Aquatic Foods Q1 profit drops 8.4% as input costs rise

AIM-listed Chinese marine foods and seafood processor and producer Aquatic Foods Group reported an 8.4% decline in gross profit for the first quarter as a result of rising input costs, while revenue was broadly flat.

Gross profit for the quarter to the end of March was down CNY4.4m to CNY47.9m compared with the same period a year ago as revenue came in at CNY216m compared to CNY214.8m. Meanwhile, cost of sales for the quarter increased 3.4 to CNY168.1m, mainly driven by the rising costs of raw materials, labour and packaging.

The unaudited gross margin was 22.2%. Having fluctuated around the 24% level in 2016, it started to dip to below 23% in December 2017. In addition to the 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.

Cash as at the end of March was around CNY485m compared to CNY377m at the end of December last year, in part reflecting favourable working capital movements.

Chief executive officer Li Xianzhi said: “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."