China Marine Food Group Announces Third Quarter 2009 Results

2009-11-12 03:44 486

SHISHI, China, Nov. 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 third quarter 2009.

-- Q3 revenues increased by 16.5% to $13.4 million YOY; seafood-based

snack foods represent for 90.3% of revenues. Gross margins increased

110 basis points to 32.0%.

-- Q3 Net income increased by 24.5% to $3.2 million compared to Q308; EPS

was $0.14 vs. $0.11 in Q308.

-- For the 9-months ended September 30, 2009 revenues increased 26.5% to

$44.7 million and net income increased 18.4% YOY to $10.2 million. EPS

was $0.44 vs. $0.37.

-- Sales to new distribution territories increased 214.7% during the first

nine months of 2009 vs. the same period in 2008.

-- Company completes second phase of capacity expansion to 20,000 tons per

annum, a 100% increase in capacity leading into the 2010 fiscal year.

2009 Third Quarter Financial Results

China Marine's revenues increased 16.5% to $13.4 million year-over-year. The increase in revenues was due to the combination of revenue growth from processed seafood snack segment and China Marine's frozen seafood catch trade which grew 11.0% and 115.7% respectively for three-month period ended September 30, 2009. China Marine's Mingxiang(R)-branded dried seafood snack food products accounted for approximately 90.3% of China Marine's revenues for the quarter while its marine catch segment accounted for approximately 9.7%. Based on demand and favourable market pricing, China Marine will at times execute a sale of frozen marine catch to select distributors in its marine catch network. China Marine's retail snack food segment remains the focus of the Company's product development and sales efforts and its primary contributor of gross profits.

Developments in the Company's distribution network included strong year-over-year sales increases in Jiangsu, Shanghai, Guangdong and Shenzhen and its newest sales territory, Sichuan and Chongqing area, were the Company shipped new orders totaling $0.5 million in the third quarter of the year.

Cost of goods sold was $9.1 million yielding gross profits of $4.3 million in the third quarter 2009 which represented an increase of 20.7% versus the same period in 2008. For the third quarter 2009, gross profit margins were 32.0%, versus 30.9% in 2008. Processed, dried and packaged seafood-based snack foods gross margins of 33.5% contributed significantly to the quarter and marine catch margins were 18.2% for the Company's marine catch sales executed during the three-month period ended September 30, 2009. Seafood snack foods contributed 94.5% 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 third quarter of 2009 were $0.7 million, or 5.2% of revenues in the quarter. Operating income was $3.6 million for the third quarter of 2009, an increase of 27.2% compared to the year ago period with operating margins of 26.9% for the three-month period ended September 30, 2009. Income taxes for the quarter were $0.5 million based on the Company's effective tax rate of 12.5%. China Marine maintains a favourable tax rate of 12.5% as a foreign investment enterprise through the end of 2009 and has already secured a reduced tax rate of 15% for 2010 through 2012 as New and High Technology Enterprise in China.

Net income for the third quarter of 2009 was $3.2 million, representing an increase of 24.5% compared to $2.6 million reported in the same period prior year. Net profit margins for the three-month period under review were 24.1% in 2009 and 22.6% in 2008, a 150 basis points improvement in margins in 2009. Earnings per share were $0.14 for the third quarter of 2009, compared to $0.11 for the third quarter of 2008, a 27.3% increase year over year.

"Growth during the third quarter benefitted from an expanded distribution network and solid profit margins in both our business segments yielded measurable improvements in our profitability," began Pengfei Liu, CEO of China Marine. "We were pleased to report increased sales in new regions like the Sichuan area and accelerating growth in the Guangzhou and Shanghai territories, where we see enormous potential. As we bring the second phase of capacity expansion online, we anticipate a strong finish to the year and meeting our revenue and net income guidance of more than $60 million in revenues and $14.3 million in net income for our 2009 fiscal year." Liu concluded.

2009 Nine-Month Financial Results

Revenues for the first nine months ended September 30, 2009 increased by approximately $9.4 million, or 26.5%, to $44.7 million compared to the same period a year ago. Sales of the Company's seafood-based snack foods increased by $4.4 million, or 13.1%, whereas sales in the marine catch segment increased by $5.0 million, or over 200%, due to trading sales booked during the first quarter of this year plus follow on sales of frozen marine catch to select distributors. 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.

As committed to investors in the second quarter of 2009, China Marine completed its 100% increase in capacity to 20,000 tons in the closing weeks of the third quarter. The Company began 2009 with 10,000 tons of available capacity and for the third quarter 2009 reported approximately a 70% utilization rate. The new capacity has doubled the Company's seafood-based snack food lines. The Company reported that the project was completed on time and under the budget allocated for the expansion.

Gross profit increased 16.4% to $13.3 million while gross margins were 29.8%, a decrease from 32.3% recorded during the first nine months of 2008 due to the marine catch revenue recorded in the first quarter of 2009. China Marine's gross profits are a blend of two product lines; seafood-based snack foods and marine catch. Average gross profit margins for seafood-based snack foods are 30% to 34% and for frozen marine catch 8% to 16%; marine catch sales are based entirely on a volume pricing program. The Company recorded approximately $10.2 million in net income for the nine months period versus $8.6 million for the same period in 2008, an 18.4% increase year-over-year. For the nine months of 2009 and 2008, earnings per share were $0.44 and $0.37, respectively, based on 23.0 million shares.

Balance Sheet and Cash Flow Discussion

Cash and cash equivalents as of September 30, 2009 amounted to approximately $31.3 million. The Company's debt as of September 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 provided by operating activities for the nine months ended September 30, 2009 amounted to approximately $1.1 million, whereas net cash provided by operating activities for the same period in 2008 amounted to approximately $1.4 million. The reduction of net cash this year was mainly attributable to an increase in inventories and accounts receivable of $7.4 million and $2.4 million, respectively. $8.3 of the inventory balance 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 distribution of goods in their respective network. 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 first three quarters of 2009, China Marine's DSO's were 37 days.

