May 18, 2012
China Marine reports Q1 2012 financial results
China Marine Food Group posted its total net income in all segments for the quarter ended March 31, at US$15.1 million, 43.4% below from US$26.7 million in the last year's period, it stated in a release on May 11.
The company produces Mingxiang seafood-based snack foods, "Hi-Power" marine algae-based beverages and a distributor of frozen marine catch.
"Our first quarter results reflect depressed demand for our products and elevated marketing investments," explained 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 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."
China Marine's sale of processed and packaged seafood snack foods generated US$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.
Revenues from the "Hi-Power" algae-based beverage line were US$5.2 million compared to US$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 US$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. "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 minimise 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.
