The financial year 2014 saw Chinese seafood processors struggle through difficult market conditions including a rise in the number of competitors from low-cost regions in Asia, rising wages in China, the unwillingness of end consumers to accept higher prices, and the ongoing credit crunch in China.
Despite this, Haikui Seafood increased its 2014 revenue by 2.9% to €121.1m thanks to higher selling prices. The company’s frozen product segment recorded a slight decrease of 0.3% in revenue to €94.5m, while revenue generated in the canned product segment rose by 16.3% to €26.5m. Haikui also recorded a 3.3% increase in net profit, but higher raw material costs as well as higher direct labour costs per production unit caused a decrease in gross profit by 6.7% to €19.8m. Despite high capital expenditure amounting to €14.2m, largely attributed to the construction of a new processing factory, Haikui Seafood was able to record a strong net cash inflow of €35.1m.
"With our strong financial condition and resilient business model, we believe that we are well positioned to deal with the market challenges in the near term while laying the foundations for our ambitious mid- and long-term growth plans", said Chen Zhenkui, CEO of Haikui Seafood.
Looking ahead, the company says it will still face a number of market challenges that will affect its profitability, but it’s “cautiously optimistic”. Revenue in RMB terms is expected to increase by around 5%, driven by an expected better harvest of aquaculture products such as shrimps and tilapias, while revenue generated from frozen seafood is anticipated to grow by around 10% in RMB terms.
Due to the tough market conditions and the foreseen higher production costs, the gross profit margin is expected to be slightly lower compared to 2014 and the EBIT margin is expected to be in the range between 8-10%.
To remain competitive and position the group for further growth in the future, Haikui Seafood is in the process of building a new production facility on Dongshan. Thanks to its advanced equipment, Haikui says the new factory will significantly increase the current production efficiency and capacity. Completion of the new factory is targeted for mid-2016 with first contributions also expected in 2016.
In addition, the company plans to extend its R&D activities with a focus on extracting chemical compounds from marine processing by-products, with targeted production in the new factory from 2016 onwards.
