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
