Thursday, June 29, 2017 6:06:07 AM
Chinese firm says it may match Vietnam’s total shrimp output, 300,000t, by 2025
Production is ramping up at Sino Agro Foods’s flagship shrimp aquaculture project in southeastern China, which is planning to stock its first commercial harvests by Q4 2016 and then scale up from there, company officials said.
Sino Agro, a US- and Norway-listed public company that focuses on selling meat and seafood to China’s middle classes, first announced the Zhongshan New Prawn Project (ZSNPP) in 2014, billing it as the world’s largest such shrimp farm. The company has claimed that its use of recirculating aquaculture systems (RAS) on such a grand scale in an urban area that amounts to no less than a “paradigm shift” in aquaculture.
Built on 600 acres in the middle of China’s Pearl River Delta, a region home to 120 million people, construction is expected to be fully complete by the end of 2025.
When complete, construction of the first phase of the project is expected to have cost $180m, plus or minus 15%.
Test stocking of the facility’s tanks — which will be filled with 80% freshwater prawns (Macrobrachium rosenbergii) and the rest with finfish species such as Asian cod, eels and jade perch — began in February.
Tony Ostrowski, Sino’s chief scientific officer, told investors during a June earnings call that the initial stockings were meant as "trial and shakedown runs" used to test the new systems.
"We’ll plan to begin commercial stocking as soon as our settling ponds, our new ponds and all of the tanks are complete which should be by the end of this year. We’ll work out the bugs in the system, which aren’t major bugs at all, and training the staff,” he said.
Ostrowski said that the biggest hurdle to achieving full production is the completion of the settling ponds which will be needed to handle large volumes of water from the tanks.
“Even though it’s a recirculating system, we’re going to be draining water out because of harvests and filling up water and taking out water out of the tanks,” he said.
He told Undercurrent News in an email this week that production at the farm is expected to be 1,000t by the end of 2016, 10,000t by 2017, 70,000t by 2020 and at least 130,000t but as much as 300,000t by the time the project is expected to be fully built out by 2025.
“These are minimal operational targets. I don’t like to say that our target is 300,000 metric tons because when I even say 100,000t people go, ‘like, yeah, really?’” he told Undercurrent in an interview earlier this year.
The system's biofilters — which Ostrowski said are the key factor in determining the facility’s output — are being built with a theoretical production capacity of 300,000t by 2025. But reaching that figure will depend "on further research on biology, selective breeding, nutrition, and system efficiencies," he added.
The figure would match Vietnam's 2015 shrimp production, he said. However, the company has said that when eventually built out, the facility's minimum operating output will be around 130,000t annually.
The project’s ambitious scale is one of the things that attracted Ostrowski, a former president and CEO at Hawaii's Oceanic Institute, to the project, he said.
“This model makes you think differently about how we’re doing aquaculture today. And that’s what’s really exciting about it,” he said.
He added that if the company’s approach works in China, it can be replicated elsewhere.
“What we’re trying to develop is a sustainable system in one of the most urbanized regions of the world,” he said.
Company history
The ZNPP isn’t the first aquaculture venture for Sino Agro in China but it is the largest.
In securities filings, Sino Agro describes as an “engineering and consulting company that specializes in building and operating agriculture and aquaculture farms” in China. What that means in practice is that Sino Agro, a Nevada-registered corporation with shares for sale in the US and Norway, enters into joint ventures with China-based investors to undertake large-scale projects.
The joint-venture model is needed to marry foreign capital with Chinese land and government licenses, which generally have to remain in Chinese hands under the country’s laws.
The Chinese government, Ostrowski said, has been “very supportive” of the project as it comes as part of a national economic plan to raise the living standards of the Chinese people and better food produced domestically is seen as one way to achieve that.
“In China it’s very, very difficult to get as big of a piece of land as we just got” Ostrowski said.
