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The Straits Times
Nov 22, 2011
Oceanus on high death rate of abalones at China farms
By Melissa Tan
OCEANUS Group yesterday attempted to shed some light on the mysterious deaths of millions of abalones at its China land-based farms.
In a reply to queries from the Singapore Exchange, the firm also said it had acted as quickly as possible to issue a profit warning.
In its statement, Oceanus linked the abnormally high mortality rate to a lack of food and summer heat.
'The abalones were in poor conditions, likely from unavailable quality feed and high temperatures during the summer season, resulting in high mortality rate affecting the larger abalones.'
The mortality rate for its larger and older abalones - those three years and older - was as high as 63 per cent in the third quarter.
The industry average mortality rate for such abalones is in the single digits, according to executive chairman Ng Cher Yew.
Earlier this month, Oceanus reported the demise of 42 million abalones during its third quarter. In comparison, only 5.8 million abalones died in the corresponding quarter last year.
The China-based producer of Japanese abalones added in its reply that the implementation of improvements to abalone production had been delayed because the production team and chief executive were 'overwhelmed' by the speed of the company's expansion and an 'inability to recruit more farm workers'.
It also admitted the team had underestimated the seriousness of the conditions at the abalone farms.
Oceanus said it could not have issued a profit guidance earlier because both its chairman and its chief financial officer had been on an overseas trip from Nov 2 and Nov 3 respectively.
They returned to the Singapore office on Nov 8, which was when the profit guidance was drafted, Oceanus said.
The profit guidance was filed the next day, on Nov 9.
The deaths of the 42 million abalones led Oceanus to incur a fair value loss of 642.6 million yuan (S$131 million) on biological assets for the three months ended Sept 30.
Oceanus has since plunged into the red, posting a net loss for the quarter of 725 million yuan, compared with a net profit of 68.6 million yuan a year earlier.
But the firm hopes to return to profitability by 2013.
It plans to use a more rigorous scientific method to breed abalone, invest in good brood stock to improve the genetic quality of its farmed abalone and start farming sea cucumbers next year as well, in order to improve its cash flow.
The company has sent eight finance staff from Singapore to its four farms in China to take stock of the company's remaining abalone. This counting process is expected to take two to three weeks.
It looks like abalones - especially the larger and older ones - need regular tender loving care from farmers in order to continue growing. Otherwise, abalones can just die en masse even housed in a modern, large-scale farm.
So it appears there is little advantage in farming abalones in a big scale by a listed company. Perhaps the traditional mode of small-scale contract farming with each farm owned and operated mainly by a farmer and its family members is still the better and safer way to go!
Quote:It plans to use a more rigorous scientific method to breed abalone, invest in good brood stock to improve the genetic quality of its farmed abalone and start farming sea cucumbers next year as well, in order to improve its cash flow.
Breeding => use more rigorous scientific method.
How did the 42 million abalones die? =>
likely from unavailable quality feed and high temperatures during the summer season.
Is he a scientist??
Quote:Oceanus said it could not have issued a profit guidance earlier because both its chairman and its chief financial officer had been on an overseas trip from Nov 2 and Nov 3 respectively.
They returned to the Singapore office on Nov 8, which was when the profit guidance was drafted, Oceanus said.
The profit guidance was filed the next day, on Nov 9.
I wonder where they went, together. Could it be China since their biz is over there?? Could they be looking for the missing/dead abalones??
Nov 2 (Wed) and Nov 3 (Thu). They went back to office, again together on same day Nov 8 (Tue). They need such a long rest after biz trips?? Or were they busy brain storming for a good story to explain the 42 Mil missing/dead abalones??
Quote from the news report published on 19 nov (post #21 of this thread) :
".....Dr Ng noted that the tanks are currently breeding abalones at low densities, an area he hopes to address. By working with good abalone breeders in China through profit sharing, yields can be improved and the number of tanks required for abalone breeding can be reduced to 10,000, down from over 30,000 currently, he said...."
So the abalones will have smaller breeding space but yet without compromise from the problem of "unavailable quality feed and high temperatures during the summer season"? In addition, foreign talents which improve cashflow (sea cucumbers) will be introduced into the tanks too? Wow, sure the abalones do not have a lower quality of living?
(22-11-2011, 02:51 PM)wsreader Wrote: [ -> ]1) Quote from the news report published on 19 nov (post #21 of this thread) :
".....Dr Ng noted that the tanks are currently breeding abalones at low densities, an area he hopes to address. By working with good abalone breeders in China through profit sharing, yields can be improved and the number of tanks required for abalone breeding can be reduced to 10,000, down from over 30,000 currently, he said...."
2) So the abalones will have smaller breeding space but yet without compromise from the problem of "unavailable quality feed and high temperatures during the summer season"? In addition, foreign talents which improve cashflow (sea cucumbers) will be introduced into the tanks too? Wow, sure the abalones do not have a lower quality of living?
Good, U are sharp!!
For 1),
If U read, Question f) of their reply to
SGX Query, they said that they lowered the rearing densities to reduce mortalities------ directly contradicting the "spin" to the media that they can increase the density of rearing so that they can free 20,000 tanks for rentals or for rearing sea cucumbers.
For 2),
quality is rather "nebulous" but recurrs often in their statements----- In Question g) Page 13 – (a) Live Marine Products, What is quality of population?
In answer to Question g), What is "quality feed"?
And in their media release, What is "genetic quality" of brood ?
