Sino Agro Food Inc. Reports FY 2016 Annual Results

From by Sino Agro Food
Completes Carve-out of Aquaculture Operations

Completes Carve-out of Aquaculture OperationsRevenue of USD 342.9MEPS Increases 39% to USD 5.00

GUANGZHOU, China, March 16, 2017 /PRNewswire/ -- Sino Agro Food, Inc. (OTCQX: SIAF; OSE: SIAF-ME), a specialized investment company focused on protein food including seafood and cattle, is pleased to announce the following annual results ending December 31, 2016:


(USD M, except per share and margin data)

FY '16

FY '15






Gross Profit




Gross Profit Margin




Net Income attributable to SIAF




Earnings Per Diluted Share (USD) – from continued and discontinued operations





Key Points

Summary Financials

Results reflect the carve-out of aquaculture operations announced March 2. Revenue from aquaculture is not consolidated on the top line, nor is proceeds from the sale of a technology master license. However, income related to its sale of goods is reported as income from discontinued operations and the Master License proceeds are reported as part of the net gain from the disposal of subsidiaries. In the future, SIAF will report recurring income from aquaculture sale of goods derived from its 36.6% interest in the carved-out company as a separate item, "income from associate." In the future, SIAF will receive recurring revenue from project development, including master license fees, which will be included in the revenue line item. The de-consolidation of aquaculture sale of goods and reporting of certain project development revenue as a gain on the disposal of subsidiaries explain the disparity between EPS from continuing operations alone and from both continued and discontinued operations.


  • Revenue of USD 342.9M in 2016 was essentially unchanged from 2015. Revenue from the sale of goods increased by 8% to USD 270.8M (251.4).
  • Gross profit for the year ending December 31, 2016 declined 9% to USD 83.9M (92.2). The decline was due to the accounting treatment cited above, and to adverse business conditions in the first quarter of 2016.
  • Net income attributable to SIAF stockholders increased by 73% to USD 115.0M (66.4). The sharp increase was due to Net Income from Discontinued Operations (Aquaculture) of USD 14.9M and from a net gain from the revaluation of SIAF's interest in Tri-Way Industries amounting to USD 56.9M.
  • As of December 31 2016, the Company had net working capital of USD 297.3M (321.8), reflecting the disposition of aquaculture assets.
  • Stockholders' equity increased by 25% year over year to USD 604.8M (482.7) or USD 26.08 per share, based on the weighted average number of fully diluted outstanding shares in the quarter. The increase of USD 2.56 per share versus Q3, 2016 is largely due to the deemed gain on sale from the aquaculture carve-out.


Core Businesses and Outlook

The decline in gross profit stemmed from Project Development; however, it was more than overcome by the gain of USD 56.9M from the revaluation of equity interest related to the carve-out, and recorded as part of the disposition of subsidiary assets. A provision of the carve-out calls for CA to receive licensing fees as recurring income upon completion of ongoing future aquaculture development.

SIAF believes that aquaculture operations are now poised for growth by:

  • Having substantially completed renovations and modernization at Aquafarm 1 ("AF1"), AF2, and AF3,
  • AF4 commencing commercial production during the fourth quarter, 2016, and
  • The newly independent company being better suited to procure working capital to accelerate growth.


Integrated Cattle (SJAP)

Revenue from the sector decreased by USD 10.0M or 7% from $144.6M for the year ended December 31, 2015 to USD 134.6M for the year ended December 31, 2016. The decrease was due to sales of live cattle at SJAP dropping from $64.9M in 2015 to $20.1M in 2016, offset by increases in the sale of livestock feed and the sector's deboning operations. The live cattle sale decrease was a function of a precipitous fall in market prices, which recovered in the later part of 2016, and by the Company's transitioning its herd to premium cattle, a multi-quarter process.

Despite the revenue decrease, gross profit from the integrated cattle sector increased by USD 0.4M to USD 33.7M for the year ended December 31, 2016. Gross profit from the deboning of imported beef increased 39% to USD 15.9M (11.4M).

Also targeted for carve-out and spinoff, SJAP remains focused on increasing its valuation prior to an IPO, which, in turn, is expected to garner a value commensurate with its peers.