According to its annual report filed March 31, the company’s divisions include a feed and fertilizer manufacturer, a vertically integrated cattle farm, a livestock trading arm and a dragonfruit flower plantation in addition to aquaculture. The common theme running through those projects is the target market: China’s middle class.
By middle class, Sino Agro means Chinese earning $9,000 per year, which is about 25% of the total, Ostrowski said.
“If you project for the next 10 years, a 50% rise in that middle class will occur,” he said, which he estimated will spur a demand for an extra 25mt more of "high-quality" seafood.
Business model
Sino Agro’s business model is to act as the technology licenser, developer and contractor for its projects, and maintains at least a minority ownership stake, at least 25% in each of them.
The company’s CEO Solomon Lee and executives had experience developing similar efforts in Australia and Malaysia before beginning to consult on Chinese projects in 2006.
In addition to the ZSNPP, the company has two other aquaculture facilities near Emping City with a combined capacity of 2,200t per year and shrimp and prawn hatchery in Zhongshan.
Lately though, sales of eels and finfish have been a drag on earnings.
The company's Capital Award and Tri-Way subsidiaries farmed 1,900t of species such as shrimp, sleepy cod and eels during Q1 2016, an increase from 1,380t a year prior. However, a shortage of eel elvers resulted in a switch in product mix to lower cost species, which reduced revenues.
Currently, about 40% of Sino Agro’s total revenues come from its aquaculture interests but the company plans to spin off some of the non-aquaculture ventures and focus on the ZSNPP and aquaculture, Ostrowski said.
“We’ve decided that aquaculture is really the thing that we want to focus on, so what we’re going to do is we’re going to carve out some of these,” he said.
The company said in a press release earlier this month that it has completed all 'stage one' Hong Kong and China legal and commercial documents related to the asset transfers. Now, aquaculture assets can now be moved into the Tri-Way Industries subsidiary in preparation for its carve-out and subsequent IPO, the firm said.
Contact the reporter jason.smith@undercurrentnews.com
https://www.undercurrentnews.com/2016/07/29/chinese-firm-says-it-may-match-vietnams-total-shrimp-output-300000t-by-2025/
Production is ramping up at Sino Agro Foods’s flagship shrimp aquaculture project in southeastern China, which is planning to stock its first commercial harvests by Q4 2016 and then scale up from there, company officials said.
Sino Agro, a US- and Norway-listed public company that focuses on selling meat and seafood to China’s middle classes, first announced the Zhongshan New Prawn Project (ZSNPP) in 2014, billing it as the world’s largest such shrimp farm. The company has claimed that its use of recirculating aquaculture systems (RAS) on such a grand scale in an urban area that amounts to no less than a “paradigm shift” in aquaculture.
Built on 600 acres in the middle of China’s Pearl River Delta, a region home to 120 million people, construction is expected to be fully complete by the end of 2025.
When complete, construction of the first phase of the project is expected to have cost $180m, plus or minus 15%.
Test stocking of the facility’s tanks — which will be filled with 80% freshwater prawns (Macrobrachium rosenbergii) and the rest with finfish species such as Asian cod, eels and jade perch — began in February.
Tony Ostrowski, Sino’s chief scientific officer, told investors during a June earnings call that the initial stockings were meant as "trial and shakedown runs" used to test the new systems.
"We’ll plan to begin commercial stocking as soon as our settling ponds, our new ponds and all of the tanks are complete which should be by the end of this year. We’ll work out the bugs in the system, which aren’t major bugs at all, and training the staff,” he said.
Ostrowski said that the biggest hurdle to achieving full production is the completion of the settling ponds which will be needed to handle large volumes of water from the tanks.
“Even though it’s a recirculating system, we’re going to be draining water out because of harvests and filling up water and taking out water out of the tanks,” he said.
He told Undercurrent News in an email this week that production at the farm is expected to be 1,000t by the end of 2016, 10,000t by 2017, 70,000t by 2020 and at least 130,000t but as much as 300,000t by the time the project is expected to be fully built out by 2025.