For most of the other S-chips malfeasance, U get saddled with a Chinese speaking CEOs or Exec Chairman and a english speaking CFO and are totally dependent on the IDs or the CFOs for translation and action.
In this case, the situation is better---- U have an english speaking Exec Chairman who can explain things.
But, his explanations are about "quality".
The issue, IMHO, is about the missing "quantities"!!
(24-11-2011, 07:43 AM)Musicwhiz Wrote: [ -> ]Some responses to queries:-
http://info.sgx.com/webcoranncatth.nsf/V...10058CF1E/$file/OGL_Annc_Response_to_SGX_queries.pdf?openelement
Quote:Query by SGX
The Company’s reply on the reasons for the high mortality rate – Why was quality feed unavailable?
Reply by Oceanus
According to Mr Yu De Hua, the out-going CEO of the Company, the Company has been primarily feeding the abalones with high quality seaweed which is very expensive during the period from May to November. In 2011, the number of abalones has increased, resulting in the exponential increment in its abalone feed cost.
Accordingly, to reduce such cost and to increase profit for the Company, the production team decided to significantly reduce the usage of high quality but expensive seaweed and opt for cheaper but lower quality seaweed to feed the abalones.
With the lower nutrient in the cheaper quality seaweed and the high water temperature during the summer season, immunity of the abalones was reduced significantly, thus resulting in high
mortality rate of the abalones.
Did I understand correctly?
Feeding the abalones with high quality, expensive seaweed from May to Nov caused the
number of abalones
to increase in 2011, resulting in the exponential increment in its abalone feed cost?
I thot the abalones will just grow faster when fed with good seaweed. I am curious,
how w/o having more high quality broods/babies, the number of good high quality abalones will increase, so as to cause the exponential increase in feed cost.
And to cut cost, they gave lower quality seaweed, hence lower nutrient, hence lower immunity, so abalones died. Wow, so scientific and logical.
Sounds like a very "iffy" and difficult biz, feeding these fickle abalones----needs a very scientific person to turn the biz around!!
Very shocking news indeed!
Business Times - 01 Mar 2012
Poor nutrition may have caused Oceanus abalones' death: probe
Firm also reports a deeper loss of 502.6m yuan for Q4
By LYNETTE KHOO
AN internal probe at Oceanus Group suggests that the mystery death of millions of abalones at Oceanus Group could be due to poor nutrition.
Many of the existing abalones are also found to be laggards, in other words, abalones of poor quality and unprofitable to grow further.
The China-based abalone breeder shed light on the probe yesterday as it reported deeper losses for the fourth quarter ended Dec 31, 2011, due to fair value losses in biological assets.
Calling the discovery 'staggering', Oceanus executive chairman Ng Cher Yew told BT yesterday that the group has since removed the former chief executive, Yu De Hua, from the company, stripped him of his role as a legal representative, and seized all company seals from him.
'We destroyed the seals and registered new seals in China,' said Dr Ng, who has taken over the role of the CEO and legal representative.
Management revamp and operational restructuring has largely taken place, keeping Oceanus on track to turn its financials around latest by 2013, he added.
Oceanus yesterday said its net loss for the fourth quarter ended Dec 31 widened to 502.6 million yuan (S$99.7 million) from 29 million yuan in a year ago period as it marked a fair value loss of 371.2 million yuan in biological assets.
Revenue during the quarter also fell 35 per cent to 78.4 million yuan as Oceanus sold fewer live and processed abalones.
Oceanus had to mark down the value of its abalone stock as a significant proportion were found to be laggards after three daunting months of stock-taking of abalones in over 30,000 tanks at 50 farms spanning two provinces.
Out of the existing population of 134.2 million abalones as at Dec 31, 85.6 million are found to be laggards of between 2cm and 4.2cm and valued at 61 million yuan, instead of 127 million yuan if they were in better marketable conditions.
Two South African abalone experts engaged by Oceanus have ruled out disease as the cause of the abalone deaths and believe that poor nutrition, coupled with poor breeding practices, was the likely cause.
'Though the experts expressed that this problem normally does not produce mortalities of the level recorded on our farms, their calculation of the empty shell volumes in the farms sampled could theoretically support the numbers,' Dr Ng said.
Given that the high mortality of abalones was a 'man-made factor', Oceanus is unable to make insurance claims on the losses, he added.
For the full year ended Dec 31, Oceanus reported a net loss of 1.17 billion yuan, compared to a net profit of 188.5 million yuan in 2010, due mainly to a fair value loss of 769 million yuan in biological assets.
Oceanus has exited from the loss-making F&B segment, which reported a net loss of 22 million yuan for the full year. To-date, all its restaurant outlets in Singapore, Taiwan and China are closed.
The group is now finalising a restructuring package that will include restructuring existing loan and warrant and a capital injection of up to $20 million by strategic partners.
So far, Oceanus has started acquiring good-quality juvenile abalones and is looking to buy high-quality brood stock.
It has also slashed operational costs on its farms by half through trimming headcount and reviewing the breeding density of its tanks.
(01-03-2012, 06:21 PM)Musicwhiz Wrote: [ -> ]Two South African abalone experts engaged by Oceanus have ruled out disease as the cause of the abalone deaths and believe that poor nutrition, coupled with poor breeding practices, was the likely cause.
Am wondering why they didn't hire these guys in the first place.
If I'm not wrong, the Board of Directors is usually the ones in charge of setting the strategic direction as well as hiring decisions of the top executives.
If so, sacking the CEO while the board remains largely the same shouldn't reassure investors no?
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