SHISHI, China, Nov. 7 /Xinhua-PRNewswire/ -- China Marine Food Group Ltd. (OTC Bulletin Board: CMFO), a China-based processor and distributor of fresh and processed seafood products and snack foods, today announced the Company's financial results for the third quarter ended September 30, 2008.
-- Third quarter revenues increased 36.3% to $11.5 million compared to
Q307
-- Gross profits improved 52.0% to $3.6 million compared to Q307
-- Net income increased 36.4% to $2.6 million for the quarter compared to
Q307
-- For the first nine months revenues increased 36.1% to $35.3 million and
net income increased 38.3% to $8.6 million with earnings of $0.37 per
diluted share
2008 Third Quarter Financial Results
Net revenues for the third quarter ended September 30, 2008 reached $11.5 million, an approximate $3.1 million or 36.3% increase over the same period of the prior year. Revenue increases were generated from the Company's processed seafood product lines which doubled sales to $10.9 million versus the same period in 2007. Processed seafood accounts for 95% of the Company's revenues and remains the focus of its operations, sales, marketing, and distribution strategy going forward.
Two new master distributors added in the second quarter of the year contributed $1.4 million, or 12% of the Company's overall revenue during the third quarter. The significant increase in revenues from these initiatives compared to prior quarters reflects the successful launch of new distribution partners in the populous areas of Guangdong, Shenzhen and Shanghai. The additional increase in revenue emanated from organic sales growth of the Company's existing product portfolio in the three principal provinces where China Marine actively promotes its products; Zhejiang, Fujian and Shandong.
Cost of goods sold was $7.9 million yielding gross profits of $3.6 million in the third quarter 2008. These profits represented an increase of $1.2 million, or 52.0% versus the third quarter 2007. For the third quarter 2008, gross profit margin improved by 320 basis points to 30.9% from 27.7% for the three months ended September 30, 2007. The increase in gross margin was attributed to the higher-margin revenues generated by the Company's processed seafood segments, which include dried, flavored, and packaged seafood snacks entirely for domestic sales. "There has been very little inflationary pressure on our products," opened Marco Ku, CFO of China Marine. "Small increases in cost detected in previous quarters were easily passed onto retail pricing without much impact on our sales for the quarter. Different than the traditional fresh catch trade which is very sensitive on bunker fuel costs and other related transportation costs, the species of fish we purchase are not subject to the same pricing fluctuations thus we can keep our margins on processed seafood products stable." Ku concluded.
Total operating expenses for the third quarter of 2008 were $724,748 versus $116,175 for the same period in 2007. Operating expenses as a percentage of revenues were 6.3% compared with 1.4% for the same period, 2007. This increase was mainly due to increases in selling, marketing, distribution, and administrative expenses 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 seven new sales managers to its sales team this year totaling 23 sales managers in 2008. Operating income and operating margin for the quarter were $2.8 million and 24.6%, versus $2.2 million and 26.3% in 2007.
Net income was $2.6 million, representing an increase of 36.4% from $1.9 million reported in the same period prior year. Corresponding net profit margins were 22.6% for the quarter. The Company will maintain a tax rate of 12.5% for the balance of the year and 2009. Based on 23 million shares outstanding, earnings were $0.11 per diluted share for the quarter.
"Much has been reported about a downturn in the Chinese economy" stated, Pengfei Liu, Chairman and CEO of China Marine, "While it's impossible for us to accurately predict the fallout of the global economic crisis and there is no doubt the export market has been significantly impacted, our belief is that consumer spending levels in China will be sufficient to enable us to meet our growth plans. This belief is supported by our financial performance which is the result of increased demand in both our core markets and the two new markets we recently entered," Liu commented.
Nine-Month Results
Revenue increased approximately 36.1% to $35.4 million for the nine months ended September 30, 2008 as compared to $26.0 million for the same period last year. Gross profits for the nine months ended September 30, 2008 were $11.4 million compared to $7.6 million for the same period in 2007. Operating expenses as a percentage of revenues is 5.1% for the nine months ended September 30, 2008. Operating income for the nine months ended September 30, 2008 was $9.6 million, an increase of 33.3% compared to $7.2 million for the nine months ended September 30, 2007.
Net income was $8.6 million for the nine months ended September 30, 2008, an increase of $2.4 million, or approximately 38.3% compared to the same period last year. Earnings per diluted share equaled to $0.37 based on 23 million shares.
Balance Sheet and Cash Flow Discussion
Cash and cash equivalents by the end of third quarter reached $28.4 million. The Company had a current ratio of 6.8 and $3.9 million in accounts receivable on September 30, 2008. Inventories were $8.9 million on September 30, 2008 compared to $1.2 million on December 31, 2007. 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 its banks. For the first nine months of 2008, the Company generated $8.6 million in cash from net income, an increase of $2.4 million versus the same period prior year. Stockholders' equity was $42.5 million on September 30, 2008, representing an increase of 6.7% versus last period as of June 30, 2008.
"June and July are restricted fishing months in China and part of a government mandate to avoid 'overfishing' problems experienced by other markets in Asia." CEO Liu opened. "This regulation normally leads to a reduction of raw materials for processing needs and the market in general. This year, our strategy to bolster the cold storage facilities in the second quarter and assume a larger inventory position during this season enabled us to fully service our customer base with products and optimize production capabilities throughout the third quarter. We could also capitalize on future trade of fresh marine catch which we added to our inventory position at very favorable prices in the third quarter."
