China Marine Food Group Announces Second Quarter 2009 Results

2009-08-12 03:18 559

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:

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.


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.



AS OF JUNE 30, 2009 AND DECEMBER 31, 2008

(Currency expressed in United States Dollars (US$), except for number of


June 30, 2009 December 31, 2008

(Unaudited) (Audited)


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


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


EQUITY $59,161,840 $51,645,726





(Currency expressed in United States Dollars (US$), except for number of



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


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


- 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




(Currency expressed in United States Dollars (US$))


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


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


EQUIVALENTS (11,152,176) 8,744,266


OF PERIOD 31,640,307 24,476,647


PERIOD $20,488,131 $33,220,913



Cash paid for income taxes $829,003 $745,803

Cash paid for interest $118,728 $159,604



Transfer from construction in

progress to property, plant and

equipment $2,600,090 $--

For further information, please contact:


Marco Hon Wai Ku, CFO

Address: Suite 815, 8th Floor, Ocean Centre, Harbour City

Kowloon, Hong Kong

Tel: +852-2111-8768




HC International, Inc.

John Mattio, SVP

Address: 56 June Road, North Salem, NY

Tel: +1-914-669-5340 (U.S.)



Source: China Marine Food Group Ltd.
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Keywords: Food/Beverages