Corporate news

Trading update

20 March 2017

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 full year ended 31 December 2016. 

Key Points

  • Unaudited revenue for the Group for the year ended 31 December 2016 decreased by 5.2%, or RMB 50.9 million (circa £6.1 million), to RMB 927.8 million (circa £110.5 million) compared with the year ended 31 December 2015 (2015: RMB 978.7 million, circa £116.5 million).  Q4 showed revenue improvement of 31.7%, 38.5% and 25.3% compared with Q1, Q2 and Q3 2016 respectively reflecting in part the seasonal strength of the quarter.
  • Sales volume for the year ended 31 December 2016 increased marginally by 1.3% compared with 2015, with the lower average prices obtained in 2016 being reflected in the headline revenue.  Quarterly sales volumes during 2016 have remained fairly consistent at around 5,100 tonnes with the exception of Q4 volume of 6,600 tonnes.
  • Unaudited gross margin which had started to decline from August 2015 has stabilised at around 24.2% for year ended 31 December 2016 (2015: 30.5%) though there was a dip in gross margin in December 2016 to 22.7%.
  • Unaudited gross profit for the year ended 31 December 2016 was RMB 224.6 million (c£26.7 million), a decrease of RMB 55.8 million (c£6.6 million) or 19.9% compared with of the same period in 2015 (2015: RMB 280.4 million, c£33.4 million).
  • The unaudited net profit margin for the year ended 31 December 2016, as anticipated in the Company's Q3 trading update, is expected to be around 10-11%, subject to foreign exchange adjustment. The net profit margin for the year ended 31 December 2015 was 14%.
  • Cash as at 31 December 2016 was approximately RMB 375 million, c£44 million (as at 30 June 2016: RMB 417 million, c£49.6 million) reflecting a cash outflow during the quarter principally as a result of the timing of negative working capital movements.

Note: Financial information above is converted into Sterling Pounds for illustrative purposes, at 8.40, being exchange rate approximating to that ruling at 10 March 2016.


Revenue breakdown by Product Category

Revenue breakdown by
product category
Full Year
31 December
Full Year
31 December
Currency: RMB'000      
Fish    663,326       704,942 -5.9%
Sea Cucumbers    134,181       137,531 -2.4%
Cephalopods      42,922         41,753 1.3%
Shrimp & Shellfish      35,404         38,688 -7.0%
Others      51,985         55,833 -6.9%
Total    927,818       978,747 -5.2%


Sales volume breakdown by Product Category

  Year ended
31 December
Year ended
31 December
Changes %
Thousand kilograms      
Fish       19,171 19,062 0.6%
Sea Cucumbers              47 49 -4.1%
Cephalopods         1,258 1,116 12.7%
Shrimp & Shellfish            936 993 -5.7%
Others            644 558 15.4%
Total    22,056 21,778 1.3%


Gross Profit margin by Product Category

  Year ended
31 December
Year ended
31 December
Fish 23% 27%
Sea Cucumbers 29% 36%
Cephalopods 24% 29%
Shrimp & Shellfish 25% 30%
Others 24% 27%
Total 24% 28%


Sales of fish products accounted for approximately 75% of the Group revenue (2015: 76%), or 89% of Group's sales volume (2015: 91%).

The revenue generated from fish products decreased by approximately 6% compared with 2015 while volume increased by 0.6%.  This decrease in revenue was predominately due strong market competition which in turn resulted in selling price reduction in order to protect the Group's market share in this competitive market environment.  

The lower average selling prices have resulted in a reduction in gross profit margin of fish products to 23% (2015: 27%). As fish products account for more than three quarter of the Group's revenue, the reductions in average selling prices and revenue have directly impacted the Group's revenue and margin, resulting in a decrease of approximately 5% in the Group's revenue and a 20% decrease in gross margin during the year.

Sea Cucumbers

Sales revenue and volume of sea cucumber products decreased by 2.4% and 1.4% respectively, compared with 2015.  Gross margin fell from 36% in 2015 to 29% in 2016 as a result of cost increases, especially raw material input cost.


Sales of Cephalopods (principally squid and cuttlefish), though only a modest 5% proportion of total group sales, were the only product category that has reported revenue growth compared with 2015. 

