We take this opportunity to congratulate Tri-Way on achieving this major step toward scaling its distributorship to a much larger business to support and supplement its primary producing fishery operations. When Tri-Way recognizes sufficient incremental profits, it will coordinate with SIAF to service its debt repayments to SIAF. “These TIFF arrangements validate the on-going perseverance in pursuing financing for various businesses from a wide multitude of debt, equity, and partnering sources. I am very pleased Tri-Way has brought this financing initiative to fruition. “It is important for shareholders to realize that the process of procuring loans in China for a company of SIAF’s size, or Tri-Way’s size, mirrors the tiered approach of the IAD business. That is, it is generally a multi quarter timetable to achieve aims, with intermediary contingencies or successful proof of execution required -- or multi-year timetable for very large loans relative to company size. “It takes a lot of work, but as we see with this announcement, work that is rewarded.
Second quarter results were substantially better than the first quarter, supporting our efforts to ensure a baseline scenario in which all our business sectors are self sufficient and then positioned for gradual organic growth. By limiting capital expenditures, SJAP, JHST, CA and the Corporate business sectors have met our baseline goal. Market conditions for HSA and MEIJI products -- organic mixed fertilizer and Yellow Asian Cattle -- are currently favorable. Consequently, each is slowly demonstrating growth beyond the baseline scenario. “We do have legacy debt to consider. It stands at 6.6% of our total assets. We are coming out of the worst patches experienced during the past two years. If and when we obtain extra financing to increase working capital, we expect to increase net income and generate additional net cash flow to service legacy debt more expeditiously. In this respect, we continue to conscientiously pursue a large number of initiatives, all involving protracted steps, some of which are showing good progress.
First quarter results were a bit softer than we expected because of the difficulties Chinese New Year presented. We believe this delayed most of the sales that were short of expectation; therefore, we anticipate a pick up in Q2 and beyond, assuming underlying market conditions remain stable. In general, we are on track with strategic plans, which I’d like to elaborate upon. During and around 2017, we experienced conditions analogous in effect to the global financial crisis in 2008. As we’ve communicated in quarterly reports and press releases for some time now, two main factors contributed: 1) a severe relaxation in the Chinese government’s taxes on imported beef, led to writing off SJAP’s slaughterhouse, and cutting back co-operative beef farming , and 2) unanticipated difficulties to scale successful fishery operations at aquafarms one, two, and three to aquafarms four and five. We reevaluated all our businesses, prioritizing to accommodate these conditions that diminished and threatened cash flow. We decided to “rightsize” all operations by curtailing capital expenditure that would not show short-term return, perhaps sacrificing upside potential in some cases, with the aim of establishing derisked businesses that would sustain profits and support modest growth by reinvesting any available, discretionary cash flow on a standalone basis, after paying down what we’ve called “legacy debt,” commensurate with a projected level of “non-discretionary” cash flow. Efforts have resulted in lease arrangements and JV agreements to provide incremental cash flow at both the HU plantation and HSA relieving the need for SIAF provided capital funding, or working capital. Largely, this restructuring has been accomplished, with a caveat or two. This has led to some businesses becoming much smaller and with low or no short-term growth – like SJAP – and others with reasonable size and reasonable growth prospects intact, like MEIJI. A second caveat is maintaining a level and pace of debt repayment that can be be supported by existing cash flow, which is a baseline scenario projection, not taking into account any of several plans to generate incremental discretionary funds. Therefore, we have been in ongoing discussions to, in essence, refinance certain legacy debts. As agreements are reached, they are reported in the quarterly SEC filings which shareholders are encouraged to read. Here’s the good news. Our reevaluation clearly showed we are best served to concentrate our growth efforts where the Company’s crown jewels lay; namely, Tri-Way, its APRAS technology and infrastructure – and where the crown jewels’ cousin lays; namely, Capital Award’s business to engineer and build aquafarms, using the crown jewels. In the case of Tri-Way’s businesses, the relatively new trading business shows a path to solid growth, constrained by working capital. And in the case of fish and prawn sales, revitalization of aquafarms four and five is underway. We’ve had good results in trial runs of Pacific White