SHISHI, China, Aug. 12 /PRNewswire-Asia/ -- China Marine Food Group Ltd. (NYSE Amex: CMFO), a processor of seafood-based snack foods and distributor of fresh and frozen marine catch, today announced the Company's financial results for the second quarter 2009.
-- Revenues increased by 12.9% to $14.8 million compared to Q2 2008;
seafood-based snack foods account for 96.6% of revenues. Gross margins
increased 0.5% to 33.2%
-- Net income increased by 15.2% to $3.7 million compared to Q2 2008;
Q2 2009 EPS was $0.16 compared to $0.14 in Q2 2008.
-- Company increased retail sales points to a total of 2,200 through June
30, 2009, compared to 1,300 for the same period 2008.
-- Build out of additional 10,000 tons of production capacity on schedule
for completion in Q3 2009.
2009 Second Quarter Financial Results
China Marine's revenues increased 12.9% to $14.8 million year-over-year. The increase in revenues was due to the continued growth in sales of the Company's processed seafood snack segment which grew 15.3% for three-months period ended June 30, 2009. China Marine's Mingxiang(R)-branded dried seafood snack food products accounted for approximately 96.6% of China Marine's revenues for the quarter while its marine catch segment accounted for approximately 3.4%. Based on demand and favorable market pricing, China Marine will at times execute a sale of fresh or frozen marine catch to select distributors it has maintained in its marine catch network since 1994. China Marine's retail snack food segment remains the focus of the Company's product development and sales efforts and its primary driver of gross profits.
Developments in the Company's distribution network included strong year-over-year sales increases in Shanghai, Jiangsu, Guangdong and Shenzhen, all new territories added in 2008 where the Company is actively selling its products through new retail sales locations. Year to date, China Marine has added more than 900 retail sales points to its retail footprint, in addition to developing four new products which are currently being launched in two targeted markets, Chengdu and Chongqing.
"We recognize that new sales territories and distributors are the key to our future growth strategy, and successfully increased retail sales point to 2,200 as of June 30, 2009, up nearly 70% from the 1,300 a year ago," began Pengfei Liu, Chairman and CEO of China Marine. "In addition to the efforts of our management team and internal sales team, our dedicated network of master distributors also recognizes the importance of new customer accounts and retail points as the key to their success as well. Both Shanghai and Guangdong have added hundreds of new retail food end points to their territories this year and we see equal opportunity to do the same in other provinces during the remainder 2009 and beyond," Liu concluded.
Cost of goods sold was $9.9 million yielding gross profits of $4.9 million in the second quarter 2009 which represented an increase of 15.0% versus the same period in 2008. For the second quarter 2009, gross profit margins were 33.2%, versus 32.7% in 2008. Processed, dried and packaged seafood-based snack foods gross margins of 33.9% contributed significantly to the quarter while marine catch margins were 15.5%. Seafood snack foods contributed 98.4% of China Marine's gross profit for the quarter. The Company expects the profit margin for its seafood snack foods will remain over 30% for the balance of 2009.
Total operating expenses for the second quarter of 2009 were $0.7 million, representing approximately 4.6% of revenues in the quarter. Operating income was $4.2 million for the second quarter of 2009, an increase of 18.3% compared to the year ago period, with corresponding operating margins of 28.6% and 27.4%, respectively. Income taxes for the quarter were $0.5 million based on the Company's effective tax rate of 12.5%. China Marine maintains a favorable tax rate of 12.5% as a foreign investment enterprise through the end of 2009 and has already applied for newly created tax incentives for 2010 and beyond for industries which it qualifies.
Net income for the second quarter of 2009 was $3.7 million, representing an increase of 15.2% compared to $3.2 million reported in the same period prior year, with corresponding net profit margins of 25.2% and 24.7%, for each corresponding period. Earnings per share were $0.16 for the second quarter of 2009, compared to $0.14 for the second quarter of 2008.
"We were pleased to deliver a quarter in which our snack food segment drove nearly all of our revenues and earnings growth for our Company", began Marco Ku, CFO of China Marine. "Though the financial crisis has had an impact on several sectors in China, mainly export, domestic retail foods continue to show growth nation-wide as consumers embrace a broader variety and higher quality food choices. Our ability to maintain margins in our retail snack food segment is a testament to market demand for our products supported by strong brand equity among consumers." Ku concluded.
2009 Six-Months Financial Results
Revenues for the first six months ended June 30, 2009 increased by approximately $7.5 million, or 31.3%, to $31.3 million compared to the year ago period. Sales of the Company's seafood-based snack foods increased by $3.2 million, or 14.2%, whereas sales in the marine catch segment increased by $4.3 million, or over 3-fold, due to trading sales booked during the first quarter of this year. While the Company will opportunistically sell marine catch in volume throughout the year, it will continue to direct all of its sales efforts in the seafood snack segment which provides the most long-term growth trajectory and highest return for its shareholders.
