omniture

China Marine Food Group Limited Announces Second Quarter 2008 Financial Results

2008-08-13 21:19 554


SHISHI, China, Aug. 13 /Xinhua-PRNewswire-FirstCall/ -- China Marine Food Group Ltd. (OTC Bulletin Board: CMFO), a China-based processor and distributor of fresh and processed seafood products, today announced the Company's financial results for the second quarter ended June 30, 2008.

-- Second quarter revenues increased 51.3% vs. Q207

-- Gross margins recorded a 500-basis point improvement to 32.7% compared

to Q207

-- Net income increased 67.8% to $3.2 million for the quarter compared to

Q207

-- For the first six months revenues increased 35.9% to $23.8 million and

net income increased 39.2% to $6.0 with earnings of $0.24 per diluted

share

2008 Second Quarter Financial Results

Net revenues for the second quarter ended June 30, 2008 reached $13.1 million, an approximate $4.4 million or 51.3% increase over the same period of the prior year. Revenue increases were generated from the Company's processed seafood product line which doubled to $12.4 million versus the same period in 2007. Processed seafood now accounts for 95% of the Company's revenues and remains the focus of its operations and growth strategy on a go-forward basis.

The increase in revenue was due to the organic growth in sales of the Company's existing product portfolio, the addition of two new master distributors in Shanghai and Guangdong provinces and the launch of three new snack food products; BBQ Squid, Sliced Squid and Roasted Octopus throughout its distribution network.

Cost of goods sold was $8.8 million yielding gross profits of $4.3 million in the second quarter 2008. These profits represented an increase of $1.9 million, or 78.5% versus the second quarter 2007. For the second quarter, gross profit margin improved by 500-basis points to 32.7% from 27.7% for the three months ended June 30, 2007. The increase in gross margin was attributed to the higher-margin revenues the Company generates from its processed seafood segments, which include dried, flavored and packaged seafood snacks predominantly for domestic sales. "Despite some small increases in our cost of goods sold due to packaging materials, we have been unaffected for the most part by price increases due to inflation," opened Marco Ku, CFO. "We are learning that our processed foods and our strong brand allow us to pass along small price increases in our products onto our distributors and then customers. The tight cash cycle we manage also allows us to quickly make pricing adjustments when costs increase. We do not believe that a meaningful increase in costs associated with the raw materials for our processed foods is likely in the foreseeable future."

Total operating expenses for the second quarter of 2008 were $0.69 million versus $0.15 million for the same period in 2007. Operating expenses as a percentage of revenues were 5.3% compared with 1.7% for the same period, 2007. This increase was mainly due to increases in selling, marketing, distribution, and administrative expenses and directly associated with the Company's increase of revenues and the additional costs incurred after going public in November 2007. The Company has also added six new sales managers to their sales team this year. Operating income and operating margin for the quarter were $3.6 million and 27.4%, versus $2.2 million and 26.0% in 2007. The

140-basis point improvement of operating margin is mainly due to the increase in sales and improved gross profit margins year over year.

Net income was $3.2 million, representing an increase of 67.8% from $1.9 million reported in the same period prior year. Corresponding net profit margins were 24.7% for the quarter, which also represented a 240-basis point increase versus the same quarter, 2007. The Company incurred $0.5 million in taxes during the second quarter at an effective tax rate of 12.5%. For the full year 2008 and 2009, the Company enjoys a tax benefit equating to 50% of the standard corporate income tax rate of 25.0%. Based on 25.2 million shares outstanding, earnings were $0.13 per diluted share for the quarter.

"Our company's processed seafood segments are the driving force behind our top and bottom line growth," opened Pengfei Liu, Chairman and CEO of China Marine. "With a focused approach on the Chinese consumer and the fast-growing retail snack food market, our quarterly results not only substantiate our business model, but also the spending habits of the Chinese retail food consumer."

