Chairman's Message
Dear Bosses
Geopolitics and inflation continued to dominate headlines in FY 2023, affecting the purchasing sentiments of our customers around the world. The numerous macro-economic challenges have plagued countless businesses all around the world; many have been shaken to the core.
THE IMPACT ON BUSINESS
While our aquaculture business is steadily making headway in the Asian region, our ornamental fish and aquarium accessories segments have been impacted by global events. Our North American and European customers have taken a conservative stance and held back their procurement as inflation continued to bite while the spectre of a global recession loomed in the horizon.
As the macro-environment continues to evolve, we want to be ready to catch the curve when the market recovers. Therefore, in FY 2023, we took the opportunity to strengthen our balance sheet and drive better efficiencies in our operations as we focus on our business fundamentals. We did this by enhancing cash flow, reducing our exposure to leverage, and cutting down on inventory through a few key initiatives.
In particular, we have made a pivotal decision to reduce our efforts in Arowana breeding and accordingly, to dispose of a substantial portion of our brooder stocks in order to free up valuable resources and space to explore new business activities that would generate better value for the Group.
As a result, this enables us to redeploy the existing earthen ponds used for Arowana breeding to pursue new, advanced and efficient farming technologies. These new technologies will also boost the overall resilience of our aquaculture and ornamental fish supply chain in the long run.
Likewise, we are in the process of setting up a new joint venture in Malaysia to farm the highly popular Marble Goby fish. This effort aims to replicate and bring the same proven farming practices within our aquaculture facilities in China closer to our customers. Consumers in Singapore and the wider Southeast Asian region will be able to enjoy healthy, antibiotic-free Marble Goby fish.
These efforts will also constitute an important part of Qian Hu’s contribution towards Singapore’s “30 by 30” initiative to sustainably produce 30% of our nutritional needs by 2030.
STRENGTHENING QIAN HU’S FUNDAMENTALS
For quite some time now, the Asian Arowana has become a commodity, especially the mass-market varieties which have been in oversupply. They no longer command high prices and we do not foresee the oversupply situation improving any time soon. It became imperative to repurpose our resources to other new business activities that would create greater value for the Group. As such, we have cleared out our Arowana brooder stocks substantially and will only produce higher-value Arowana - such as Albino Asian varieties - as we put new strategies into motion for our Arowana trading business going forward.
We anticipate that the shrinking supply of ornamental fish may also become imminent in coming years, given the consolidation of local fish farms in Singapore and various breeders retiring from the trade. We have therefore started building up our supply capabilities by intensifying our R&D in breeding. This will ensure that we accumulate enough data and know-how in terms of breeding various fish and gear ourselves up to mitigate future supply issues. Our emphasis is on breeding around 15 types of essential fish varieties, such as guppies and goldfish, with plans for further expansion.
In order to shore up resilience in our aquaculture and ornamental fish supply chains, we are pilot testing an Aqua-Ring Technology (ART) system which is ideal for intensive breeding and farming in Singapore. A standalone land-based system with minimal footprint, the ART tank is an environmentally friendly integrated system with zero discharge. Its innovative design accommodates both freshwater and marine species and enhances biosecurity by minimising the risk and spread of diseases.
We plan to convert the earthen ponds vacated by the Arowana brooder stocks to accommodate this new technology at our Singapore farm to carry out the breeding and farming of certain species of ornamental fish as well as food fish. We expect this innovative technology to yield many times the number of fish in a much shorter time, and in a more sustainable manner as well.
Moving ahead, we are focused on expanding the above intensive farming technologies for our Aquaculture and Ornamental Fish businesses, to meet the future demand in the Asian region as well as closer to home.
PROGRESSING WITH OUR AGRI-TECHNOLOGY VENTURES
We are pleased that Bosch’s AquaEasy is gaining traction in the region. We are establishing AquaEasy’s footprint in Malaysia and Thailand through our distribution rights for the AquaEasy’s sustainable aquaculture solutions based on Artificial Intelligence (AI) and Internet-of-Things (IoT) technology to help farmers increase productivity and predictivity. We are also working with AquaEasy to develop a local version for the China market.
At the same time, we will be investing more in the production of ornamental fish and food fish in both Singapore and Malaysia. Contract farming of ornamental fish has been successful, and we will continue to expand the programme to a few more farms in the country.
Our new collaboration in Malaysia to produce the highly popular Marble Goby fish is also expected to boost our Aquaculture offerings in the region. In the near future, we are looking to produce other seafood favourites while we expand our pond capacity.
EXPANSION INTO THE REGIONAL PET MARKET
Sales of accessories for dogs, cats and small animals have been on the uptick and we intend to ride on this rising demand by expanding our pet food, medication and accessory categories for export and domestic sales. Over the years, Qian Hu has developed various pet accessories brands, but they have largely been complementary to our mainstay ornamental fish business. We have since made expansions in the consumables category for cats by introducing products such as high-volume cat litter, and we are poised to accelerate our coverage of this segment.
In time to come, we expect the pet segment to expand further and emerge to be another growth pillar for Qian Hu. With its growing middle-class, Indonesia has strong prospects for the pet care business. We are currently in the midst of setting up a new pet distribution arm in Indonesia to capture this projected growth.
UP AHEAD
Someone famous once said, “The plan is useless; but planning is essential.”
With all of our Singapore units having completed the transition to our cloud-based “One Qian Hu” digital platform in FY 2023, our subsidiaries in Malaysia, Thailand, Indonesia and China have gradually cut over to the digital platform in phases. This initiative positions the Group as we navigate the present challenges, seize new opportunities and become future-ready.
We believe that our core business model remains relevant as we seek to nurture new growth segments. We are laserfocused on generating healthy cash flows from everything we do while we fix our sight on managing risks.
We envisage that our business segments will continue to perform in FY 2024, amidst a challenging business environment.
APPRECIATION
We would like to thank everyone in our Qian Hu team in Singapore, Malaysia, Thailand, Indonesia and China for their diligence and dedication as we steer through such turbulent times and as we move from strength to strength.
We would also like to convey our heartfelt gratitude to our independent directors, our business partners, our customers and other stakeholders for their unwavering cooperation and support. We will continue to positively position the Group for the next wave of growth and the boundless opportunities.
Let us all look forward to better times ahead!
Kenny The Fish
Executive Chairman
Yap Kok Cheng
Chief Executive Officer