China Marine is in the process of increasing its production capacity by 100% to 20,000 tons which is expected to come online by the end of the third quarter of 2009. The Company began 2009 with 10,000 tons of available capacity and for the second quarter of the year reported approximately 70% utilization rate, which it expects to further increase as its distribution network and sales network continue to grow. The new capacity, which is currently being installed, will more than double some of the Company's seafood-based snack food lines. The capacity expansion is budgeted to cost less than $3.0 million, including the new facility expansion and all necessary equipment. Current working capital will be sufficient to fund this capital expenditure.
Gross profit increased 14.5% to $9.0 million while gross margins were 28.8%, a decrease from 33.0% recorded during the first six months of 2008 due to the marine catch revenue during the first quarter of 2009. Operating profit increased 13.7% to $7.7 million with operating margins of 24.7% for the six months period ended June 30, 2009 versus 28.5% for the same period in 2008. The Company recorded approximately $7.0 million in net income for the six months period current year versus $6.0 million for the same period in 2008, a 15.7% increase year-over-year. For the first six months of 2009 and 2008, earnings per share were $0.30 and $0.26, respectively, based on 23.0 million shares.
Balance Sheet and Cash Flow Discussion
Cash and cash equivalents as of June 30, 2009 amounted to approximately $20.5 million, a decrease of $11.2 million or 35.2% compared to $31.6 million as of December 31, 2008. The Company's debt as of June 30, 2009 was comprised of short-term bank loans in the amount of $4.1 million compared to $4.3 million as of December 31, 2008.
Net cash used in operating activities for the six months ended June 30, 2009 amounted to approximately $9.7 million, whereas net cash provided by operating activities for the same period in 2008 amounted to approximately $4.9 million. The reduction of net cash this year was mainly attributable to an increase in inventories and accounts receivable of $10.6 million and $5.8 million, respectively. A significant portion of the inventory, $8.7 million, was related to trading of marine catch. To meet anticipated customer demand for a marine catch trade combined with the Company's yearly requirement to boost inventories in the summer during mandatory provincial reductions of fishing, China Marine was able to negotiate favourable prices on a bulk buy of raw materials.
The increase in accounts receivables and associated days sales outstanding ("DSO") is directly related to growth in the Company's food retail sales segment. Market trends have extended payment terms for some food distributors to as much as 90 days to encourage continued stocking of goods in distributors' warehouses. China Marine's payment terms are credit-based, and mostly are either, payment in advance, 30 or 60 days dependant on the distributor's credit rating. For the second quarter, China Marine's DSO's were less than 60 days.
Working capital on June 30, 2009 was $42.8 million, an increase of $6.0 million from working capital at December 31, 2008 totaled $36.8 million, which was primarily attributable to net income the Company realized for the period. The Company also maintained a current ratio of 7.0 to 1.
Conference Call
To attend the call, please use the dial information below. When prompted, ask for the "China Marine Call" and/or be prepared to provide the conference ID.
Date: August 12th, 2009
Time: 10:00am ET
Conference Line Dial-In (U.S.): 1-877-941-8631
International Dial-In: +1-480-629-9819
Conference ID: 4136099
Webcast link: http://viavid.net/dce.aspx?sid=000068B8
Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through August 19th, 2009. To listen, please call 1-800-406-7325 within the United States or +1-303-590-3030 when calling internationally. Utilize the pass code 4136099 for the replay.
About China Marine
China Marine Food Group Ltd. processes and distributes seafood-based snack foods, and fresh and frozen marine catch to seven provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its "Mingxiang(R)" brand as a category leader in 2,200 retail sales points in the PRC. The Company has received "The Famous Brand" and "Green Food" awards. Located in the Fujian province, it is one of the largest coastal provinces in the PRC and a vital navigation hub between the East China Sea and the South China Sea. The Company is committed to the highest standard of quality control with the ISO9001, ISO14001, HACCP certification and EU export registration.