Six Month Results

Revenue increased approximately 35.9% to $23.8 million for the six months ended June 30, 2008 as compared to $17.5 million for the same period last year. Operating expenses for the six months ended June 30, 2008 were $1.1 million compared to $0.2 million for the same period in 2007. Operating expenses as a percentage of revenues is 4.5% for the six months ended June 30, 2008. Operating income for the six months ended June 30, 2008 was $6.8 million, an increase of 35.9% compared to $5.0 million for the six months ended June 30, 2007.

Net income is $6.0 million for the six months ended June 30, 2008, an increase of $1.7 million, or approximately 39.2% compared to same period last year. Earnings per diluted share equaled to $0.24 based on 25.2 million shares.

Balance Sheet and Cash Flow Discussion

Cash and cash equivalents by the end of second quarter reached $33.2 million. The Company had a current ratio of 6.1 and $5.3 million in accounts receivable on June 30, 2008. 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. For the first six months of 2008, the Company generated $4.9 million in cash from operations, an increase of $3.7 million versus same period prior year. Stockholders' equity was $39.8 million on June 30, 2008, representing an increase of 11.8% versus last period, March 31, 2008, reported the first quarter.

"We are very pleased with our results year-to-date and anticipate continued growth for the full year, which will be supported by new production capacity which comes on line in the fourth quarter this year," Chairman Liu stated. "Our performances demonstrated top and bottom line growth which we attribute to a combination of the growth of the retail food sector in China, the demand for our products and the cost efficiency of our production and staff," Mr. Liu concluded.

According to China's National Board of Statistics, retail sales increased 21.4% to date versus 2007. Retail foods in particular, increased 21.3%. For the first six months of the year, China Marine was operating at 90-plus percent capacity. Considering its ongoing expansion of its processing line, the Company is forecasting for a 50% increase in overall capacity to about 10,000 tons by the end of this year.

Conference Call

The Company will host a conference call on August 14, 2008, at 10:00 a.m. 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.

Conference Line Dial-In (U.S.): 1 800-762-8795

International Dial-In: +1 480-629-9031

Conference ID: 3911217

Webcast link: http://viavid.net/dce.aspx?sid=000054D6

The conference call will take place at 10:00 a.m. ET on Thursday, August 14, 2008. Interested participants should call 800-762-8795 when calling within the United States or +1 480-629-9031 when calling internationally. Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through August 21, 2008. To listen, please call 800-406-7325 within the United States or +1 303-590-3030 when calling internationally. Utilize the pass code 3911217 for the replay.

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 1,300 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.

CHINA MARINE FOOD GROUP LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007

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

(Unaudited)

Three months ended June 30, Six months ended June 30,

2008 2007 2008 2007

REVENUE, NET $13,067,599 $8,634,984 $23,849,651 $17,545,971

COST OF REVENUE 8,800,852 6,245,372 15,979,996 12,322,998

GROSS PROFIT 4,266,747 2,389,612 7,869,655 5,222,973

OPERATING

EXPENSES:

Depreciation and

amortization 10,346 11,250 19,766 22,396

Selling and

distribution 164,695 44,627 253,279 65,563

General and

administrative 517,695 92,402 794,862 129,937

Total operating

expenses 692,736 148,279 1,067,907 217,896

INCOME FROM

OPERATIONS 3,574,011 2,241,333 6,801,748 5,005,077

OTHER INCOME

(EXPENSE):

Subsidy income 63,626 13,210 63,626 26,069

Rental income 18,458 17,002 36,394 33,551

Interest income 133,066 14,067 172,326 30,568

Interest expense (78,163) (81,438) (159,604) (157,225)

Total other

income (expense) 136,987 (37,159) 112,742 (67,037)

INCOME BEFORE

INCOME TAXES 3,710,998 2,204,174 6,914,490 4,938,040

Income tax

expense (477,776) (277,508) (890,257) (609,224)