Aquaculture (CA)

In early March, the Company announced the successful carve-out of its interests in aquaculture assets:

  • The carve-out now holds SIAF's previously held assets, namely AF1; and acquired assets from their respective owners/investors, including SIAF, namely AF 2, 3, 4, and 5; as well as rights to technology licensed from Capital Award a wholly owned subsidiary of SIAF
  • SIAF holds an equity interest of 36.6% in the carved-out, separate Hong Kong domiciled corporation, Tri-Way Industries, Ltd.
  • The certified fair value of SIAF's equity interest is $124.7M (36.6% of $340.5M). SIAF booked a revised, audited deemed gain on sale of $56.9M in relation to the transaction.


The carve-out was a major milestone confirming the Company's strategy to unlock the value of its aquaculture business assets and plans for one of the world's largest land-based aquaculture projects. To assist our investors in answering questions about the carve-out, the Company is in the process of drafting an FAQ document about the transaction, which will be posted on its website.

CA remains a wholly owned subsidiary of Sino Agro Food. CA will no longer be involved in the sale of aquaculture goods. It will concentrate on project development as the turnkey provider for ongoing and development at AF4 and AF5, and providing license for its APRAS technology.

During the fourth quarter and through the first quarter of 2017, renovation, upgrading, and supporting transformation work were undertaken at AF1, AF2, and AF3. Depending on the farm, this work improves yields, adds capacities, and supports the interoperations with AF4. The aquaculture farms were well prepared for the transition.

In total, aquaculture operations in 2016 produced and sold approximately 12,000 metric tons of varied fish species and prawns, with AF4 starting commercial production during the fourth quarter. Two of the three planned AF4 buildings representing a capacity of 6,500 metric tons per year are fully built. One building is for higher and final stage grow-out. The other was 75% stocked late in the fourth quarter. The third building, which will bring capacity to 10,000 to 12,000 metric tons per year, is currently under construction.

Part of the carve-out rationale was to better position the assets for debt and equity investment for working and development capital. With renovations substantially complete and AF4 beginning its production ramp, the Company estimates base case 2017 production to increase at least 50% in 2017, depending on the timing of capital infusions. Although SIAF has reduced its equity interest in Tri-way, the Company expects to generate higher overall income not only because of growing production, but also because SIAF's equity interest of 36.6% pertains to all the farms versus its previous 75% ownership of only AF1.

In addition to SIAF, Tri-way in the near future will, through its own public relations campaign, provide periodic updates on its progress and development. SIAF, as a major stakeholder in Tri-way, will also provide periodic updates of milestones and markers related to both production and strategic progress, either as web updates or stand alone press releases.

Seafood and Meat Trading

Yearly revenue from this business segment increased by 91% (USD 34.6M) in 2016 to USD $72.4M (37.9M). The increase was primarily due to increasing sources of supplies from other countries; namely, Canada, USA and South America instead of solely from Madagascar in the past. In addition, revenue benefitted from an increase of higher-grade meats and more varieties sourced from Australia and other countries. Sales of imported beef increased year over year 86% to USD 43.6M (23.4M).

Gross profit grew 84% to USD 8.7M (4.7M) for the year ended December 31, 2016. The increase was primarily due to reasons explained above.

Business grew throughout the year, portending a solid year in 2017. It should be noted, however, that business benefitted by global trade restrictions, which may be relaxed in the future. On the beef side, the Company expects increased competition, which may impact the overall growth rate in this sector.

Carve-out Exercises

The Company firmly believes that the sum of its parts is worth considerably more than the market's value of the whole. Accordingly, it has undertaken efforts to carve out its major businesses, establishing each as a standalone corporate entity. These carve-out enterprises will seek to establish value within the same financial measures afforded peer group companies, in part through private placement prior to applying to higher value market exchanges for IPO, utilizing market industry experts to assist those efforts in securing the best market(s) for listing. The Company continues to work diligently, making progress on its ambitions, yet may at times find it necessary to veer from a straight-line approach to attain best results.               

Major milestones in the process will indicate progress, imputed value, and liquidity: completing the aquaculture carve-out was the first. The Company looks forward to reporting on these milestones, all related material events, and other markers as they occur, either as press releases or updates to its web site throughout 2017.


Investor Relations
Peter Grossman
+1 (775) 901-0344

Todd Fromer / Elizabeth Barker
+1 (212) 896-1215 / 212-896-1203

Erik Ahl
Nordic Countries
+46 (0) 760 495 885

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The following files are available for download:


Sino Agro Food Inc 10-K 2017-03-16

SIAF Fourth Quarter and Full-year Report 2016

SOURCE Sino Agro Food