China Marine Food Group Limited Announces First Quarter 2008 Financial Results

2008-05-16 20:36 762

-- First Quarter Net Revenues Increased 21%

-- Processed Seafood Accounted for 92% of Net Revenues and 97% of Gross


-- Gross Margins Recorded a 160 Basis Point Improvement at 33.4%

-- Net Cash from Operations Improved 161% Over Same Period in 2007

SHISHI, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- China Marine Food Group Ltd. (OTC Bulletin Board: CMFO), a China-based processor and distributor of fresh and processed seafood products, announced the Company's first quarter financial results for the period ended March 31, 2008.

2008 First Quarter Financial Results

Revenues for the first quarter ended March 31, 2008 increased 21% to $10.8 million from $8.9 million recorded during the first quarter of 2007. Revenue improvements emanated almost entirely from the Company's marketing of its processed seafood segment which attributed 92% of the Company's sales for this quarter and 97% of its gross profit respectively. In the first quarter of 2008, the Company also booked sales to direct export markets, Japan and the Philippines, totaling $262,000.

Cost of revenues was $7.2 million yielding a gross profit of $3.6 million for the first quarter of 2008. Gross profits were up 27.2% versus the first quarter 2007. The increase is attributed to greater top line sales revenues and a 160 basis point improvement in gross margins quarter over quarter, 33.4% compared to 31.8% respectively.

Total operating expenses for the first quarter of 2008 was $375,000 versus $70,000 for the same period in 2007. The increase is credited to staff additions and costs of being public. Operating expenses as a percentage of revenues is 3.5%. Operating margin for the quarter were 29.9% versus 31.0% in 2007 respectively. The one point reduction of operating margin is entirely associated to the increase in operating expenses and not an erosion of gross profits.

Net income for the first quarter of 2008 increased to $2.8 million versus $2.4 million for the same period in 2007 which represents 16.2% growth in net earnings. Net profit margins were 25.9% for the quarter. Earnings were $0.11 per diluted share, based on 25.1 million shares outstanding. The Company incurred $0.4 million in taxes during the first quarter at an effective tax rate of 12.5%. For the full year 2008 and 2009, the Company enjoys a tax benefit of equating to 50% of the standard Chinese Enterprise Income Tax (EIT) rate of 25%.

"As revealed by the first quarter financial results, we were pleased to note that our model and plan to focus on higher margin processed seafood production and sales has put the Company on track to meet our revenue forecast of approximately $43.2 million and surpass our make good net income target of $10.5 million," opened Pengfei Liu, Chairman and CEO of China Marine. "Our ongoing shift in product focus from marine catch to processed and frozen seafood now represents more than 90% of our revenues and income, a big step from 77% in 2007, and in absolute terms represented a $3 million revenue increase in the segment. We believe this is a tribute to strong consumer spending and brand recognition. We continue to drive a wider range of our processed and dried seafood sales through China's fast-growing supermarket and convenient store chains in the five provinces we operate and we are in a test market phase in two new provinces. While the news on the quake is devastating, neither our test markets nor our business will be affected by the quake in Southwest China."

China Marine is in the process of building out a new production facility before the end of the year. The Company is currently running at an estimated 90% of capacity, 2-shifts a day, and 7-days a week. When the new facility comes on line in the fourth quarter of this year, the Company is forecasting a production increase of 50% in output for the quarter and throughout 2009.

Balance Sheet and Cash Flow discussion The Company had a current ratio of 5.8 to 1 and $4.6 million in accounts receivable on March 31, 2008. The Company reported $4.2 million in short term notes payable: China Marine has no long term debt and uses short term financing to support working capital each fiscal year. For the first three months of 2008, the Company generated $2.0 million in cash for operations and ended the period with $31.1 million in cash and cash equivalents. Cash generated from the first 3-months of operations in 2008 was $2.0 million, triple the amount generated during the same 3-month period in 2007.

About China Marine

China Marine Food Group Ltd. processes and distributes processed seafood products, and fresh and frozen marine catch to five provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its "Mingxiang" brand as a category leader in 1,200 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 the 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.



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

except for number of shares)

March 31, 2008 December 31, 2007

(Unaudited) (Audited)


Current assets:

Cash and cash equivalents $ 31,103,827 $ 24,476,647

Accounts receivable, net 4,649,289 4,183,437

Inventories 1,319,432 1,187,335

Prepaid expenses 875,500 165,528

Total current assets 37,948,048 30,012,947

Property, plant and equipment, net 3,620,510 3,510,837

Intangible assets, net 627,023 605,823

Total assets $ 42,195,581 $ 34,129,607


Current liabilities:

Short-term borrowings $ 4,185,298 $ 772,481

Accounts payable, trade 877,610 436,620

Amount due to a shareholder 315,260 262,388

Salaries payable 216,117 345,319

Income tax payable 421,498 341,094

Other payables and accrued

liabilities 552,786 443,533

Total current liabilities 6,568,569 2,601,435

Stockholders' equity:

Common stock, $0.001 par value;

100,000,000 shares authorized;

22,972,301 shares issued

and outstanding 22,972 22,972

Additional paid-in capital 16,579,443 16,579,443

Statutory reserve 3,110,266 3,110,266

Accumulated other comprehensive income 2,560,725 1,252,896

Retained earnings 13,353,606 10,562,595

Total stockholders' equity 35,627,012 31,528,172

Total liabilities and stockholders'

equity $ 42,195,581 $ 34,129,607



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


Three months ended March 31,

2008 2007

Revenue, net $ 10,782,052 $ 8,910,987

Cost of revenue 7,179,144 6,077,626

Gross profit 3,602,908 2,833,361

Operating expenses:

Depreciation and amortization 9,420 11,146

Selling and distribution 88,584 20,936

General and administrative 277,167 37,535

Total operating expenses 375,171 69,617

Income from operations 3,227,737 2,763,744

Other income (expenses):

Subsidy income -- 12,859

Rental income 17,936 16,549

Interest income 39,260 16,501

Interest expense (81,441) (75,787)

Total other expenses (24,245) (29,878)

Income before income taxes 3,203,492 2,733,866

Income tax expense (412,481) (331,716)

Net income $ 2,791,011 $ 2,402,150

Net income per share - basic $ 0.12 $ 0.15

Net income per share - diluted $ 0.11 $ 0.15

Weighted average shares

outstanding - basic 22,972,301 15,624,034

Weighted average shares

outstanding - diluted 25,142,105 15,624,034

For more information, please contact:

Company Contact

Marco Hon Wai KU, CFO

Suite 815, 8th Floor

Ocean Centre, Harbour City

Kowloon, HONG KONG

Tel: +852-2111-8768



Investor Relations Contacts

John Mattio & Feng Peng

HC International, Inc.

Tel: +1-914-669-0222 (U.S.)




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