prawns, and will employ the new methods at ODRAS farms within the mega farm, the scale of which is dependent again on the magnitude of working capita available. In the case of Capital Award, there are no capital constraints. Because Tri-Way’s best use of funds is for expansion working capital, they will have limited need to build new facilities in the near-term. Therefore, we are in discussions to contract the engineering and/or building of APRAS aquafarms in both India and Malaysia. Any signed contract, should one occur, would result in revenue incremental to baseline plans. We are endeavoring to align the pace of debt repayment in line with baseline cash flow to satisfy creditor terms and provide internally generated working capital for the Company. Flexibility and overall results would be greatly enhanced, if and when any of the above efforts bear fruit. In addition, if and when one or more of our efforts to obtain ouside project based funding materializes, we would expect to generate “discretionary” cash flow sufficient to obtain considerably more favorable debt to cash flow ratios. As the global financial crisis made refinancing and new financing more difficult, we have discovered an analogous situation, post our downsizing. We believe this situation has been alleviated by our current plan, results, and trajectory, and remain cautiously sanguine with respect to significant upside potential related to successful debt or equity financing(s).
Solomon Lee, CEO of Sino Agro Food
Capital Award, our wholly owned subsidiary, has deep knowledge and experience developing just the kind of aquaculture assets envisioned in Angola, where various projects are being funded through an existing cooperative understanding between China and Angola. We are delighted to partner with Nortus, Lda to tailor our technology to the project aims and to the physical conditions of the project locales. For some time Capital Award has evaluated opportunities to export its expertise. This opportunity presents the best set of commitments to proceed.
This was a positive quarter for the Company as we saw a continuation of the trends reported in Q2 2018 in the form of a sequential increase in revenues and stable gross margins. This is the direct result of our restructuring strategy implemented in 2017 that involved divesting some businesses that had become unprofitable, streamlining others, and implementing strict cost controls across several areas of the business. The current operations are leaner and more efficient which, as seen this quarter, is positively impacting our bottom line, with net income increasing 285% to USD 3.47M, compared with the second quarter of 2018. These positive trends are expected to continue as we leverage this platform to continue to steadily grow the business. “We are pleased to see increased activity at Tri-Way, our investment associate, which generated slighter higher income to SIAF on both a year over year and sequential basis. Tri-Way’s activities also generated revenues to Capital Award, our provider of engineering technology, consulting and services, as we supported its development projects, including the construction and retrofit work on its indoor A Power Module farms and about 20 acres of open dam recirculating system farms. “As previously discussed, we have downsized our Integrated Cattle farm (SJAP) as we adapt to increased market competition, especially from foreign imports. This strategy is working and we are pleased to report an operational profit for the third quarter, in line with our expectations. We partially compensated for the fall in cattle sales by ramping up fertilizer sales. We will continue to monitor this business and seek ways in which we can adapt and grow with changing market dynamics. One longer-term strategy is to establish a trading center for the cattle and beef industry. “We are particularly pleased with our progress at HSA selling organic fertilizer, which benefited from two fully operational production plants. We also successfully leased out its cattle buildings and related facilities to a third party to provide additional income and maintain control over costs. Likewise, we reported strength from Cattle Farms (MEIJI). As in prior quarters, we saw strength from our seafood and meat trading business, which is well positioned to leverage trends in the market as a result of our transition toward higher quality, and higher margin, products. This remains a core part of our business and we will continue to focus on expanding sales. “To conclude, although sales are not as high as they were a year ago, we are pleased with the trend toward improved profitability and more sustainable margins. These results validate our strategies to “right size” businesses in the near term while reducing legacy debt until expansion or new initiatives are funded. In the meantime, we are encouraged that positive operational trends will continue to drive improved financials, and grow the value of SIAF, which we believe is deeply undervalued. We are confident in our long term prospects and, therefore, plan to issue a dividend before year-end.
