber products increased by 5.1%, and volume
increased by 1.3%, compared with 1Q 2016.
Gross margin fell to 28% (1Q 2016: 30%) as a result of augmented
cost especially raw material input cost.
Cephalopods
Cephalopods (principally squid and cuttlefish) products had been
experiencing solid growth over prior periods. However, for quarter
ended 31 March 2017, sales of Cephalopods products declined by 4.5%
in value and 2.2% in volume compared with 1Q 2016. Together with
rising cost, these have resulted in significant declined in gross
profit of approximately 26% for the quarter. Gross margin declined
to 19% (1Q 2016: 25%).
Shrimp and Shellfish
Sales value decreased by approximately 14.4% whilst volume
decreased by approximately 15.7% compared with 1Q 2106. Gross
profit margins were down to approximately 23% (1Q 2016: 26%).
Others
These are primarily sales of gift boxes. Sales decreased by
24.5% and gross profit were down to 23% (1Q 2016: 25%).
Cash and working capital
The cash position of the Group remains solid. The Group's cash
balance at 31 March 2017 improved by approximately RMB 108 million
from the year end to RMB 485 million, c.GBP54 million (31 December
2016: RMB 377 million, cGBP42 million). The majority of the cash is
held in the PRC with approximately GBP2.7 million held
predominantly in Hong Kong.
In contrast to quarter ended 31 December 2016 where the working
capital demand was high due to the Group paying down its creditors
ahead of the year end, and at the same time taking on a higher
debtors balance as a result of seasonal sales improvement in 4Q
2016, the working capital position for quarter ended 31 March 2017
has improved by approximately RMB 100 million, reversing the amount
of working capital tied up in the previous quarter.
During the quarter ended 31 March 2017, trade and other
receivables decreased by approximately RMB 59 million reflecting a
good debt recovery post year end, and payment to creditors is back
to the normal term resulting in trade and other payables increasing
by approximately RMB 30 million.
The Group has faced continued difficulties in remitting funds
from its operating entities in China to the UK on a timely and
regular basis to meet the ongoing UK expenses due to more stringent
cross border fund remittance control by the PRC State
Administration of Foreign Exchange (SAFE). The Group is continuing
to work with relevant parties to resolve this issue.
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. In order to maintain its market position in China and promote
market awareness of "Zhenhaitang" brand, the Group has further
increased its marketing and advertising efforts in 2017. The
advertising cost in Q1 2016 was RMB9 million and this has increased
to RMB 12 million in Q1 2017 in both cases this reflects the cash
payment [in advance for a full year of advertising costs.
The Group is also actively looking for overseas business
development opportunities as well as working to increase its sales
to supermarkets in the PRC.
The Group continues to consider 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.
Li Xianzhi, Chief Executive Officer of Aquatic Foods Group Plc,
commented: "The fall in gross and net margins reflects the pressure
imposed by the macroeconomic conditions in China. However the Board
is satisfied that the Company remains profitable despite these
negative factors. The Group continues to consider opportunities for
investing its available cash resources to ensure that it can thrive
and seek to build market share during the ongoing more challenging
trading environment."
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
-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 Tel: +44 (0) 20 3470
LLP 0470
Nominated Adviser and Broker www.spangel.co.uk
Stuart Gledhill / Robert
Wooldridge
Media enquiries:
Abchurch Tel: +44 (0) 20 7398
7700
Julian Bosdet / Jenny Lee www.abchurch-group.com
/ Alejandra Campuzano
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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