Qian Hu swings into loss for H1, hurt by dearth of cargo flights

MAINBOARD-LISTED integrated fish service provider Qian Hu has swung into the red for the first half, with the drastic reduction of cargo flights as a result of the virus outbreak hurting its fish sales.

It reported on Friday a net loss of S$525,000 for the six months ended June 30, 2020, reversing from its net profit of S$273,000 in the year-ago period. Its fish segment's operating profit, which was its largest profit segment a year ago, swung into a loss.

Qian Hu, which exports ornamental fish to more than 80 countries, saw fish sales slide by 25.7 per cent for the first half of 2020 to S$11.9 million. The group's fish exports, which are very dependent on the operations and availability of air cargo, were also hit by the reduction of flight capacities. The lockdown in China affected its aquaculture business in Hainan province too, dampening domestic demand.

Sale of accessories fared better, posting a slight increase of 2.2 per cent to S$16.8 million in sales as aquarium and pet accessories products emerged unscathed from reduction in flight operations as they largely rely on sea freight for export. The accessories segment also benefited from contributions from the group's newly acquired accessories factory in Guangzhou. 

Sales of plastics fell 19.4 per cent to S$4.6 million. The increase in demand for plastic products during the virus outbreak in the food and beverage packaging and healthcare sectors was not sufficient to mitigate the impact of Qian Hu's loss of a major customer. 

With revenue hit by supply chain disruptions, total sales fell 12.7 per cent y-o-y to S$33.2 million.

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The group reported a loss per share of 0.46 Singapore cent from 0.24 Singapore cent in the year-ago period. Its net asset value per share also dipped to 44.92 Singapore cents as at June 30, compared to 45.71 Singapore cents a year ago. Cash and cash equivalents stood at S$16.7 million.

In its news statement, Qian Hu's executive chairman and managing director Kenny Yap said that the business outlook remains "extremely challenging" at least for the second half of 2020. 

"Until a vaccine is successfully developed, or a viable solution is found to eradicate Covid-19, the global economic landscape remains very fluid. While we are not able to control the external environment, we can, however, do what we must to renew our products and processes, continue to innovate, and digitalise our operations," he said. 

"Although we will continue to experience impact on revenue and profit in the second half of FY2020, we believe that we have positioned ourselves pertinently to weather the crisis and will emerge much stronger than before," he added. 

It is developing its aquaculture business and expects it to be a "sustainable engine of growth", outstripping its current core ornamental fish segment.

The group has started to develop its aquaculture footprint beyond China. In July, it embarked on commercial farming of freshwater shrimps in Desaru, West Malaysia and said the project is expected to contribute to its financial results for the second half of 2020. It is also in the midst of conducting research on production of other edible seafood, in line with Singapore's aim to produce 30 per cent of its nutritional needs by 2030.  

In addition, it plans to expand the domestic network within each of its export hubs in Singapore, Malaysia, Thailand, Indonesia and China to mitigate the risks of global supply chain disruptions that had hurt its business amid the pandemic. 

Shares of Qian Hu last traded at 13 Singapore cents.