“These are minimal operational targets. I don’t like to say that our target is 300,000 metric tons because when I even say 100,000t people go, ‘like, yeah, really?’” he told Undercurrent in an interview earlier this year.
The system's biofilters — which Ostrowski said are the key factor in determining the facility’s output — are being built with a theoretical production capacity of 300,000t by 2025. But reaching that figure will depend "on further research on biology, selective breeding, nutrition, and system efficiencies," he added.
The figure would match Vietnam's 2015 shrimp production, he said. However, the company has said that when eventually built out, the facility's minimum operating output will be around 130,000t annually.
The project’s ambitious scale is one of the things that attracted Ostrowski, a former president and CEO at Hawaii's Oceanic Institute, to the project, he said.
“This model makes you think differently about how we’re doing aquaculture today. And that’s what’s really exciting about it,” he said.
He added that if the company’s approach works in China, it can be replicated elsewhere.
“What we’re trying to develop is a sustainable system in one of the most urbanized regions of the world,” he said.
Company history
The ZNPP isn’t the first aquaculture venture for Sino Agro in China but it is the largest.
In securities filings, Sino Agro describes as an “engineering and consulting company that specializes in building and operating agriculture and aquaculture farms” in China. What that means in practice is that Sino Agro, a Nevada-registered corporation with shares for sale in the US and Norway, enters into joint ventures with China-based investors to undertake large-scale projects.
The joint-venture model is needed to marry foreign capital with Chinese land and government licenses, which generally have to remain in Chinese hands under the country’s laws.
The Chinese government, Ostrowski said, has been “very supportive” of the project as it comes as part of a national economic plan to raise the living standards of the Chinese people and better food produced domestically is seen as one way to achieve that.
“In China it’s very, very difficult to get as big of a piece of land as we just got” Ostrowski said.
According to its annual report filed March 31, the company’s divisions include a feed and fertilizer manufacturer, a vertically integrated cattle farm, a livestock trading arm and a dragonfruit flower plantation in addition to aquaculture. The common theme running through those projects is the target market: China’s middle class.
By middle class, Sino Agro means Chinese earning $9,000 per year, which is about 25% of the total, Ostrowski said.
“If you project for the next 10 years, a 50% rise in that middle class will occur,” he said, which he estimated will spur a demand for an extra 25mt more of "high-quality" seafood.
Business model
Sino Agro’s business model is to act as the technology licenser, developer and contractor for its projects, and maintains at least a minority ownership stake, at least 25% in each of them.
The company’s CEO Solomon Lee and executives had experience developing similar efforts in Australia and Malaysia before beginning to consult on Chinese projects in 2006.
In addition to the ZSNPP, the company has two other aquaculture facilities near Emping City with a combined capacity of 2,200t per year and shrimp and prawn hatchery in Zhongshan.
Lately though, sales of eels and finfish have been a drag on earnings.
The company's Capital Award and Tri-Way subsidiaries farmed 1,900t of species such as shrimp, sleepy cod and eels during Q1 2016, an increase from 1,380t a year prior. However, a shortage of eel elvers resulted in a switch in product mix to lower cost species, which reduced revenues.
Currently, about 40% of Sino Agro’s total revenues come from its aquaculture interests but the company plans to spin off some of the non-aquaculture ventures and focus on the ZSNPP and aquaculture, Ostrowski said.
“We’ve decided that aquaculture is really the thing that we want to focus on, so what we’re going to do is we’re going to carve out some of these,” he said.
The company said in a press release earlier this month that it has completed all 'stage one' Hong Kong and China legal and commercial documents related to the asset transfers. Now, aquaculture assets can now be moved into the Tri-Way Industries subsidiary in preparation for its carve-out and subsequent IPO, the firm said.
Contact the reporter jason.smith@undercurrentnews.com
https://www.undercurrentnews.com/2016/07/29/chinese-firm-says-it-may-match-vietnams-total-shrimp-output-300000t-by-2025/
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
