SHISHI, China, March 23 /PRNewswire-Asia/ -- China Marine Food Group Ltd. (OTC Bulletin Board: CMFO), a China-based processor of seafood-based snack foods and fresh and frozen marine catch seafood, today announced the Company’s financial results for the fourth quarter and full year 2008.
-- Q4 revenues increased 28.8% to $13.5 million compared to Q407
-- Q4 Net Income was $2.5 million with EPS of $0.11; 2008 revenues
increased 34.0% to $48.8 million; net income increased 28.4% to $11.1
million with EPS of $0.48
-- Successfully expanded production to 10,000 tons annually by the end of
2008, with further expansion planned for 2009
-- 2009 guidance; Company expects revenues in excess of $60.0 million and
net income in excess of $14.3 million
2008 Fourth Quarter Financial Results
Net revenues for the fourth quarter ended December 31, 2008 reached $13.5 million, an approximate $3.0 million or 28.8% increase over the same period of the prior year. Revenue increases were driven by the Company’s seafood-based snack food product lines which now account for about 91% of the Company’s revenues. Processed, dried, flavored and packaged seafood snack foods remain the focus of China Marine’s operations, marketing and distribution strategy.
Cost of goods sold were $9.7 million yielding gross profits of $3.8 million in the fourth quarter 2008, which represented an increase of $0.6 million, or 17.2% versus the fourth quarter 2007. For the fourth quarter 2008, gross profit margins were 28.0% in 2008 vs. 30.8% for the same period in 2007. The decrease in gross margin was attributed to the increased sales of marine catch in the fourth quarter 2008, which generated lower gross margins when comparing to that of processed seafood products. Profit margins for trading of marine catch approximately 10% compared to more than 30% for processed foods. The increase in marine catch sales produced a slightly lower than average blended margin for the quarter.
Total operating expenses for the fourth quarter of 2008 were $0.9 million versus $0.4 million for the same period in 2007. Operating expenses as a percentage of revenues were 7.0% compared with 4.3% for the same period, 2007.
Net income for the fourth quarter was $2.5 million, representing an increase of 3.1% vs. $2.4 million reported in the same period prior year. Corresponding net profit margins were 18.6% for the quarter. The mild increase in net profits was attributed to strong operating results but offset by increased operating expenses associated with being a public company. Based on 23 million shares outstanding, earnings were $0.11 per diluted share for the quarter.
"We are very pleased with our financial results and growth during the fourth quarter which pushed production capacity near full utilization. This certainly paves the way for our new production facilities which will accommodate incremental growth in 2009,” stated Pengfei Liu, CEO and Chairman of China Marine.
Full Year 2008 Results
Revenue increased approximately 34.0% to $48.8 million in 2008 as compared to $36.4 million for 2007. Gross profits for the year were $15.2 million compared to $10.8 million in 2007, an increase of 41.0%. Gross margins were 31.1% compared to 29.6% in 2007. Operating income for the year totaled $12.5 million, an increase of 24.7% compared to $10.0 million in 2007. Operating margins were 25.5% compared to 27.4% in 2007. The decrease in operating margins was mainly attributed to the costs of being a US-listed public company.
In July 2008, the Company signed agreements with two new master distributors based in Shanghai and Guangdong. Combined, the new distributors and their respective customer bases contributed $3.5 million or 7.2% of the Company’s overall revenues in 2008. The Company expects this growth trend to continue as new sales opportunities are developed in these highly-populated areas. On March 3 of 2009, the Company subsequently announced a sales contract with a leading convenient store chain in Shanghai which over time can add over 1,000 new points of sale to the Company’s existing retail network of 1,400 locations. Similar sales opportunities are developing in Guangdong and other provinces where the Company actively markets and sells its goods. Convenient store chains are one of China Marine’s target customers.
The top selling province in 2008 was Zhejiang which contributed 45.8% of the Company’s revenues. Zhejiang is one of China’s richest and most populous provinces with a population of over 50 million habitants.
Net income was $11.1 million for the year ended December 31, 2008, an increase of $2.5 million, or approximately 28.4% compared to last year. Earnings per diluted share were $0.48 based on 23 million shares outstanding.
During 2008, the Company added more than 3,000 tons of additional capacity to its production lines, which came online at the end of the fourth quarter. The additional capacity boosted total annual output by 50% to 10,000 tons per year. The Company has also announced plans to double annual capacity up to 20,000 tons by Q3 of 2009. Utilizing its current land use rights at its corporate headquarters in Shi Shi, Fujian Province, the Company expects to complete the “Phase 2” expansion within $5.0 million in capital expenditures, a significant decrease to previously budgeted CAPEX expenses. Space and machinery for both phases of capacity expansion are allocated entirely to the production of China Marine’s line of “Mingxiang”-branded, seafood-based snack foods
Balance Sheet and Cash Flow Discussion
Cash and cash equivalents on December 31, 2008 were $31.6 million. Accounts receivable stood at $4.8 million, with corresponding 34 days sales outstanding. Inventories were $6.7 million on December 31, 2008, of which $4.3 million was related to trading raw materials that are expected to be sold entirely by the end of first quarter 2009. The Company reported $4.3 million in short term borrowings: China Marine has no long term debt and uses short term financing to support working capital each fiscal year and to maintain favorable lending and deposit rates with the banks. For 2008, the Company generated $6.0 million in cash flow from operations, a decrease of 10.4% from 2007, mainly related to the purchase of marine catch for trade. Stockholder’s equity increased 42.8% to $45.0 million vs. $31.5 million in 2007.