We were pleased that, despite our strategy to restrict capital expenditures, we reported a leveling out or slight increase in revenues on a sequential basis at the Organic Fertilizer business segment, (HSA), Cattle Farms (MEIJI), Plantation (JHST) and Seafood & Meat Trading. SJAP continued to face near-term headwinds due to external factors that have impacted our strategic plans, but still demonstrated sustainability. “Over the past several months we have reorganized SJAP, the Integrated Cattle Farm, to better withstand the price volatility that we have witnessed in the cattle and livestock market. As expected, sustained pricing pressure from foreign imports continued to affect sales of both live cattle and livestock feed in the second quarter; however, we were pleased to report a net operating profit at SJAP. The beef market in China undeniably presents a major opportunity, and, fueled by a steadily growing middle-class and rising incomes, beef and lamb consumption continues to grow steadily. We are confident that, supported by both our organizational structure and our work with government officials, we can restructure the business model to overcome the challenges brought about by the loosening of restrictions on beef imports. We expect that, over the medium to long-term, SJAP will be a major revenue driver for the Company. “In the meantime, we have made solid progress positioning our other segments for growth. In particular, we are pleased to have started planting 15 acres for Immortal Vegetables at JHST to advance our entry into the herbal tea market, which, if successful, should prove to be a lucrative source of revenue growth for the Company. To further diversify our product mix, we are also producing aromatic oils and passion fruit juice through this segment. Again, we are encouraged by these initiatives and believe our willingness to adapt to changing market conditions and implement growth strategies will drive our growth going forward. Moreover, at HSA our organic fertilizer segment, we are ramping production following the completion of the retrofitting of the production plant. This has led to steadily increasing revenues throughout the first half of 2018 and we expect this ramp to continue to contribute to sales growth throughout the remainder of the year. “Furthermore, the seafood and meat trading business continued to demonstrate positively trending results on both a year-over-year and sequential basis. This segment is well positioned to leverage trends in the market as a result of our transition toward higher quality, and higher margin, products. China is short of seafood supply with demand increasing each year, as is reflected in our results.” Mr. Lee concluded, “While our top-line performance is not as strong as it has been in the past, several of our segments performed well and we have identified the factors restricting growth at SJAP and Capital Award. Tri-way, our investee aquaculture operation, continues to hold promise as a future growth driver, while management remains committed to securing additional financing. “The Company underwent a major overhaul in 2017, shedding some businesses which had become unprofitable, rationalizing others, and introducing more stringent capital standards throughout. The first half of 2018 represents a transition to a smaller Sino Agro Food, but one with better-defined opportunities. We were left with some obligations befitting our former, larger size. We are working through these, and are confident enough about overall prospects to have announced a USD .05 per share dividend projected to be paid in the fourth quarter once all the regulatory requirements are met.
We are pleased to see our restructuring initiatives take hold as improved operational efficiency strengthened our bottom line results, compared with Q4 2017. “At SJAP, the Integrated Cattle Farm, we took steps to reduce our fixed costs in response to increased price competition from abroad, including eliminating our QZH slaughtering and deboning subsidiary, and scaling back the live cattle business. Having reorganized these unprofitable business areas, we are now implementing several initiatives to position the Company to build out new revenue streams. Supported by our close ties to local government agencies, we believe our lean operations give us a strong foundation on which to achieve this goal. As an example, we are exploring plans to establish a commercial cattle and meat trade center, which would further diversify the Company’s operations within China’s protein market and enable us to reposition ourselves in a new but related vertical. “We also made progress at the HU plantation (JHST), which suffered from unfavorable weather conditions in 2017. To counterbalance the decline in sales, we commenced processing and repackaging a new herbal health tea product, which is already being sold at a franchise of one of China’s best brand names in health and herbal products. We are encouraged by this opportunity and are exploring ways to leverage this new revenue stream to generate additional sales. “The trading business generated improved revenues and gross margins, across both meat and seafood, as our strategy to transition toward higher quality, and higher margin, products positively impacted results. To support this new product mix, we are building out our distribution channels, and believe our early success will continue throughout 2018. Likewise, sales and gross margins improved at HSA as we scaled up production of organic fertilizer, following the completion of the retrofitting of our production plant. “Tri-way and CA Award generated slightly improved results compared with Q4 2017 as the businesses grow at a gradual pace. We expect the true potential of these operations will be realized if and when Tri-way secures additional funding. Although this process is taking longer than initially expected, this continues to be a core component of the Company’s long term growth strategy. “Given the positive direction the Company is moving in, the Board of Directors has approved a dividend to further its commitment to unlocking value for shareholders. We believe the progress we have made throughout the first quarter demonstrates our flexibility in the face of changing market conditions, our willingness to rapidly identify new growth opportunities, and our ability to execute on these plans. While the business is smaller than it was a year ago, primarily as a result of increased competition from foreign imports, it is also leaner, better organized and well positioned to take advantage of new opportunities. As a result of these strategic changes, we now have a strong foundation on which to strengthen the business and grow the Company’s market value.