NET INCOME $3,233,222 $1,926,666 $6,024,233 $4,328,816

Net income per

share - basic $0.14 $0.12 $0.26 $0.28

Net income per

share - diluted $0.13 $0.12 $0.24 $0.28

Weighted average

shares

outstanding -

basic 23,026,301 15,624,034 23,026,301 15,624,034

Weighted average

shares

outstanding -

diluted 25,196,105 15,624,034 25,196,105 15,624,034

CHINA MARINE FOOD GROUP LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2008 AND DECEMBER 31, 2007

(Currency expressed in United States Dollars (“US$”),

except for number of shares)

(Unaudited)

June 30, December 31,

2008 2007

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents $33,220,913 $24,476,647

Accounts receivable, net 5,325,854 4,183,437

Inventories 1,651,244 1,187,335

Prepaid expenses and other

receivables 394,006 165,528

Total current assets 40,592,017 30,012,947

Property, plant and equipment, net 3,960,153 3,510,837

Intangible assets, net 636,677 605,823

Construction in progress 1,341,372 --

Total assets $46,530,219 $34,129,607

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Short-term borrowings $4,278,355 $772,481

Accounts payable, trade 736,492 436,620

Amount due to a shareholder 306,896 262,388

Salaries payable 299,017 345,319

Income tax payable 485,548 341,094

Other payables and accrued

liabilities 586,849 443,533

Total current liabilities 6,693,157 2,601,435

Stockholders’ equity:

Common stock, $0.001 par value,

100,000,000 shares authorized;

23,026,301 and 22,972,301

shares issued and outstanding,

respectively 23,026 22,972

Additional paid-in capital 16,752,945 16,579,443

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

Accumulated other comprehensive

income 3,363,997 1,252,896

Retained earnings 16,586,828 10,562,595

Total stockholders’ equity 39,837,062 31,528,172

Total liabilities and stockholders’

equity $46,530,219 $34,129,607

CHINA MARINE FOOD GROUP LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2008 and 2007

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

(Unaudited)

Six months ended June 30,

2008 2007

Cash flows from operating activities:

Net income 6,024,233 4,328,816

Adjustments to reconcile net income to

net cash provided by / (used in)

operating activities:

Depreciation 96,602 141,080

Amortization 7,911 7,344

Loss on disposal of property, plant and

equipment 64,462 --

Allowance for doubtful accounts 2,342 24,624

Change in operating assets and

liabilities (1,295,806) (3,281,802)

Net cash provided by operating

activities 4,899,744 1,220,062

Cash flows from investing activities:

Purchase of property, plant and

equipment (382,321) (19,756)

Addition of construction in progress (1,341,372) --

Net cash used in investing activities (1,723,693) (19,756)

Cash flows from financing activities:

Proceeds from a shareholder 44,508 31,085

Proceeds from issuance of common stock 173,556 --

Drawdown from short-term borrowings 8,844,844 3,905,076

Repayment of short-term borrowings (5,388,690) (3,792,640)

Dividend paid -- (4,562,044)

Net cash provided by / (used in)

financing activities 3,674,218 (4,418,523)

Foreign currency translation adjustment 1,893,997 150,373

NET CHANGE IN CASH AND CASH

EQUIVALENTS 8,744,266 (3,067,844)

CASH AND CASH EQUIVALENTS, BEGINNING OF

PERIOD 24,476,647 9,182,239

CASH AND CASH EQUIVALENTS, END OF

PERIOD $33,220,913 $6,114,395

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION

Cash paid for income taxes $745,803 $333,116

Cash paid for interest expense $159,604 $157,225

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

Email: marco.ku@china-marine.cn

Web: http://www.china-marine.cn

Investor Relations Contacts

John Mattio & Feng Peng

HC International, Inc.

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

Email: john.mattio@hcinternational.net & feng.peng@hcinternational.net

Web: http://www.hcinternational.net

Source: China Marine Food Group Limited
Related Stocks:
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Keywords: Food/Beverages
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