The Company is confident that we will see a rebound in the remainder of 2017. On a more strategic front, in consultation with our partners and advisors, the aim is to prudently address the spectrum of external agricultural market conditions to facilitate our carve-out and spinoff exercises, some of which are well underway.” “The growth in demand for seafood in China is set to rise to 39kg per capita in 2020. Whereas the Chinese seafood industry is heavily challenged by sea pollution and overfishing of wild fish, Tri-way’s sustainable production environment produces healthy, safe and sustainable seafood all year round. Moreover, it produces premium quality seafood that can yield higher margins than competitors. We are encouraged by our business plan and the macro-trends that support our belief in this strategy. To further this strategy while minimizing risks and ensuring the long-term sustainability of its business model, Tri-way has decided to focus its near-term goals on securing financing to support the execution of this business plan before proceeding. “Tri-way continues to make meaningful progress toward securing this financing to develop its infrastructure and grow the business. Recent achievements include the granting of a credit facility of RMB 100 million with the Agricultural Bank of China (“ABC”), the world’s third largest bank based on reported assets, and being assigned the strongest credit rating, 5A-1, from Dun & Bradstreet, a reputable business services company headquartered in the U.S.A. These milestones confirm Tri-way’s credit worthiness, clean balance sheet, and its risk averse approach, all of which support our confidence in Tri-way’s ability to secure additional financing to complete the build out of Aquafarm 4 and to commence the construction of Aquafarm 5. “Moving onto our beef sales, we experienced a decline in sales this quarter due to a shift in market demand toward newer sources of imported beef. We adapted to the influx of Australian beef by importing it to the Shanghai Distribution Center, and in Xining for value added processing. Now, new imports offer a further competition, offering us the same opportunities to embrace, after a transitional period. “Having previously identified the trend of imported beef, we have been transitioning toward premium domestic beef, while maintaining the farmer’s cooperative model, which promotes several missions. While we expect short-term headwinds related to increased competition from international beef farmers to impact sales, we are confident in our long-term strategy. We are fortunate to enjoy excellent working relationships with various government agencies, with which we are currently discussing new means to accomplish our mission, without SJAP having to continue businesses made unprofitable by the relaxation of import restrictions. These private company/state agency relationships hold greater significance in China than in western countries, and we are proud to have established a positive working relationship with the Xining Government in an effort to support our growth strategy. “During the quarter we also implemented several initiatives aimed at improving financial discipline across the business to support a sustainable and cost-efficient business model, such as concentrating on increasing free cash flow at Tri-way by optimizing operations at each aquafarm in terms of product mix and APRAS performance, and retrofitting HSA’s second production plant’s fertilizer processor to adapt to poultry. “I would like to thank our loyal shareholders as we implement these steps and work through this transition period toward building long-term value at the Company.
Sino Agro Food’s Chairman and CEO Solomon Lee
The transition of operations management to Tri-way is proceeding smoothly,” commented Mr. Solomon Lee, interim Chairman of TW as well as Chairman and CEO of Sino Agro Food, Inc. “The move toward premium seafood with higher margin or higher annual yield demonstrates the agility of the APRAS technology and Tri-way business model. We look forward to reporting additional progress, in both operations and meeting milestones toward the spinoff of Tri-way on an on-going basis.
Solomon Lee, Interim Chairman of TW as well as Chairman and CEO of Sino Agro Food
our mission remains threefold; to produce great product, to market great product, and to distribute great product. TV stations such as ZSTV and NanFang TV allow us to reach their extensive viewing areas helping to broaden brand awareness and publicize the benefits of indoor farmed seafood. We believe on-going press coverage will further several aims: • Facilitate sell-through to consumers directly, through e-commerce, and from our wholesale customers, • Consolidate and extend premium pricing, and • Potentially broaden the footprint of Capital Award’s APRAS technology within China, and possibly into other Asian countries.
Solomon Lee, Chairman and CEO of Sino Agro Food
The ocean supply of seafood has remained stagnant since the mid-1980s while the demand worldwide, and especially in China is increasing rapidly. In addition, as more and more Chinese enter the middle class, specific demand for safe and sustainably produced seafood is rising quickly. Aquafarm 4 is a large-scale model for technologically advanced indoor and environmentally friendly aquaculture production of safe, high-quality, and healthy seafood. The farm already enjoys a competitive advantage for freshness, owing to its valuable location adjacent to Hong Kong and Macau, bordering Shenzhen and Guangzhou to the north, within 100 miles of tens of millions of people. “Longer term plans call for the Zhongshan facility to produce well over 100,000 metric tons of prawns and fish annually. Likewise, Tri-way is working toward an integrated set of facilities and processes to become vertically integrated with respect to life cycle — from its own selectively-bred broodstock and in-house hatchery seed supplies through grow-out and sale — of genetically and environmentally controlled, biosecure and, ultimately, internationally certified sustainable seafood
Dr. Anthony Ostrowski, Chief Scientific Officer
the ‘win-win’ partnership signed today with ABC, increases TW/JFD’s capacity to meet its development goals while enhancing its status as an economic driver throughout the region. Along with its recent 5A-1 rating by Dun and Bradstreet, the BECSCA arrangement provides further testament to JFD’s parent, TW, providing additional merit to the Company’s overall standing and expanded opportunities within the banking and business communities.”