The 2017 results were impacted by several continuing challenges, some minor and some major: • Increased competition from low priced exporters in the integrated cattle business segment (SJAP): • Unrelenting unfavorable weather at the HU plantation (HU); • Building a cattle farm and transitioning the mixed fertilizer plant to cattle based waste at the Organic fertilizer business segment (HSA); • After the aquaculture business was carved-out into Tri-Way, allocated capital/ funding for consulting and construction services for product development was limited to a percentage of generated free cash flow. SIAF’s wholly owned subsidiary, Capital Award (”CA”) is the turnkey provider of such services to Tri-Way. While these headwinds led to lower revenues in 2017, we made significant progress adapting operations and corporate policies to advance our strategy to transition SIAF into a differentiated, solutions-destination investment vehicle. We have identified which businesses are well positioned to improve significantly on 2017 results and which are unlikely to recover, at least in the near or perhaps intermediate term. To improve financial stability, we began a process of reducing and restructuring debt at the SIAF level to lower both dollar amount and security needed, while applying for development capital at the focused, private company investee level. The first carved-out investee, Tri-Way, was a bright spot in several ways. • It provides the legal and general business model for other subsidiaries; • Its sale of goods contributed USD 12.0M to SIAF’s bottom line in its first year; • Opportunities and relationships necessary for significant growth in a new trading business were formulated; ones that could be jump started by short-term conventional loans currently being applied for; • New and efficient facilities at Aquafarm 1 and expansion of Aquafarms 4 and 5, all dependent on long-term conventional financing. “Tri-Way continues to work closely with several banks to secure development financing. Negotiations with banks are in advanced stages. While this is taking longer than expected to materialize, we remain confident that, once secured, this will serve not only to boost sale of goods at Tri-Way, but also and most notably, enable SIAF to generate revenue from its Capital Award subsidiary toward or past 2016 levels over time. In the meantime, Tri-Way is exploring lower cost and more rapidly achievable methods of growing complementary, incremental revenues, such as importing frozen seafood to supply to the China market. “Beyond implementing our carve-out-spin-off (‘COSO’) plans, our strategy to refocus the business also calls for thorough and prudent efforts to strengthen our balance sheet and improve financial discipline. This included paying down certain loans from USD 10.4M to USD 4.7M and undertaking a series of cost reduction initiatives to better align the Company’s cost structure while rationalizing businesses to ongoing market, environmental, and transitional conditions. A principal measure to improve short-term cash flow was to close and dispose of SJAP’s QZH slaughtering and deboning operations. These efforts are aimed at stabilizing the Company financially and allow it to focus on the areas with the most growth potential. Some plans for each business segment are itemized in this release, with considerably more detail provided in the 10-K filing. “We are committed to improving the Company’s performance by achieving a successful balance between having addressed near-term challenges and positioning the Company to return to growth. Achieved and supplemental plans to streamline efficiencies are expected to improve operational performance in 2018 and beyond, and also better position the Company and its investees to secure external financing. We remain confident of the opportunity to achieve scale by supplying beef and seafood to the sizable Chinese population.
