Andatee China Marine Fuel Services Announces Third Quarter 2010 Financial Results

DALIAN, Liaoning Province, China, Nov. 12, 2010 /PRNewswire-Asia/ -- Andatee China Marine Fuel Services Corporation (Nasdaq: AMCF), the leading independent operator engaged in the production, storage, distribution, wholesale purchase and sale of blended marine fuel oil for cargo and fishing vessels in Northern China, today announced financial results for the third quarter ended September 30, 2010.

Third Quarter 2010 Highlights

• Revenue increased 78.5% to approximately $57.5 million
• Gross profit was  up 52.8% to $5.7 million
• Income from operations was $3.8 million, up 63.4% from $2.3 million in the same period of 2009
• Operating margin was 6.7%
• Net income attributable to Andatee shareholders was $2.6 million, increased 73.5%
• Earnings per share was approximately $0.27

"We are delighted with the solid business results we delivered in the third quarter 2010. During the period in September 2010, we have achieved a major milestone by signing agreements with Haiyu Fishery Limited Corporation and Jinghai Group to supply marine fuel, on an exclusive basis, for a period of 10 years. We also acquired 52% stake in Mashan Xingyuan and Hailong Petrochemical Co., Ltd. respectively. As a result, we have expanded our footprint into Tianjin market, which is the largest port cities in China," said Mr. An Fengbin, Chairman, CEO and President of Andatee China Marine Fuel Services Corporation. "In addition, we have expanded our business in the markets in southern China by finding more reliable distributors of 1# marine fuel products."

Third Quarter 2010 Results

Revenues for the third quarter ended September 30 2010, were $57.5 million, which represented an increase of approximately 78.5% as compared with $32.2 million during the same period in 2009. This increase was attributable to an increase in sales volume and to higher average crude oil price prevailing in the marketplace.

Total sales volume during the third quarter of 2010 has increased by 82% to 86,000 tons from 47,000 tons in the corresponding quarter last year. This increase was attributable to our intensified marketing efforts of 1# marine fuel products by finding more reliable distributors in Southern China. Also, we saw the contribution of approximately 6,000 tons to the sales volume of our marine fuel products by Mashan Xingyuan and Hailong, newly acquired in 2010. The increase in the international crude oil price contributed to the sales volume increase as well, which fluctuated around $79 a barrel, an average increase of approximately $20 per barrel as compared with the same period in 2009.

Gross profit increased 52.8% in the third quarter of 2010 to $5.7 million from $3.7 million third quarter last year. Gross profit margin decreased from 11.7% for the third quarter of 2009 to 10.0% for the third quarter of 2010.

Selling, general and administrative expenses were approximately $1.9 million in the third quarter of 2010 as compared with $1.4 million during the same period last year. The increase was primarily due to higher compensation expenses as a result of higher sales volume and increased promotional expenses related to marketing the Company's products in the newly acquired areas of Mashan and Tianjin, as well as in the market of Southern China.

Income from operations in the third quarter of 2010 was $3.8 million, representing 63.4% increase from $2.3 million during the same period last year. Operating margin was 6.7% in the third quarter of 2010 compared to7.3% in the third quarter of 2009.

Net income attributable to Andatee shareholders during the third quarter of 2010 was $2.6 million, or $0.27 per diluted share, compared to $1.5 million, or $0.25 per share, for third quarter of 2009. Diluted weighted average shares outstanding was 9.7 million in third quarter 2010 and 6 million in the same period in 2009.

Financial Condition

As of September 30, 2010, Andatee had $17.2 million in cash and cash equivalents, and approximately $6.4 million in working capital surplus, as compared to $1.5 million in cash and $3.9 million in working capital for the quarter ended December 31, 2009. Stockholders' equity as of September 30, 2010 was $45.2 million, an increase of 157.3% over the $17.6 million recorded as of December 31, 2009.

Nine Months ended September 30, 2010 Results

For the nine months ended September 2010, our revenue increased to $131.1 million, up 54% from $85.3 million in the corresponding period of 2009. The portion of retail sales in our total revenues had decreased to 38.3% for the nine months of 2010 from 40.8% for the nine months of 2009. Gross profit increased 43.5% to $14.6 million, as compared to $10.2 million in the same period one year ago.  Gross margin was decreased from 11.9% for the nine months of 2010 to 11.1% for the same period in 2009. Operating income increased 48.1% to $9.9 million from $6.7 million. Net income was $6.7 million, or $0.72 per diluted share, 41.9% increase from $4.7 million or $0.79 per diluted share.  

