In 2010, the money-free association wanted to do some new business. A team of them consulted with a lot of investors. We had billions. Agriculture has become a point of interest for senior stake-holders, headed by yoyo. At that time, they looked at modern agricultural models in some european countries and felt that modern agriculture, with its high-end agricultural products, had great market opportunities in the context of china's rising consumption. They were advised by one investor that the agricultural ponds in china are large, but the fish are small. So the joint shares wanted to raise a big fish in this pond in agriculture。
In 2010, the unit established the ministry of agriculture, in 2011, a team was identified, and the agricultural brand, gavo, was launched in may 2013. The explanation given to javo is that it's good, it's from fertile soil. In may of the same year, javo launched the first agricultural blueberries. However, ten years ago blueberries were poorly known to consumers in the chinese market, and blueberries themselves were a little sour, so they did not raise too many waves. By november, gavo had re-energized the monkeys, which were known as the “chillows” throughout the country, in an attempt to match each other with oranges to raise the value of the gills. But the core of oranges, which is well known, comes from the inspirational story of qianjin growing oranges himself in his 70s and age, which underpins the value of oranges, while quillows are unknown and extremely expensive, so they initially resonate flatly。
In 2017, the javo foods entered the board of business through the “shell” manchuria, while the then-gavo foods mainly operated the import sales of arctic sweet shrimp and cod, but did not have their own farm。
1 billion to 1. 6 billion in 2022
On 1 february, gavo food received a deep-seated letter of concern requesting companies to fully assess their current sustainability. According to the letter, the 2022 performance forecast, disclosed by your company on 30 january 2023, indicates that the net profits expected to be attributed to the shareholders of the listed company in 2022 were a loss of between 1 billion and 1. 6 billion yuan, net profits after deduction of non-recurring gains and losses were between 980 million and 5. 77 billion yuan, and the rights of the owners of the companies listed at the end of the period ranged from 300 million to 750 million yuan. Please describe the concerns expressed by my ministry。
As of 1 march, the total market value of the gavo food products was 3,562 million, a year short of over one billion, making them the worst performer since they were put on the market. It is no wonder there is an inquisitive question. In fact, the net profit from the return of the javo food to the mother has been running a loss of more than rmb billion for the fourth consecutive year, with a loss of rmb 290 million for the same period in 2021. According to analysts, for the third year in a row, there is a risk that corporate shares will be subject to a risk warning of de-marketing or be labelled as st。
During the first three quarters of 2022, javo achieved a profit of $86. 96 million, an increase of 182. 05 per cent over the same period. Why did the last quarter cost more than $1 billion a year
It took more than half a month for javo to respond to deep-seated friends. In a 20-page response announcement, gavo explained that the main reason for the huge shortfall was “depreciation of goodwill”。
According to gavo, the company's reputation for the merger and purchase of chilean subsidiary australis seafoods s. A. Was tested for impairment, and its discount rate increased — with the impact of the united states dollar's no-risk interest rate soaring from 1. 90 per cent at the beginning of 2022 to 3. 97 per cent at the end of 2022, lower sales, feed, etc., estimated to be between $1. 2 billion and $1. 8 billion, with an impact on the company's combined net profit to the mother of approximately 80. 62 per cent, with final data to be determined on the basis of the results of the assessment produced by the professional evaluation bodies。
What does goodwill mean? To put it simply, the subsidiaries acquired by the listed companies are not now as valuable as they were at the time of their acquisition, so they need to deduct the amount of money spent in the first place, thus affecting current profit performance. In general, the greater the value of goodwill in relation to the net assets of the acquired company, the greater the risk that the goodwill will be impaired at a later stage, and the greater the share of goodwill in net profits, the greater the loss。
The so-called goodwill refers to the ability of an enterprise to earn more than the normal level of profit (i. E., the excess proceeds) and to the present value of the excess proceeds that the enterprise will realize in the future. The extent to which goodwill will yield excessive returns to the enterprise in the future is entirely an estimate. If more estimates are made, this means that the firm's future real earning capacity is exceeded。
The loss of more than a billion from the loss of goodwill can only be explained by the price of the chilean salmon company that gavo acquired。
Two, salmon, first in the world
In 2019, gavo spent $5,887 million on food products, buying australis, a salmon business based in chile, to become a fish farm with nearly 100 salmon operating licence plates. Following the acquisition of the chilean company, gavo became the first company to enter the global salmon industry. In 2020, gavo acquired sichuan mizumi — an enterprise for deep processing salmon. Java intends to become the only whole-industry enterprise in the country that covers salmon farming, imports and processing。
The financial data show that the chilean firm australis acquired by gavo had only about $1. 59 billion in net assets in 2019, and that the excess of $4. 3 billion in the acquisition represented additional payments. Nearly 1. 4 billion of these are included in goodwill, with the remaining approximately 3 billion being farm concessions and intangible assets, which are in fact a disguised goodwill premium。
The value of goodwill in the course of an enterprise's m & as goes beyond net assets and is not depreciated, and must continue to exceed profits in future operations. If the profitability of the acquired company is unsustainable or not as expected, the goodwill bubble will break and the impairment will need to be measured in later financial data。
By june 2022, gavo had a debt of 89 per cent of its food assets and 1. 21 billion of its goodwill, of which 1. 19 billion came from australis, while the reduction of between rmb 1. 2 billion and rmb 1. 8 billion in this performance forecast almost gave gavo's reputation the value of its goodwill to “finish”。