Sales of cephalopod products increased approximately 1.3% by value and 12.7% by volume compared with 2015. Nevertheless, gross profit declined by 16% primarily due to lower selling prices and rising input costs. Gross margin declined to 24% in 2016 (2015: 29%).

Shrimp and Shellfish

Sales value decreased by approximately 7.0% whilst volume decreased by approximately 5.7% compared with 2015, reflecting the general price pressure in the current market. As a result, gross profit margins were down to approximately 25% (2015: 30%).


These are primarily sales of gift boxes. Sales decreased by 7% and gross profit were down to 24% (2015: 27%).

Cash and working capital

The cash position of the Group remains solid.  The Group's cash balance at 31 December 2016 was approximately RMB 375 million, c£44 million (2015: RMB 380 million, c£45 million), the majority of which is held in the PRC with approximately GBP2.7 million held predominantly in Hong Kong.  

Most of the cash generated from trading activities had been absorbed into working capital as at the year end.  In 2016, the Group's working capital requirement increased by approximately RMB 100 million, of which trade and other receivables increased by approximately RMB 30 million and trade and other payables decreased by approximately RMB 67 million reflecting in part the paying down of creditors ahead of the year end.  The Group also paid the final dividend for 2015 and the interim dividend for the first half of 2016 totalling approximately £1.0 million (RMB 8.4 million) during the year.

The Group has been facing difficulties in remitting funds from its operating entities in China to the UK due to more stringent cross border fund remittance control by the PRC State Administration of Foreign Exchange (SAFE).  The Board is looking for a solution to ensure that funds can be transferred out of China on a timely, regular basis to meet the Company's ongoing UK expenses and to provide for the payment of future dividends should such be declared.

Market environment, Outlook and Strategy

2016 has been a challenging year in China.  The year marked the slowest economic growth in China since 1990, with the growth achieved primarily driven by government led fixed asset investment and property development.  Consumer spending has been cautious whilst enterprises have been heavily discounting selling prices in order to protect market share.  The Group's operations have not been spared this particularly challenging sales environment.  Group sales volume remained stagnant whilst revenue declined by 5.2% reflecting a declining weighted average selling price. On the cost side, a weaker Chinese Yuan, coupled with rising labour and packaging costs further impacted the Group's profitability although the Group still expects to report a healthy net profit margin for the year in excess of 10 per cent.

2017 remains a challenging year for the Group and the Board expects these difficult conditions to continue in the near term.

The Group continues to invest in marketing and advertising.  The Group is also working to build its e-commerce platform as well as continuing to develop sales to supermarkets in the PRC.

The Group is also actively seeking further overseas business development opportunities although a number of potential customers that the Group has entered into discussions with have specified extended pricing and/or credit terms that the Group is unwilling to match in order to protect margins. 

Whilst the Board is mindful of the potential challenges that lie ahead, the Board believes that such a demanding business environment also presents consolidation opportunities.  AFG's strong cash position has the potential to allow the Group to take advantage of this difficult time to grow via merger and acquisitions.  Accordingly the Group continues to review potential acquisition opportunities in the PRC and overseas 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 intends to leverage this strength and continue to focus on building its "Zhenhaitang" brand.

Li Xianzhi, Chief Executive Officer of Aquatic Foods Group Plc, commented: "The market environment in 2017 continues to present challenges with turnover in January 2017 at a similar level to that of 2016. Notwithstanding this backdrop, the Board is satisfied with the Company's continued profitability which demonstrates the strength and resilience of our business model.  The Group has been preserving its cash prudently to ensure that it is in the best position to sustain difficult trading periods."

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.

For further information:

Aquatic Foods Group Plc
Tel: +44 (0) 20 7398 7714
Po Ling Low, Finance Director
SP Angel Corporate Finance LLP
Nominated Adviser and Broker
Tel: +44 (0) 20 3470 0470
Stuart Gledhill / Robert Wooldridge

Media enquiries:

Abchurch Communications Limited  
Julian Bosdet / Tim Thompson / Jenny Lee Tel: +44 (0) 20 7398 7700


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



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