FORWARD LOOKING STATEMENTS
This release contains certain "forward-looking statements" relating to the business of China Marine Food Group Limited and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, concentration in a single customer, raw material costs, market acceptance, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. China Marine Food Group Limited is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND DECEMBER 31, 2008
(Currency expressed in United States Dollars (US$), except for number of
shares)
June 30, 2009 December 31, 2008
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $20,488,131 $31,640,307
Accounts receivable, net 10,576,055 4,819,434
Inventories 17,254,081 6,679,488
Prepaid expenses and other current
assets 1,598,673 326,977
Total current assets 49,916,940 43,466,206
Property, plant and equipment, net 8,622,056 5,944,515
Land use rights, net 622,844 630,150
Construction in progress -- 1,604,855
TOTAL ASSETS $59,161,840 $51,645,726
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $4,134,525 $4,289,341
Accounts payable, trade 1,597,735 416,463
Amount due to a stockholder 6,091 170,091
Income tax payable 520,805 362,326
Accrued liabilities and other payable 850,358 1,387,427
Total current liabilities 7,109,514 6,625,648
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized; 0
shares issued and outstanding as of
June 30, 2009 and December 31, 2008 -- --
Common stock, $0.001 par value;
100,000,000 shares authorized;
23,026,301 shares issued and
outstanding as of June 30, 2009 and
December 31, 2008 23,026 23,026
Additional paid-in capital 16,752,945 16,752,945
Statutory reserve 4,883,700 4,883,700
Accumulated other comprehensive
income 3,508,500 3,448,436
Retained earnings 26,884,155 19,911,971
Total stockholders' equity 52,052,326 45,020,078
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $59,161,840 $51,645,726
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Currency expressed in United States Dollars (US$), except for number of
shares)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2009 2008 2009 2008
Revenue, net $14,756,384 $13,067,599 $31,304,436 $23,849,651
Cost of revenue
(inclusive of
depreciation and
amortization) (9,850,602) (8,800,852) (22,292,879) (15,979,996)
Gross profit 4,905,782 4,266,747 9,011,557 7,869,655
Operating expenses:
Depreciation and
amortization (19,680) (10,346) (39,052) (19,766)
Sales and marketing (143,494) (164,695) (257,556) (253,279)
General and
administrative (515,842) (517,695) (981,596) (794,862)
Total operating
expenses (679,016) (692,736) (1,278,204) (1,067,907)
Income from operations 4,226,766 3,574,011 7,733,353 6,801,748
Other income
(expenses):
Subsidy income 71 63,626 143,208 63,626
Rental income 20,396 18,458 40,771 36,394
Interest income 70,592 133,066 161,062 172,326
Interest expense (56,020) (78,163) (118,728) (159,604)
Income before income
taxes 4,261,805 3,710,998 7,959,666 6,914,490
Income tax expense (538,222) (477,776) (987,482) (890,257)
NET INCOME $3,723,583 $3,233,222 $6,972,184 $6,024,233
Other comprehensive
income:
- Foreign currency
translation gain 3,109 803,272 60,064 2,111,101
COMPREHENSIVE INCOME $3,726,692 $4,036,494 $7,032,248 $8,135,334
Net income per share:
- Basic $0.16 $0.14 $0.30 $0.26
- Diluted $0.16 $0.13 $0.30 $0.24
Weighted average
shares outstanding:
- Basic 23,026,301 23,026,301 23,026,301 23,026,301
- Diluted 23,026,301 25,196,105 23,026,301 25,196,105
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Currency expressed in United States Dollars (US$))
(Unaudited)
Six months ended June 30,
2009 2008
Cash flows from operating activities:
Net income $6,972,184 $6,024,233
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 156,216 104,513
Loss on disposal of property,
plant and equipment -- 64,462
Allowance for doubtful accounts 28,928 2,342
Changes in operating assets and
liabilities:
Accounts receivable (5,785,549) (1,144,759)
Inventories (10,574,593) (463,909)
Prepaid expenses and other current
assets (1,271,696) (228,478)
Accounts payable, trade 1,181,272 299,872
Income tax payable 158,479 144,454
Accrued liabilities and other payable (537,069) 97,014
Net cash (used in) provided by
operating activities (9,671,828) 4,899,744
Cash flows from investing activities:
Purchase of property, plant and
equipment (217,471) (382,321)
Addition of construction in progress (995,235) (1,341,372)
Net cash used in investing activities (1,212,706) (1,723,693)
Cash flows from financing activities:
(Repayment to) advance from a
stockholder (164,000) 44,508
Proceeds from issuance of common
stock -- 173,556
Proceeds from short-term borrowings 4,134,525 8,844,844
Payment on short-term borrowings (4,289,341) (5,388,690)
Net cash (used in) provided by
financing activities (318,816) 3,674,218
Effect of exchange rate changes on
cash and cash equivalents 51,174 1,893,997
NET CHANGE IN CASH AND CASH
EQUIVALENTS (11,152,176) 8,744,266
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 31,640,307 24,476,647
CASH AND CASH EQUIVALENTS, END OF
PERIOD $20,488,131 $33,220,913
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $829,003 $745,803
Cash paid for interest $118,728 $159,604
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Transfer from construction in
progress to property, plant and
equipment $2,600,090 $--
For further information, please contact:
COMPANY
Marco Hon Wai Ku, CFO
Address: Suite 815, 8th Floor, Ocean Centre, Harbour City
Kowloon, Hong Kong
Tel: +852-2111-8768
Email: marco.ku@china-marine.cn
Web: http://www.china-marine.cn
INVESTOR RELATIONS
HC International, Inc.
John Mattio, SVP
Address: 56 June Road, North Salem, NY
Tel: +1-914-669-5340 (U.S.)
Email: john.mattio@hcinternational.net
Web: http://www.hcinternational.net