Business Outlook

Sea freight shipping activities at ports in China remained relatively strong, driving steady growth in the marine bunkering industry in China. Fishing activities continued to pick up during the third quarter of 2010 due to the peak season and the increasing demand from the fishing industry. Andatee believes its success in implementing its business strategies to explore increasing market opportunities for retail sales, to acquire and upgrade retail facilities to reduce risk of fluctuation of crude oil prices, and to build retail points in strategic locations to capture market growth continue to strengthen the Company's market position in the marine fuel services industry in China.

"Given the highly fragmented nature of the marine fuel industry for fishing and smaller vessels, we are committed in our effort to expand our geographic footprint to capture market share and build our "Xingyuan" brand. During the third quarter, we intensified our marketing efforts of 1# marine fuel products by finding more reliable distributors in Southern China, who could distribute 1# marine fuels products in large numbers." said Mr. An. "We believe that a solid foundation for our marine fuel business will be established step by step along with development of more value-added products as well as exploration into more high margin strategic positions."

Conference Call

Andatee will conduct a conference call at 9:00 a.m. ET on Friday, November 12, 2010 to discuss its third quarter 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time. US Toll Free: 1-800-860-2442. Canadian Toll Free: +1-866-605-3852. International callers should dial: +1 412-858-4600.

If you are unable to participate in the call at this time, a playback will be available for 10 days starting one hour after the conference call through November 22, 2010 at 9:00 a.m. ET. Please dial US Toll Free: 1-877-344-7529 or global toll: 1-412-317-0088 to access the replay. The conference number is 446061.

About Andatee China Marine Fuel Services

Andatee China Marine Fuel Services Corporation is a leading independent operator engaged in the production, storage, distribution, wholesale purchase and sale of blended marine fuel oil for cargo and fishing vessels in Northern China. Headquartered in the City of Dalian, a key international shipping hub and an international logistics center in Northern China, Andatee maintains operations in Liaoning, Shandong and Zhejiang Provinces in the People's Republic of China.

Andatee China Marine Fuel Services provides customers with value-added benefits, including single-supplier convenience, competitive pricing, logistical support and fuel quality control. Its products are substitutes for diesel used throughout east China fishing industry. Backed by core facilities, such as storage tanks, marine fuel pumps, blending facilities and berths (the space allotted to a vessel at the wharf) and small to medium sized cargo vessels, its sales network covers major depots along the towns of Dandong, Shidao and Shipu along the east coast of China.  Additional information about the Company is available at http://www.andatee.com.

Safe Harbor Relating to the Forward Looking Statements

Statements contained in this press release not relating to historical facts are forward-looking statements that are intended to fall within the safe harbor rule under the Private Securities Litigation Reform Act of 1995. All forward-looking statements included herein are based upon information available to the Company as of the date hereof and, except as is expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. As a result, investors should not place undue reliance on these forward-looking statements. To the extent that any statements made here are not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as "expects," "plans," "will," "may," "anticipates," "believes," "should," "intends," "estimates" and other words of similar meaning. The Company may also make written or oral forward-looking statements in its periodic reports filed with the U.S. Securities and Exchange Commission and other written materials and in oral statements made by its officers, directors or employees to third parties. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by these forward-looking statements. Such risk factors include, without limitation, our ability to properly execute our business model, to address price and demand volatility, to counter weather and seasonal fluctuations, to attract and retain management and operational personnel, potential volatility in future earnings, fluctuations in the Company's operating results, our ability to expand geographically into new markets and successfully integrate future acquisitions, our ability to integrate and capitalize on the recent acquisitions in Mashan and other markets, PRC governmental decisions and regulation, and existing and future competition that the Company is facing. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual events to differ from the forward-looking statements. More information about some of these risks and uncertainties may be found in the Company's filings with the Securities and Exchange Commission under the caption "Risk Factors" in such filings.

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