Working capital on September 30, 2009 was $46.0 million; an increase of $9.2 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 7.8 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: November 12, 2009

Time: 10:00am ET

Conference Line Dial-In (U.S.): 1-877-941-8601

International Dial-In: 1-480-629-9810

Conference ID: 4182014

Webcast link:

Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through November 19, 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 4182014 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link or at ViaVid's website at , where the webcast can be accessed through November 12, 2010.

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.




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


September December

30, 2009 31, 2008

(Unaudited) (Audited)


Current assets:

Cash and cash equivalents $31,298,084 $31,640,307

Accounts receivable, net 7,211,701 4,819,434

Inventories 14,082,458 6,679,488

Prepaid expenses and other current

assets 219,579 326,977

Total current assets 52,811,822 43,466,206

Property, plant and equipment, net 8,678,539 5,944,515

Land use rights, net 619,409 630,150

Construction in progress -- 1,604,855

TOTAL ASSETS $62,109,770 $51,645,726


Current liabilities:

Short-term borrowings $4,138,879 $4,289,341

Accounts payable, trade 904,874 416,463

Amount due to a stockholder 95,540 170,091

Income tax payable 446,153 362,326

Accrued liabilities and other payable 1,185,842 1,387,427

Total current liabilities 6,771,288 6,625,648

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value;

1,000,000 shares authorized; 0 share

issued and outstanding as of

September 30, 2009 and December 31,

2008 -- --

Common stock, $0.001 par value;

100,000,000 shares authorized;

23,045,791 shares and 23,026,301

shares issued and outstanding as of

September 30, 2009 and December 31,

2008, respectively 23,045 23,026

Additional paid-in capital 16,752,926 16,752,945

Statutory reserve 4,883,700 4,883,700

Accumulated other comprehensive

income 3,564,866 3,448,436

Retained earnings 30,113,945 19,911,971

Total stockholders' equity 55,338,482 45,020,078


EQUITY $62,109,770 $51,645,726





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



Three months ended Nine months ended

September 30, September 30,

2009 2008 2009 2008

Revenue, net $13,392,423 $11,496,462 $44,696,859 $35,346,113

Cost of revenue

(inclusive of

depreciation and

amortization) (9,105,924) (7,944,212) (31,398,803) (23,924,208)

Gross profit 4,286,499 3,552,250 13,298,056 11,421,905

Operating expenses:

Depreciation and

amortization (20,248) (19,218) (59,300) (38,984)

Sales and marketing (147,254) (198,051) (404,810) (451,330)

General and

administrative (522,630) (507,479) (1,504,226) (1,302,341)

Total operating

expenses (690,132) (724,748) (1,968,336) (1,792,655)

Income from operations 3,596,367 2,827,502 11,329,720 9,629,250

Other income


Subsidy income 93,548 4,242 236,756 67,868

Rental income 20,391 18,772 61,162 55,166

Interest income 29,618 218,105 190,680 390,431

Interest expense (56,136) (81,871) (174,864) (241,475)

Income before income

taxes 3,683,788 2,986,750 11,643,454 9,901,240

Income tax expense (453,998) (393,240) (1,441,480) (1,283,497)

NET INCOME $3,229,790 $2,593,510 $10,201,974 $8,617,743

Other comprehensive


- Foreign currency

translation gain 56,366 83,784 116,430 2,194,885

COMPREHENSIVE INCOME $3,286,156 $2,677,294 $10,318,304 $10,812,628

Net income per share:-

Basic $0.14 $0.11 $0.44 $0.37

- Diluted $0.14 $0.11 $0.44 $0.37

Weighted average

shares outstanding:-

Basic 23,045,791 23,026,301 23,045,791 23,026,301

- Diluted 23,045,791 23,026,301 23,045,791 23,120,014




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


Nine months ended September 30,

2009 2008

Cash flows from operating activities:

Net income $10,201,974 $8,617,743

Adjustments to reconcile net income

to net cash provided by operating


Depreciation and amortization 242,510 167,550

Loss on disposal of property, plant

and equipment -- 64,462

Allowance for doubtful accounts 12,021 2,342

Changes in operating assets and


Accounts receivable (2,404,288) 283,097

Inventories (7,402,970) (7,758,595)

Prepaid expenses and other current

assets 107,398 (183,953)

Accounts payable, trade 488,411 362,965

Income tax payable 83,827 66,887

Accrued liabilities and other payable (201,585) (189,830)

Net cash provided by operating

activities 1,127,298 1,432,668

Cash flows from investing activities:

Purchase of property, plant and

equipment (347,057) (465,054)

Addition of construction in progress (995,235) (2,394,953)

Net cash used in investing activities (1,342,292) (2,860,007)

Cash flows from financing activities:

Repayment to a stockholder (74,551) (217,417)

Proceeds from issuance of common

stock -- 173,556

Proceeds from short-term borrowings 4,138,879 8,844,844

Payment on short-term borrowings (4,289,341) (5,388,690)

Net cash (used in) provided by

financing activities (225,013) 3,412,293

Effect of exchange rate changes on

cash and cash equivalents 97,784 1,977,013


EQUIVALENTS (342,223) 3,961,967


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


PERIOD $31,298,084 $28,438,614



Cash paid for income taxes $1,357,653 $1,216,610

Cash paid for interest $174,864 $241,475



Transfer from construction in

progress to property, plant and

equipment $2,600,090 $62,323

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