How bad is Ukraine war for shrimp industry?

Infograph: TBS

A prolonged Russia-Ukraine war carries a huge risk for the Bangladesh shrimp industry, given that it is yet to fully recover from the pandemic shock, according to industry people.

Even though shrimp exports picked up in fiscal 2021-22 riding on a surge in demand and prices following an easing of the Covid situation, the conflict in Ukraine has hindered the recovery trend by slashing demand for the item in the European Union -- Bangladesh's biggest shrimp export destination -- by about 30%-40%, says the Bangladesh Frozen Foods Exporters Association (BFFEA).

In the process, prices of the product also have dropped by over 30%, the trade body adds.

Data released by the Export Promotion Bureau (EPB) also reinforce exporters' claims about the declining trend in shrimp exports.

According to the EPB, frozen and live fish exports decreased by about 13% in the first quarter (July-September) of the current financial year, with live fish exports falling 29% and shrimps exports 18%.

In FY22, exports of frozen and live fish registered a 11.65% YOY growth mainly riding on a 24% rise in shrimp exports as frozen fish export fell 20% during the period.

Entrepreneurs in the sector told TBS that they were able to sell shrimps at higher prices in the last fiscal year, thanks to the regaining of demand that had been dampened by a pandemic-induced supply chain disruption.

But the Russia-Ukraine war has come in the way of the sector's full recovery from the pandemic shock, they mentioned, adding that if the war continues, exports will decrease further in the future.

Listed companies Apex Foods and Gemini Sea Foods saw huge jumps in revenue and profit in FY22, riding on increased sales of shrimps following the improvement in the Covid situation and the subsequent normalisation of the global supply chain.

The 100% export-oriented Apex Foods posted a 148% year-on-year growth in profit last year, while Gemini Sea Foods saw its profit go up by a whopping 1,634% to Tk5.86 crore.

Bangladesh Frozen Foods Exporters Association President Md Amin Ullah told TBS that shrimp exporters in the country did good business in FY22, which helped them roll back the pandemic blues to a great extent.

But the Russia-Ukraine war has emerged as a fresh cause of worries for the sector, he noted, adding that shrimp consumption has come down markedly following the outbreak of the war.

BFFEA President Md Amin Ullah, who is also managing director of ARK Seafoods Ltd, told TBS, "Everyone did good business for the first 10 months of the last fiscal year. The Russia-Ukraine war broke out in February. Although there was no immediate impact [of the war] on exports due to demand, the war left a major impact in the last two months of the financial year. Otherwise, there would have been more growth in shrimp exports at the end of the fiscal year."

Expressing his fears of a decrease in exports in the current financial year, he said, "If the war continues in this way, there is a possibility that exports will decrease further. This is because demand has decreased and foreign buyers are also offering lower prices for the product."

Apex Foods sees 148% growth in profit

Apex Foods Limited saw its profit grow 148% to Tk2.99 in FY22, riding on a surge in shrimp exports over the previous fiscal year.

According to the its last five years' financials, after a 19% de-growth in revenue in FY17, the company had been posting consistent growth until FY22 despite the pandemic in 2020.

Its earnings per share (EPS) stood at Tk5.14 in FY22, which was Tk1.88 in the previous year.

Apex Foods said a global upturn in the demand for its products, especially food items, and the company's efficient running as well as cost efficiency were the main reasons behind its significant profit growth.

It recommended a 20% cash dividend to its shareholders for the last fiscal as in FY21. 

Gemini Sea Foods makes hefty profit 

Gemini Sea Foods pioneered the export of certified organic shrimps from Bangladesh to EU retailers in the year 2008.

It exports products to the USA, UK, Russia and EU countries such as Germany, Denmark, the Netherlands, Belgium, etc.

Owing to the Covid-19 pandemic, and a fall in shrimp price in the international market, the frozen shrimp and fish exporter witnessed a 4.32% fall in revenue to Tk34.71 crore in FY21.

But in FY22, the company saw a 109% growth in revenue to Tk72.54 crore while its profit jumped by 1,634%. 

Earnings per share (EPS) of the company increased to Tk12.49, which was Tk0.72.

The company recommended a 10% cash, and 30% stock dividend for its shareholders for last fiscal.

The cash dividend is only for general shareholders excluding sponsor-directors.

Earlier, in FY21, it had paid a 5% cash dividend to general shareholders, excluding sponsor-directors of the company.

The market

According to industry sources, Bangladesh's export receipts from frozen food are about $400 million annually and shrimps contribute more than 80% to this income. 

A significant area of the southern part of the country has been brought under shrimp cultivation.

Having around 148 sea food processing companies, Bangladesh is the eighth largest shrimp exporter in the world, although it caters to only 2% of the international demand for frozen shrimps, according to the Bangladesh Shrimp and Fish Foundation (BSFF), 

Currently, around 10 million people are involved in fishing and processing in this sector. 

In FY22, Bangladesh exported $477.37 million worth of frozen and live fish, a 4.56% growth over the previous fiscal year.

Of the amount, shrimps contributed $328.84, which is 1.15% lower than that of the previous year.