-- 2007 Revenues Increased 32.7% year-over-year to $36.4 Million;
Processed Seafood Products accounted for 76.5% of revenues
-- 2007 Operating Profit Increased 38.8% to $10.0 Million
-- 2007 Net Income Increased 23.1% to $8.7 Million or $0.34 Per Diluted
Share
-- Company Received $19.9 million in Capital to Fund 2008-09 Growth
SHISHI, China, April 1, 2008 /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 full year financial results for the year ended December 31, 2007.
2007 Fourth Quarter Results
Revenues for the fourth quarter ended December 31, 2007 increased 32.8% to $10.4 million from $7.9 million recorded during the fourth quarter of 2006, and emanated almost entirely from sales in the PRC of both frozen and dried processed seafood products.
Gross profit for the fourth quarter of 2007 increased 25.2% to $3.2 million from $2.6 million in the fourth quarter 2006, representing gross margins of 30.8% compared to 32.7% respectively.
Total operating expenses for the fourth quarter of 2007 increased to $0.5 million from $0.2 million in the fourth quarter of 2006. The increase resulted from staff additions and additional costs of being public.
Net income for the fourth quarter of 2007 increased to $2.4 million, or 5.1% from $2.3 million recorded during the fourth quarter of 2006. Earnings were $0.10 per diluted share, based on 25.1 million shares outstanding. Since the Company was private in 2006, the associated earnings per share in the fourth quarter of 2006 would not provide a good basis for comparison. The Company incurred $342,000 in taxes during the fourth quarter, representing an effective tax rate of 12%. For the full year 2006 and each quarter, the Company enjoyed a tax holiday with 0% taxes.
"The fourth quarter showed continued growth in sales of our frozen and dried processed seafood products to both current and new distributors who collectively serviced a broad sales network of customers throughout the Fujian, Zhejiang, and Shandong Provinces. We accurately predicted that margins on fresh marine catch would come under pressure and have been implementing a strategy to focus our resources on expanding sales of our processed seafood products. Anticipated year end expenses recorded in our fourth quarter and income taxes slightly affected our historical net profit margins, however full year numbers demonstrate we were able to deliver solid year over year growth in profitability," stated Pengfei Liu, Chairman and CEO.
Full Year 2007 Results
Revenues for the year ended December 31, 2007 increased 32.7% to $36.4 million from $27.4 million reported in the prior year. The Company’s revenues are derived from sales of fresh and frozen marine catch, and dried and processed seafood through its operating subsidiary, Shishi Rixiang Marine Food Co., Ltd. Increases in revenues were directly attributed to the Company’s sales of processed seafood products which increased 68.4% year-over-year. Marine catch comprised 23.5% of the Company’s overall revenue, or $8.6 million, while processed seafood accounted for 76.5% of total 2007 revenues, or $27.9 million. During 2006 marine catch accounted for 39.7% while processed seafood products accounted for 60.3% of revenues.
Gross profit for the Company grew substantially to $10.8 million, representing a 39.7% increase from the $7.7 million reported during 2006, while overall gross margins increased to 29.6% compared to 28.1% in 2006. Due to competitive forces, gross margins from the Company’s marine catch segment decreased from 23.2% in 2006 to 20.0% in 2007. This impact on profitability was mitigated by growth in sales of the Company’s higher margin processed seafood products. Processed seafood gross profits increased 74.8% over 2006 to $9.1 million with gross margins of 32.5% compared to 31.3% respectively.
Total operating expenses for 2007 increased 52.4% to $0.8 million from $0.5 million during 2006. This increase was directly related to additional sales, marketing and administration staffing levels and increased advertising initiatives for the Company’s 1,000 plus points of sale in China. As a percentage of net revenues, operating expenses were 2.2% in 2007 versus 1.9% in 2006.
Income from operations for 2007 increased 38.8% year-over-year to $10.0 million, while operating margins also improved to 27.4% during 2007, versus 26.2% during 2006.
