February 25, 2004

China's Tongwei Co. To Continue Focus on Its Core Aqua Business After Stock Listing

An eFeedLink Exclusive Report
 

Tongwei Co, a leading Chinese feed manufacturer, has sought listing on the Shanghai Stock Exchange. Tongwei Limited Company will issue 60 million 'A' shares at a fixed price of RMB 7.50 per share, and the amount of share capital raised is anticipated to reach RMB450 million. The company is expected to be listed on March 2, 2004.

Tongwei will utilize most of the capital raised in the area of aqua feed production, industrialization of fish production, as well as development of feed production skills.

Tongwei is a typical agricultural industrialization enterprise in china, and has been ranked China's largest aqua feed manufacturer for six consecutive years. Today, Tongwei has become a brand name of premium quality aqua feed products in China.

According to the board chairman of Tongwei, Mr Liu Hanyuan, it has been a great challenge for the company to proceed with the listing in March 2004, as the bird flu outbreak has badly hit the animal production industry in China, and the losses are hard to quantify at this time. Besides, prices of feed ingredients rose sharply last year and this had also severely reduced the profit margins for the company's feed products.

However, Mr Liu added that most feed production enterprises in China are not large-scale operations, with the majority of feed millers relatively small compare with China's huge animal production and husbandry markets. As such, he believes there is still substantial room for expansion and now is the time for eliminating those less competitive participants through market competition.

With the poultry production industry in China being adversely affected by the bird flu outbreak, there is a good opportunity to expand aquaculture production instead. Currently, prices of fish have risen by RMB0.4-0.6/half kg in China. This is the right time and there is great potential for Tongwei to develop and expand its aqua feed production.

The board chairman revealed that Tongwei would continue to put its emphasis on the development of aqua feed production, aquaculture production, and related product chain activities after its listing.

China's aqua products make up 35% of the world's total output, and aquaculture production accounts for two thirds of the global aquaculture production. China is a huge market for aqua feed, and Mr Liu felt that now is the good opportunity for China to expand its aqua feed production industry during a time when increasing number of people are turning to aqua products for their food requirements in preference to other meat products.