China Marine Reports First Quarter 2012 Financial Results
1 days 11 hours 45 minutes ago - PR Newswire via Comtex
China Marine Food Group Limited (NYSE Amex: CMFO) ("China Marine" or the "Company"), a manufacturer of Mingxiang® seafood-based snack foods, "Hi-Power" marine algae-based beverages and a distributor of frozen marine catch, today announced its financial results for its first quarter ended March 31, 2012.
"Our first quarter results reflect depressed demand for our products and elevated marketing investments," explained Mr. Pengfei Liu, Chairman and CEO of China Marine. "As we discussed on our year-end 2011 earnings call, we anticipated a down first quarter in 2012 as the effects of the radiation leaks in Japan and a clouding agent concern from Taiwan and China continuously affected both our Mingxiang® Food and "Hi-Power" beverage sales. As a result, we maintained an elevated level of investments in advertisements and promotions to communicate the safety and value of our products. While we have seen certain distributors place reorders as they restock inventories, overall consumer demand remained well below levels prior to the Japan disaster. However, sales have rebounded nicely in April and the early part of May."
First Quarter 2012 Results
Total net revenues in all segments for the quarter ended March 31, 2012, including Mingxiang®-branded seafood snack foods, "Hi-Power" beverages and marine catch, was $15.1 million, down 43.4% from $26.7 million in the prior year's period.
Seafood Snack Food Segment
China Marine's sale of processed and packaged seafood snack foods generated $9.9 million in revenue, down 50.2% from the first quarter of 2011 due to depressed demand resulting from continued and negative consumer perceptions regarding the safety of seafood products following the nuclear radiation leaks in Japan. Seafood snack foods accounted for 65.7% of total revenues in the first quarter of 2012. China Marine has maintained its product line of 27 Mingxiang®-branded seafood jerky snacks sold to consumers at retail locations. Gross profits margins for the seafood snack foods segment were 26.6% compared to 33.9% in the same period last year. Retail points for seafood snack foods include major supermarket chains, convenience store chains, general food stores, campus canteens and local corner shops in Fujian, Zhejiang, Guangdong, Shandong and major prefectures like Shenzhen.
"Hi-Power" Beverage Segment
Revenues from the "Hi-Power" algae-based beverage line were $5.2 million compared to $6.7 million in the first quarter of 2011. While the Company's beverage has never contained any toxic materials or clouding agents, overall sales for "Hi-Power" were down due to public concerns over the plasticizer contamination in the beverage industry. The Company generated $1.3 million of sales in Zhejiang province in the first quarter of 2012 after entering the new provincial market in the second quarter of 2011.
The total numbers of retail end-points for "Hi-Power" were 12,000 on March 31, 2012. "Hi-Power" beverages are sold and promoted in major international retailers such as Walmart®, China-based supermarkets like Trust-Mart®, convenience stores, bars, restaurants, school canteens and local corner stores which carry "Hi-Power" beverages, and certain locations where Mingxiang®-branded seafood products are also sold.
Gross margin was 38.0% in the first quarter of 2012, down 430 basis points from 42.3% in the same period last year. The Company outsources production, bottling and distribution to minimize its working capital and capital expenditures. China Marine continues to invest in sales and marketing, including in store promotions and sporting event sponsorships, to drive trial and brand awareness.
Marine Catch Trade Segment
China Marine's frozen marine catch business segment generated no sales in the first quarter of 2012 compared to minimal sales in the same period a year ago. The Company usually generates the majority of its marine catch sales in the second half of the year.
Consolidated costs of goods sold totaled $10.5 million for the quarter, or 69.5% of net revenues for the period ended March 31, 2012, which consists of the cost of raw materials, packaging materials, direct labor and manufacturing overhead. In the seafood snack food segment, costs of raw materials account for the greatest percentage of costs and were 72.4% for the quarter while packaging represented 11.3%.
Gross profit in the first quarter of 2012 was $4.6 million compared to $9.6 million in the prior year's corresponding period. Consolidated gross margins were 30.5% for the quarter, down from 36.1% for the three months ended March 31, 2011.
Selling, general and administrative expenses in the quarter ended March 31, 2012 were $5.1 million compared to $2.2 million in the prior year period. Sales and marketing increased by $3.0 million to $4.6 million in the first quarter of 2012 as a result of $1.8 million in advertising campaigns and $2.1 million in promotional costs to strengthen its brand position and improve market awareness of its "Hi-Power" beverages. China Marine's advertising efforts included a series of TV commercials and extensive direct marketing activities.
Operating income in the first quarter of 2012 was a loss of $1.9 million compared to $6.7 million of operating income in the prior year period. Excluding the $0.6 million non-cash amortization expense related to the "Hi-Power" acquisition and $0.6 million of after-tax non-cash stock-based compensation expenses, operating loss was $0.7 million for the three months ended March 31, 2012.
Non-GAAP adjusted net loss of $0.8 million, or $0.03 net loss per share, compared to $6.2 million net income and $0.21 earnings per share, respectively, in the first quarter of 2011.
Financial Condition
As of March 31, 2012, the Company had $17.5 million in cash compared to $0.6 million as of December 31, 2011. China Marine had $2.6 million of debt outstanding at March 31, 2012 as a result of a short-term loan taken out in the fourth quarter of 2011. Cash flows from operations were $17.0 million due to an increase in accounts receivable collection, partially offset by an increase in trading inventories.
Working capital was $68.8 million, down from $70.2 million as of December 31, 2011. The current ratio was 11.2 to 1 on March 31, 2012 compared to 9.0 to 1 on December 31, 2011. Accounts receivable were $9.6 million compared to $68.6 million as of December 31, 2011 due to collections of marine catch receivables outstanding at the end of 2011. Shareholder equity was $128.9 million.
Construction Update - V Cold Storage Facility
The Company expects to commence operating its new 20,000 tons cold storage facility by the end of the second quarter of 2012. The project is expected to contribute approximately $8.0 million in revenues and $4.0 million in net income yearly once fully operational. The total construction cost of the project was approximately $24.5 million. Management hosted several customers and local officials on April 16th, 2012 to commemorate the completion of this facility.
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