Why is the value of goodwill much lower than it was at the time of the acquisition, and in fact gavo is not. With the acquisition of chilean companies, the new global epidemic, combined with the russian-uu war, a series of adverse macro-environmental impacts such as trade conflicts between china and the united states, positive net profits. In the three consecutive years of loss in 2019, 2020 and 2021, net loss to the mother amounted to 126 million yuan, 713 million yuan and 289 million yuan respectively。
According to the 2022 semi-annual report, salmon products at the javo food camp account for approximately 78 per cent of the total, and salmon operations represent an important source of revenue for the company. In addition, the primary income from marine products such as cod and sweet shrimp in the arctic is approximately $455 million, or 20. 08 per cent。
During the epidemic, the costs of raising and transporting salmon increased dramatically, while the demand declined sharply. In 2020, the māori rate for the javo food salmon business was 12. 2 per cent. That is to say, for every $100 sold, 12 dollars is put in reverse, resulting in a loss of $713 million for the gavo food in 2020. In 2021, as the epidemic eased, the price of salmon began to pick up, and the rate of maori in the food salmon business in java finally went from negative to 4. 8 per cent。
This sudden loss of information of between $1 billion and $1. 6 billion in 2022 caused the capital market to fall again。
In addition to the impact of the erosion of goodwill as a result of the acquisition in 2019, gavo explained that fluctuations in the exchange rate between the renminbi and the united states dollar were one of the major causes of the losses. In its bulletin, gavo stated that the company borrowed most of its borrowings in united states dollars and at floating interest rates, and that the interest rate in the united states dollar for the three-month period continued to climb rapidly from 0. 30 per cent at the beginning of 2022 to 4. 77 per cent at the end of 2022, with significant increases in the company's financial costs affected by exchange rate movements。
There's still a big opportunity in the salmon industry
In its response to the in-depth inquiry, gavor also indicated that the fair value of expendable biological assets had decreased at the end of 2022, negatively affecting the company's performance. The so-called expendable biological assets, i. E. Fish in the sea, are important assets as farming enterprises, the quantity and size of fish in the water。
As of 2022 q2, the gavo food stock amounted to $3. 18 billion, of which expendable biological assets, namely salmon being farmed, amounted to $2. 35 billion. However, the exact value of salmon assets is determined by three factors: first, the price of salmon on the market; second, the size of the amount of salmon owned by gavo; and third, the size of salmon。
According to industry, atlantic salmon that meets fishing requirements fish weighs about 5. 5 kg - 6 kg and, during mariculture, four kilograms and more of atlantic salmon and trout with a weight of 2. 3 kg and above will opt for subsequent measurement at fair value. In other words, fish below this standard weight are excluded from fair value. So the exact number of fish by weight is a very inaccurate figure。
As a result of persistent losses, on the afternoon of 1 february, during the investor question and answer period, gavo foods said that they were doing their best to resolve the problem. The chilean subsidiary remains a high-quality asset with scarce resources and believes that, as consumption demand recovers, high-quality bottom assets will continue to have good sustainability and profitability. In addition to debt-to-equity swaps, the company will accelerate the reduction of corporate debt ratios and financial costs and optimize the corporate capital structure by a variety of capital instruments, including, but not limited to, issuing shares to specific audiences and introducing strategic investors。
Australis, who was acquired at a high premium in java, became the key player in determining his life and death。
Australis is a listed company in santiago de chile. The 96 salmon farming licences in their hands have become important “monopolistic intangible assets”。
Because of the extreme environmental requirements of salmon, globally norway and chile are the two major producers of salmon, which together account for about 80 per cent of the global supply, and the salmon industry, which is regulated by the government and requires a licence to farm in the respective areas. In recent years, there has been an increase in carrying pressure on the water environment, increased regulation in the major producing countries, such as norway and chile, norway has been limiting the number of salmon licences and the number of salmon in the region since the last century, and the issuance of licences has been suspended in chile's farming regions. And the australis acquired by gavo had 96 plates。
In addition, global demand for salmon is on a high trend. As the epidemic recedes, the global salmon market will return to normal. The global salmon market has long been characterized by a tight supply and demand balance, strong demand for salmon consumption in europe, europe and asia, and rising sales prices and demand。
4. Towards global markets, gavo needs more experience
Gavo's bulletin also disclosed that, by 31 december 2023, gavo's parent company in food would have an opportunity to inject kb food into the listed company. Kb food is one of australia's largest seafood companies, with the main product being seafood products such as lobster, with over 3,700 lobster fishing sites worldwide and an industry-wide chain of lobster fishing for export。
From salmon to australian lobsters, gavo will become an influential global supplier of high-quality seafood products. But for the present, the dilemma to be overcome is how to make a profit, particularly by gaining the confidence of the regulatory sector and the capital market and avoiding the risk of exit。
In terms of long-term strategies, agricultural products range from upstream to end-use in industries and involve a very long chain of industries and require a high level of technology, operational management capacity and resource integration. Especially for high-end foods such as salmon and lobsters, the market demand itself is focused on high-end consumers, and the size of the demand is not large, requiring a very high level of low-risk business, which, in the event of force majeure, such as epidemics or other causes, is a major blow to businesses, regardless of changes in upstream farming industries or shrinking market demand。
For its focus in 2023, the gavo foods indicated that the company would continue to cultivate deep into the marine protein market, represented by salmon, through the expansion of national chemical joint factory layouts and marketing and supply chain delivery teams, and by accelerating the geographical coverage and market occupancy of retail brands of fresh “good living”。
The future of gavo is to be expected。