China Marine recorded after tax net profits of $8.7 million for the 2007 year, a 23.1% increase in net profits with corresponding earnings of $0.34 per share fully diluted based on 25.1 million shares outstanding. The Company incurred $1.2 million in income taxes, representing an effective tax rate of 12% and anticipates a similar tax rate for 2008.
Mr. Liu continued, "We are very pleased with the progress and accomplishments our entire team made during the 2007 calendar year. During the year, the Company introduced new products to the market which has further elevated our brand name with our installed customer base of both distributors and retail stores. By focusing our efforts on growing revenues from our processed seafood segment we were able to increase overall margins and we view this segment as our key conduit for growth during the next several years. We have also consolidated our sales channels to include only high-volume master distributors committed to extending our brand and currently have over 30 representing us. Our recently completed $19.9 million capital raise will provide the necessary funding to expand our processing plant production and cold storage facility which will significantly increase overall production capacity in the near future, while also enabling us to increase both our research and development efforts and sales and marketing initiatives to launch in additional new markets.
Balance Sheet and Financial Position
As of December 31, 2007, the Company reported cash and cash equivalents of $24.5 million versus $9.2 million as at December 31, 2006. Cash balances reflect the net proceeds from the Company’s $19.9 million capital raise which was completed in November 2007, and $6.7 million in cash flow from operations. The Company maintained $0.8 million in short term borrowings and had a current ratio of 11.5 to 1. Accounts receivables on December 31, 2007 were $4.2 million compared to $1.3 million in 2006 with Days Sales Outstanding of 27 and 33 days respectively.
Conference Call
Management from China Marine will begin to host quarterly earnings conference calls beginning with its first quarter results, which are expected to be reported in May, 2008.
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.
TABLES
CHINA MARINE FOOD GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars ("US$"),
except for number of shares)
As of December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $ 24,476,647 $ 9,182,239
Accounts receivable, net 4,183,437 1,289,669
Inventories 1,187,335 1,136,086
Prepaid expenses 165,528 34,884
Total current assets 30,012,947 11,642,878
Property, plant and equipment, net 3,510,837 3,236,455
Intangible assets, net 605,823 550,303
Total assets $ 34,129,607 $ 15,429,636
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings $ 772,481 $ 3,792,640
Accounts payable, trade 436,620 228,093
Amount due to a shareholder 262,388 646,094
Salaries payable 345,319 168,659
Income tax payable 341,094 --
Other payables and accrued liabilities 443,533 279,218
Total current liabilities 2,601,435 5,114,704
Stockholders’ equity:
Common stock, $0.001 par value;
100,000,000 shares authorized;
22,972,301 and 15,624,034 shares issued
and outstanding as of December 31, 2007
and 2006, respectively 22,972 15,624
Additional paid-in capital 16,579,443 661,791
Statutory reserve 3,110,266 1,724,269
Accumulated other comprehensive income 1,252,896 63,967
Retained earnings 10,562,595 7,849,281
Total stockholders’ equity 31,528,172 10,314,932
Total liabilities and stockholders’
equity $ 34,129,607 $ 15,429,636
CHINA MARINE FOOD GROUP LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(Currency expressed in United States Dollars ("US$"))
Years ended December 31,
2007 2006
Revenue, net $ 36,425,327 $ 27,442,022
Cost of revenue 25,649,518 19,730,190
Gross profit 10,775,809 7,711,832
Operating expenses:
Depreciation and amortization 37,013 32,075
Selling and distribution 148,840 94,399
General and administrative 597,767 387,699
Total operating expenses 783,620 514,173
Income from operations 9,992,189 7,197,659
Other income (expenses):
Other income 13,533 18,940
Subsidy income 62,142 15,453
Rental income 68,066 54,861
Interest income 79,183 20,322
Interest expense (332,816) (271,593)
Total other expenses (109,892) (162,017)
Income before income taxes 9,882,297 7,035,642
Income tax expense (1,220,942) --
Net income $ 8,661,355 $ 7,035,642
Net income per share - basic $ 0.377 $ 0.450
Net income per share - diluted $ 0.344 $ 0.450
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
Email: marco.ku@gmail.com
Web: http://www.mingxiang.com
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