2009 Guidance
For the full year ending December 31, 2009, the Company estimates revenues in excess of $60.0 million and net income in excess of $14.3 million, representing approximately 23% and 29% growth over 2008. Based on 23 million shares outstanding, EPS guidance for 2009 would be $0.62. This is the Company’s current and preliminary view, which is subject to change.
Conference Call
The Company will host a conference call on March 25, 2009, at 10:00 a.m. ET. 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: March 25, 2009
Time: 10:00am ET
Conference Line Dial-In (U.S.): +1-800-762-8795
International Dial-In: +1-480-248-5085
Conference ID: 4037396
Webcast link: http://viavid.net/dce.aspx?sid=00006049
Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through April 6, 2009. To listen, please call 800-406-7325 within the United States or +1-303-590-3030 when calling internationally. Utilize the pass code 3939777 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 six provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its "Mingxiang" brand as a category leader in 1,400 retail sales points in the PRC. The Company has received "The Famous Brand" and "Green Food" awards. China Marine is located in the Fujian Province, 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
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
(Currency expressed in United States Dollars ("US$"))
As of December 31,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $ 31,640,307 $ 24,476,647
Accounts receivable, net 4,819,434 4,183,437
Inventories 6,679,488 1,187,335
Prepaid expenses and other current assets 326,977 165,528
Total current assets 43,466,206 30,012,947
Property, plant and equipment, net 5,944,515 3,510,837
Land use rights, net 630,150 605,823
Construction in progress 1,604,855 --
TOTAL ASSETS $ 51,645,726 $ 34,129,607
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings $ 4,289,341 $ 772,481
Accounts payable, trade 416,463 436,620
Amount due to a stockholder 170,091 262,388
Income tax payable 362,326 341,094
Accrued liabilities and other payable 1,387,427 788,852
Total current liabilities 6,625,648 2,601,435
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized; 0
shares issued and outstanding as of
December 31, 2008 and 2007
Common stock, $0.001 par value;
100,000,000 shares authorized;
23,026,301 and 22,972,301 shares
issued and outstanding as of
December 31, 2008 and 2007 23,026 22,972
Additional paid-in capital 16,752,945 16,579,443
Statutory reserve 4,883,700 3,110,266
Accumulated other comprehensive income 3,448,436 1,252,896
Retained earnings 19,911,971 10,562,595
Total stockholders’ equity 45,020,078 31,528,172
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 51,645,726 $ 34,129,607
CHINA MARINE FOOD GROUP LIMITED
CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency expressed in United States Dollars ("US$"),
except for number of shares)
Years ended December 31,
2008 2007
Revenue, net $ 48,798,804 $ 36,425,327
Cost of revenue (inclusive of
depreciation and amortization) (33,606,972) (25,649,518)
Gross profit 15,191,832 10,775,809
Operating expenses:
Depreciation and amortization (58,310) (37,013)
Sales and marketing (608,259) (148,840)
General and administrative (2,067,802) (597,767)
Total operating expenses (2,734,371) (783,620)
Income from operations 12,457,461 9,992,189
Other income (expenses):
Other income -- 13,533
Subsidy income 68,225 62,142
Rental income 73,941 68,066
Interest income 505,173 79,183
Interest expense (319,229) (332,816)
Income before income taxes 12,785,571 9,882,297
Income tax expense (1,662,761) (1,220,942)
NET INCOME $ 11,122,810 $ 8,661,355
Other comprehensive income:
- Foreign currency translation gain 2,195,540 1,188,929
COMPREHENSIVE INCOME $ 13,318,350 $ 9,850,284
Net income per share - basic $ 0.48 $ 0.38
Net income per share - diluted $ 0.48 $ 0.34
Weighted average shares outstanding - basic 23,010,842 22,972,301
Weighted average shares outstanding - diluted 23,010,842 25,142,105
CHINA MARINE FOOD GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency expressed in United States Dollars ("US$"))
Years ended December 31,
2008 2007
Cash flows from operating activities:
Net income $ 11,122,810 $ 8,661,355
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 237,400 224,293
Loss on disposal of property, plant and
equipment 156,681 --
Stock issued to an executive 77,136 --
Stock issued for service 96,420 --
Allowance for doubtful accounts 3,196 14,581
Changes in operating assets and liabilities:
Accounts receivable (639,193) (2,908,349)
Inventories (5,492,153) (51,249)
Prepaid expenses and other current assets (161,449) (130,644)
Accounts payable, trade (20,157) 208,527
Income tax payable 21,232 341,094
Accrued liabilities and other payable 598,575 340,975
Net cash provided by operating activities 6,000,498 6,700,583
Cash flows from investing activities:
Purchase of property, plant and equipment (634,069) (21,079)
Proceeds from disposal of property, plant and
equipment 13,906 --
Cash paid to construction in progress (3,558,441) --
Net cash used in investing activities (4,178,604) (21,079)
Cash flows from financing activities:
Repayment of amount due to a stockholder (92,297) (383,706)
Proceeds from short-term borrowings 8,844,844 772,481
Payment on short-term borrowings (5,388,690) (3,792,640)
Proceeds from private placement, net of
offering expenses -- 15,925,000
Payment on dividends -- (4,562,044)
Net cash provided by financing activities 3,363,857 7,959,091
Effect of exchange rate changes in
cash and cash equivalents 1,977,909 655,813
NET CHANGE IN CASH AND CASH EQUIVALENTS 7,163,660 15,294,408
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 24,476,647 9,182,239
CASH AND CASH EQUIVALENTS, END OF YEAR $ 31,640,307 $ 24,476,647
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes $ 1,641,529 $ 879,848
Cash paid for interest expenses $ 319,229 $ 332,816
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING TRANSACTIONS
Warrant shares granted for offering costs $ -- $ 1,941,014
