Chinese agricultural investment company Sino Agro Food said its shrimp 'mega farm' received more financing during the second quarter of 2017, which will help towards the completion of Aquafarm 4 and Aquafarm 5.

Based in Guangzhou, Guangdong Province, Sino Agro said it secured a CNY 100 million ($15m) credit facility from the Agricultural Bank of China, and was assigned the strongest credit rating, 5A-1, from Dun & Bradstreet, a business services company headquartered in the US, during the period.

"These milestones confirm Tri-way’s credit worthiness, clean balance sheet, and its risk averse approach, all of which support our confidence in Tri-way’s ability to secure additional financing to complete the build out of Aquafarm 4 and to commence the construction of Aquafarm 5," said the company.

The firm said that during the quarter it also implemented several initiatives aimed at improving financial discipline across the business to support a sustainable and cost-efficient business model, "such as concentrating on increasing free cash flow at Tri-way by optimizing operations at each aquafarm in terms of product mix and [A Power Recirculating Aquaculture System] performance."

Earlier this month Sino Agro said it is now farming pearl grouper, a tropical marine species, and empurau, a fish native to Malaysia, at Aquafarm 1 and Aquafarm 2 respectively.

According to the firm, Tri-way intends to exploit pearl grouper's fast growth-rates to cash in on strong demand from Chinese restaurants, and use the super-premium market price for empurau to raise the profile of Tri-way's brand.

Sino Agro spun off its shrimp 'mega farm' in March of this year in a sale worth $340.6m, although it remains the largest shareholder with a 36.6% stake.

At the time, it said separating into two groups -- one focused on the aquaculture industry and the other focused on investing in technology-based agriculture initiatives with substantial growth potential -- would generate "significant value for shareholders".

However, with revenues from the farm stripped out, overall Q2 revenues at the firm were down 17% to $47m, compared with the corresponding period last year, according to the firm's financial statement. Gross profit was $6.5m, down 35% year-on-year, while gross profit margin was 13.6%, down 3.8 percentage points.

The fall was driven largely by a weak performance in its engineering and beef trading segments.

“We experienced a decline in sales this quarter due to a shift in market demand toward newer sources of imported beef. We adapted to the influx of Australian beef by importing it to the Shanghai Distribution Center, and in Xining for value added processing.

"Now, new imports offer a further competition, offering us the same opportunities, after a transitional period," said the firm.

Seafood sales strong

Once fully completed the Zhongshan farm will be the world's largest shrimp production facility in the world, with production rising up to 200,000 metric tons of shrimp per year.

Sales at Sino Agro's separate seafood trade business were up by $2.3m, while gross profits increased by $180,000. This made it one of only two business segments which saw revenues rise during the period.

The firm said that it would aim to increase seafood imports in Q3, exploiting China's shortfall in supply.

"In the interim, China is short in seafood supply with demand increasing each year. The current shortfall is running at some 6-7m metric tons per year."

"In this respect, the locally grown seafood and imported seafood trade has strong potential to increase the company’s sales revenue and profits, such that the plan is to increase import seafood trading starting in Q3," said the firm.

Source: Undercurrent News. Date: 2017-08-16