Our investors have expressed a desire for more detailed information of our operations and concepts behind plans for Tri-way Industries. Please take the time to read the lengthy memo, as we believe it provides an informative appraisal of recent operations, technical considerations, and seafood markets in China. We believe all of these to be positive. Even though occasional modifications to plans may be required, many present marginal opportunities. The memo indicates history-based production extrapolation for several species, based upon SIAF’s proofs of concept and continual refinements at its first three aquafarms, dating from 2011, and at the Zhongshan aquafarm 4 facility in the last year plus. Tri-way’s historical financial profitability is a matter of record, reported quarterly. We remain highly confident that Tri-way is well positioned to increase both production numbers and gross margins, the pace of which would be accelerated if and when expected development capital additional to cash flow materializes.
Our year over year results continued to reflect the impact of increased competition from imported beef on the local beef raising industry, as well as the marked decrease in aquaculture sales that are no longer conducted by the Company, but rather by its investee, Tri-way Industries. However, we are pleased to see a leveling off in the revenue decline, with total sales of USD 48.4 million in Q3 2017, (versus USD 47.7 million in Q2 2017) and gross profit of USD 6.5 million in Q3 2017, consistent with Q2 2017. “Even though an immediate solution for SJAP is not expected, we are hopeful that one materializes in the near future since SJAP’s business is directly associated with the livelihood of thousands of farmers. It is a major concern and responsibility of the Government to secure an ultimate and practical solution for the farmers, with SJAP available to assist when it can do so profitably. “Under current circumstances, we believe our most significant growth opportunities will come from: • Tri-Way, which is focused on ramping up its seafood production for domestic sales, and on utilizing its marketing network and global connections to increase sales on imported frozen seafood into China. As such, we are confident that the pace of revenue growth will rapidly accelerate once Tri-way secures adequate debt financing. The process to secure this funding has made significant progress, the details of which will be made public once the funding is secured and its closing in place. • Import sales of high grade quality meats (i.e., Wagyu beef with higher overall margins) will continue to improve, achieving better performance as we secure additional high quality products from new reputable suppliers and from loyal, consistent customers. “Adjusting to the current spectrum of external agricultural market conditions, we are pleased to have achieved USD 0.15 earnings per share during the third quarter, a meaningful improvement compared with USD 0.03 in Q2 2017. This result is a testimony to our agility to execute even under unfavorable conditions, establishing a positive baseline for improved results, when external conditions return to more ‘normal’ levels. “We continue to believe that there is a major opportunity to capitalize on the growth of China’s economy as the disposable income of China’s middle class continues to rise, leading to increased demand for premium seafood. We will continue to tailor our strategy to leverage this growth, mindful of the shorter term macro trends affecting agriculture in Sino Agro Food, Inc. Q3 2017 Results Press Release Page 6 China, while Tri-way continues its efforts to secure financing to accelerate production expansion. “During the quarter we also continued 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 allow for better cost savings in raw material. “I would like to again thank our loyal shareholders as we implement these steps and work through this transition period toward building long-term value at the Company, while at the same time, continuing with positive momentum on our carve-out and spinoff strategies.
Given that SIAF has multiple species of animals entering its sites daily, it is imperative we have a method to rapidly screen incoming animals for disease to maintain high levels of biosecurity. This device will screen for selected diseases within an hour, instead of days, as is the typical time for collection of samples, sending them to an appropriate lab, and having the results returned. The device is easy to use with a minimum of training and results cannot be compromised by poor analytical or reporting methods. It will greatly reduce our risk of bringing disease onto our sites. The device will be used to monitor for disease status on SIAF farms on a regular basis.
The MOU with CibusDX is one among many partnerships we envision with high technology companies to enhance the value and scientific credibility of SIAF and its investee, Tri-way Industries, Ltd. Such partnerships will provide the latest technologies as well as an additional income stream to the company.
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.
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.
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.
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
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.”
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.
“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.
“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.
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
“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.”
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
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.
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.