China Marine raises 2010 guidance to $100 million in revenues and $21.5 million net income
SHISHI, China, Jan. 5 /PRNewswire-Asia-FirstCall/ -- China Marine Food Group Ltd. (NYSE Amex: CMFO), a China-based manufacturer of seafood-based snack foods and distributor of fresh and frozen marine catch, today announced the closing of its acquisition of Shishi Xianghe Food Science and Technology Co., Ltd. ("Xianghe"), a Fujian-based manufacturer of the branded "Hi-Power" algae-based soft drinks. China Marine purchased 80% of the registered capital stock (the "Shares") of Xianghe for $27.8 million on January 1, 2010.
China Marine's acquisition of Xianghe was finalized after management's due diligence through December 2009. As detailed in the Company's press release on December 2, 2009, the acquisition plan included the transfer of an initial loan of $26.4 million, which was owed by Xianghe to China Marine, to be the purchase consideration for the Shares of Xianghe and a final payment of $1.4 million to the former sole shareholder of Xianghe within 30 days after completion of the audit report of Xianghe for the year ended December 31, 2009.
Xianghe's flagship product, "Hi-Power" algae-based soft drink, was developed by the Yellow Sea Fisheries Research Institute of Chinese Academy of Fishery Science in coordination with Xianghe's founder, Mr. Qiu Shang Jing. Hi-Power is marketed as a high-protein content drink, low in calories and fat, which provides the consumers a combination of immune system benefits, improved digestion and reductions in hyperglycemia and hypertension. Hi-Power's target market focuses on health-conscious consumers in China's fast-growing beverage market.
Similar to China Marine, Xianghe has developed a network of distributors with exclusive territories in Fujian, Zhejiang, Guangdong and Hunan provinces, which sell Hi-Power to retail food stores, restaurant food supply dealers and the hospitality industry. 2010 estimates of revenues from Xianghe are $20 plus million with net profit margins anticipated at 20%. Through integrating the product into China Marine's distribution network and expanding distribution to untapped provinces in China, management expects revenues for 2011 to grow over 60% year over year with a trend toward normalized long-term net profit margins of 25%.
As part of the acquisition, the management team of Xianghe and all associated sales and marketing staff will join the China Marine team. Collectively, the team plans to meet the strategic goals of Hi-Power's marketing strategy and also collaborate with China Marine's
Mingxiang(R)-branded seafood-based snack food sales team to leverage China Marine's current distribution in seven provinces and future distribution throughout China.
"We are very pleased to announce the closing of the acquisition of Xianghe Food," began Pengfei Liu, Chairman and CEO of China Marine. "In addition to the earnings contribution from this newly acquired product line, there are a number of synergies, including our customer base, brand identity and distribution methodology that meet our acquisition criteria. Xianghe's location in our home province of Fujian is very near to our Shishi-based headquarters which leads to their quick assimilation into our business operations and corporate culture. We are equally pleased that we have added a product line in beverages which is one of the fast growing categories in China's retail food and drink markets. The final consideration was that the company's use of algae as the base raw material in Hi-Power is consistent with healthy, marine-based food sources we currently use ourselves. We are equally confident that our investors will find similar value in our decision, expansion of our product portfolio and anticipated of payback for this investment within four years," Liu concluded.
Revised 2010 Guidance
Based on the revenue and net income projections from Xianghe for 2010, China Marine will increase its previously stated guidance of $80.0 million in revenues and $18.0 million in net income to $100.0 million in revenues and $21.5 million in net income for the year ending December 31, 2010.
About Xianghe Food Science and Technology
Shishi Xianghe Food Science and Technology Co., Ltd. is a Fujian-based manufacturer of the branded Hi-Power algae-based soft drinks. Hi-Power was developed by the Yellow Sea Fisheries Research Institute of Chinese Academy of Fishery Sciences in coordination with the founder. Xianghe has developed a network of distributors with exclusive territories in Fujian, Zhejiang, Guangdong and Hunan which sell Hi-Power to retail food stores, restaurants food supply dealers and the hospitality industry.
About China Marine
China Marine Food Group Ltd. processes and distributes seafood-based snack foods, and fresh and frozen marine catch to seven provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its "Mingxiang" brand as a category leader in 2,200 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.