China Marine's production facility was running close to its maximum capacity in the third quarter. Before the end of this year, the Company will complete the installation of new processing equipment thus increasing its capacity 50% to approximately 10,000 tons per year. "The addition of our new production lines will enable us to meet pent up demand and capitalize on increased customer orders in the fourth quarter and during 2009. We are confident in our fourth quarter results and our team will exceed our net income make good target of $10.5 million for 2008." Mr. Liu concluded.
Company Announcements:
-- China Marine has authorized a $3.0 million dollar buy-back program.
-- China Marine will participate in the Rodman and Renshaw Global
Investment Conference in New York the 10-12th of November of this year.
The Company will present at noon on November 10th 2008 and conduct a
non-deal roadshow in the New York area to meet with current and
prospective investors.
-- The Company has recently appointed three new independent members to its
board of directors thus meeting requirements to transition to a fully-
listed exchange.
-- China Marine will also attend and present at the Roth Vegas Conference
in Las Vegas the 19-21st of November. The Company is scheduled to
present at 2:00 pm PT on the 20th of November.
Conference Call
The Company will host a conference call on November 7th, 2008, 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: November 7th, 2008
Time: 10:00am ET
Conference Line Dial-In (U.S.): 1 800-762-9439
International Dial-In: + 1 480-629-9041
Conference ID: 3939777
Webcast link: http://viavid.net/dce.aspx?sid=000058DB
Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through November 14th, 2008. 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 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 1,400 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 BALANCE SHEETS
AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Unaudited)
September 30, 2008 December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents $ 28,438,614 $ 24,476,647
Accounts receivable, net 3,897,998 4,183,437
Inventories 8,945,930 1,187,335
Prepaid expenses and other
receivables 349,481 165,528
Total current assets 41,632,023 30,012,947
Property, plant and equipment, net 3,993,569 3,510,837
Intangible assets, net 634,148 605,823
Construction in progress 2,394,953 --
Total assets $ 48,654,693 34,129,607
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 4,288,778 $772,481
Accounts payable, trade 799,585 436,620
Amount due to a shareholder 44,971 262,388
Salaries payable 353,827 345,319
Income tax payable 407,981 341,094
Other payables and accrued
liabilities 245,195 443,533
Total current liabilities 6,140,337 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 3,447,781 1,252,896
Retained earnings 19,180,338 10,562,595
Total stockholders' equity 42,514,356 31,528,172
Total liabilities and
stockholders' equity $ 48,654,693 $ 34,129,607
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Currency expressed in United States Dollars ("US$"))
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
REVENUE, NET $11,496,462 $8,432,856 $35,346,113 $25,978,827
COST OF REVENUE (7,944,212) (6,095,555) (23,924,208) (18,418,553)
GROSS PROFIT 3,552,250 2,337,301 11,421,905 7,560,274
OPERATING EXPENSES:
Depreciation and
amortization (19,218) (7,021) (38,984) (29,417)
Selling and
distribution (198,051) (24,887) (451,330) (90,450)
General and
administrative (507,479) (84,267) (1,302,341) (214,204)
Total operating
Expenses (724,748) (116,175) (1,792,655) (334,071)
INCOME FROM
OPERATIONS 2,827,502 2,221,126 9,629,250 7,226,203
OTHER INCOME
(EXPENSE):
Subsidy income 4,242 3,937 67,868 30,006
Rental income 18,772 16,820 55,166 50,371
Interest income 218,105 14,568 390,431 45,136
Interest expense (81,871) (84,566) (241,475) (241,791)
Total other income
(expense) 159,248 (49,241) 271,990 (116,278)
INCOME BEFORE
INCOME TAXES 2,986,750 2,171,885 9,901,240 7,109,925
Income tax expense (393,240) (270,028) (1,283,497) (879,252)
NET INCOME $2,593,510 $1,901,857 $8,617,743 $6,230,673
Net income per
share - basic $0.11 $0.12 $0.37 $0.40
Net income per
share - diluted $0.11 $0.12 $0.37 $0.40
Weighted average
shares outstanding
- basic 23,026,301 15,624,034 23,026,301 15,624,034
Weighted average
shares outstanding
- diluted 23,026,301 15,624,034 23,120,014 15,624,034
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 and 2007
(Currency expressed in United States Dollars ("US$"))
(Unaudited)
Nine months ended September 30,
2008 2007
Cash flows from operating activities:
Net income $8,617,743 $6,230,673
Adjustments to reconcile net income
to net cash
provided by / (used in) operating
activities:
Depreciation 155,558 158,411
Amortization 11,992 10,946
Loss on disposal of property, plant
and equipment 64,462 --
Allowance for doubtful accounts 2,342 17,801
Change in operating assets and
liabilities (7,419,429) (1,526,747)
Net cash provided by operating
activities 1,432,668 4,891,084
Cash flows from investing activities:
Purchase of property, plant and
equipment (465,054) (19,756)
Addition of construction in progress (2,394,953) --
Net cash used in investing activities (2,860,007) (19,756)
Cash flows from financing activities:
Proceeds from a shareholder 44,508 137,372
Repayment of amount due to a
shareholder (261,925) --
Proceeds from issuance of common
stock 173,556 --
Drawdown from short-term borrowings 8,844,844 3,944,078
Repayment of short-term borrowings (5,388,690) (3,792,640)
Dividend paid -- (4,562,044)
Net cash provided by / (used in)
financing activities 3,412,293 (4,273,234)
Foreign currency translation
adjustment 1,977,013 272,248
NET CHANGE IN CASH AND CASH
EQUIVALENTS 3,961,967 870,342
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 24,476,647 9,182,239
CASH AND CASH EQUIVALENTS, END OF
PERIOD $28,438,614 $10,052,581
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes $1,216,610 $604,484
Cash paid for interest expense $241,475 $241,791