Solomon Lee, Chairman and CEO Sino Agro Food
ABC is perhaps uniquely well-suited to help Tri-Way meet its aims, through not only financial commitment, but also direct strategic communication, and what it says to partners, customers, and other constituents about Tri-Way. As communicated previously, Tri-way is in discussions with financial institutions in other Asian countries.
Dan Ritchey, Chief Financial Officer Sino Agro Food
“Our primary objectives for 2017 are to increase returns from our aquaculture investment at a larger scale; likewise, for other business segments as the right opportunities surface. We are now in a strong position to capitalize on the new capacity developed in 2015 and 2016, and look forward to moving toward actualizing properly appreciated IPO valuations. Although the COSO strategy is an inherently long and complex process, we are proud of our accomplishments to date in the aquaculture business, and are encouraged by the current timeline for progress as outlined in the “Carve-out” section above. Discussions with our advisors and investment banker support this milestone path; likewise, they reinforce our firm belief that the sum of our business parts is worth considerably more than the market’s value of the whole. I am very confident that the strategy will succeed in unlocking substantial value for our shareholders, as steps along the way are designed to evidence. “Buoyed by encouragement to date, your management team remains committed to fulfilling the COSO strategy, starting with the aquaculture business. At the same time, the team is further encouraged to manage and grow all businesses efficiently. The beef business (SJAP) is facing unstable markets as noted earlier in this release. In a very real sense, these challenges have presented an opportunity to collaborate with the provincial government to develop a plan that from our perspective will better position SJAP as a major player in the China beef market, culminating with a listing on the main board in China, either in Shanghai or Shenzhen. “This was a strong start to the year and we will continue to execute against our strategic plan to reach the milestones outlined above during this pivotal time in the Company’s evolution.
Solomon Lee, Chairman and CEO
“To recap our vision for Sino Agro Food, we are executing on our strategy to become a ‘solutions destination’ investment company, with associate investments that supply premium protein foods to the relatively new and underserved middle class in China. In 2016, we laid much of the groundwork for growth of our aquaculture and Integrated Cattle Farm (SJAP) businesses, in support of our plans to spin off these entities into publicly traded companies . In 2017 we shall continue to evaluate and work diligently on other divisional businesses of the group by exploring opportunities aiming to create more benefits for our shareholders. We believe that completing these carve-outs for eventual spinoff and subsequent listing will allow them to trade at market values commensurate with their peers. To support these businesses, SIAF has rapidly grown its revenues from $22M in 2009 to $342.9M in 2016 by investing in production facilities and processes to maximize economies of scale, commencing production, and ramping production at our facilities. We have achieved a lot to date and, with stockholders’ equity of USD 604.8M, or USD 26.08 per share as of 12/31/2016, we believe the company is now in a strong position to achieve sustainable and rapid growth.
Chairman and CEO Solomon Lee
This milestone represents one of the key steps in SIAF’s more than decade-long transformation. “The Group strongly believes that separating into two industry-leading companies – one focused on the aquaculture industry and the other focused on investing in technology-based agriculture initiatives with substantial growth potential – will generate significant value for shareholders by enabling each company to focus on its specific business and strategic priorities. “For SIAF, that means becoming a ‘solutions destination’, supporting a wide range of agriculture endeavors through the delivery of value-added technology and world-class operations. “Additional information regarding Tri-way’s progress will be disclosed as it becomes available
Solomon Lee, Chairman and Chief Executive Officer of SIAF
“The significant progress we have made restructuring our business and completing legal due diligence has helped with our preparation for the anticipated carve-out and subsequent spin-off of our aquaculture operations, which is designed to provide greater clarity to investors and to drive current and future value for the business and its stakeholders. Tri-way, as an independent entity, will be listed on the public markets where it is expected to trade at a market value commensurate with its peers, unleashing value for shareholders.”
Solomon Lee, the Chairman and CEO of Sino Agro Food
In addition to providing capital to build out the Aquaculture segment of our business, we are confident this facility will enhance the Company’s credit worthiness in its ability to secure additional funds from the market. We remain committed to executing on our strategic plan to develop the Aquaculture business into a world-leading provider of seafood prior to spinning out the business and listing it on a major stock exchange. This strategy is expected to unleash significant shareholder value and we are excited by the opportunities ahead of us as we move into this high growth phase of our development
Solomon Lee, the Chairman and CEO of Sino Agro Food,
We are excited to begin working with KCSA Strategic Communications to enhance our shareholder communications program and generate greater investor awareness for Sino Agro Food as we enter an inflection point in the Company’s development.
Solomon Lee, CEO of Sino Agro Food
With its ongoing construction of the world’s largest recirculating aquaculture (farm) system (“RAS”), its shift toward offering higher-margin, premium quality food items, and with an established track record, Sino Agro Food is extremely well-positioned to address the ramp-up in demand for seafood and beef occurring in China. We are pleased to implement a communications plan based on best practices to provide strategic counsel to Sino Agro Food and help the Company tell its story clearly and effectively to both existing and potential shareholders as it executes on its strategic plan.
Todd Fromer, Managing Partner of KCSA Strategic Communications
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