Zhangzidao loss not unusual for risky industry: experts

Updated 2018-02-06 13:43:06

Experts said that an unexpected loss reported by Zhangzidao Group Co, an aquatic products company, reflected a "normal phenomenon" in the highly risky aquaculture industry.

The comments came after the company released the results of an investigation into its abnormal inventories, which said that its scallops died because of declining precipitation and abnormal sea temperatures, according to an announcement the company sent to the Shenzhen Stock Exchange on Monday.

These conditions also affected the bait for the mollusks. Combined with an expansion in farming, these factors caused the scallops to starve to death.

Citing these reasons, Zhangzidao reported a loss of 629 million yuan (.19 million) for 2017, compared with a net profit of 79.59 million yuan for 2016.

Shares in the company resumed trading on Monday after a three-day suspension.

The shares ended the day down 9.96 percent, almost the daily limit of 10 percent, at 6.96 yuan.

"Aquaculture is more risky than other agriculture types, and it is much more vulnerable to changing weather," Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant, told the Global Times on Monday.

Ma said that seashells are more fragile under difficult weather conditions.

Ma said that individual scallop farmers can also be affected by abnormal factors, but they can monitor the condition of bait in a timely fashion, compared with big companies like Zhangzidao.

The company encountered a similar situation in November 2014 when it declared that a cold water current, which was a rare natural phenomenon, swept through the northern Yellow Sea from June to August in 2014 and wiped out the company's scallop stocks.

Zhangzidao said it will deal with the situation by adjusting its product structure, ensuring the safety of cash flow and introducing strategic investment partners.

Suspicion rose after Zhangzidao declared on January 30 in a filing to the Shenzhen exchange that it expected a full-year loss in 2017, a sharp turnaround from the reported profit of 90 million yuan to 110 million yuan in 2017.