Pingtan Marine Enterprise Ltd.
Q1 2020 Earnings Call Transcript

Published: 12 May 2020

[Operator:]

Greetings, and welcome to the Pingtan Marine Enterprises First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Jay Zhou of Pure-Rock Communications [ph]. Please go ahead sir.

[Unidentified Company Representative:]

Thanks operator and good morning everyone. Thank you for joining us. [Foreign Language] Copies of the press release announcing the 2020 first quarter financial results are available on Pingtan Marine’s website at www.ptmarine.com.[Foreign Language]You are also welcome to contact us by e-mail to [e-mail] and we would be happy to send you a copy. In addition, this broadcast will be made available at Pingtan Marine’s website.[Foreign Language]Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.[Foreign Language]Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect Pingtan Marine’s business and the prospects and the results of operations. Such risks are fully detailed in Pingtan Marine’s filings with the Securities and Exchange Commission.[Foreign Language]I would like now to take a moment to outline the format for today’s call. In order to take care of all conference call participants, this call will be conducted in both English and Chinese.First of all, the company’s Chairman and CEO, Mr. Xinrong Zhuo will read a prepared opening statement in Mandarin, which I will then read in English. I will then turn the conference call to Mr. Liming Yung, Pingtan Marine’s CFO, who will continue with the presentation. When he is finished, we will open the floor for questions.[Foreign Language]For the question-and-answer session, please allow us a moment to translate the questions and then we will respond to everyone on the call, in both English and Chinese.[Foreign Language]With that, I turn the call over to Pingtan Marine’s Chairman and CEO, Mr. Xinrong Zhuo. Please welcome Mr. Zhuo.[Foreign Language]

[Xinrong Zhuo:]

[Foreign Language]Ladies and gentlemen, good morning. Thank you for joining our 2020 first quarter earnings conference call.[Foreign Language]In the first quarter of 2020, economic activities in China and many countries of the world were affected to a varied extent by the COVID-19 pandemic.[Foreign Language]In the first quarter of 2020, Pingtan's sales volume was over 13 million kg, which showed our robust year-on-year growth, but our sales revenue was adversely affected by both pandemic and the seafood market situation.[Foreign Language]On one hand, there was a decrease in the demand from the catering industry in the first quarter due to the pandemic, which affect the price of seafood. On the other, the market supply of Indian Ocean squid, one of our key product types was more than sufficient to meet the market demand, which led to a downward pricing trend for this product.However, the market activity in China is starting to recover from the pandemic. And we believe consumption of seafood will gradually return to normal levels.[Foreign Language]The evolving and uncertain environment related to the COVID-19 worldwide, however, makes it difficult to accurately predict the future impact on our results. In light of the current developments, we expected Q2 demand to increase, having a positive impact on our shares for the remainder of the year.[Foreign Language]Expansion of operations and enhancing catching capacity by increasing the number of operating fishing vessels is a part of our established strategies. We previously announced that in late 2019, Pingtan applied to the Ministry of Agriculture and Rural Affairs of the PRC for permits to rebuild 10 fishing vessels in addition to all applications for rebuilding another one refrigerated transport vessel in January of this year. Currently, we have 11 vessels that are pending the permits from the MLA and are undergoing modifications and rebuilding projects.[Foreign Language]More 10 fishing vessels will be replacing to chicken [ph] vessels with loss of tonnage of 1,200 tons and the transport vessel will have a loss of tonnage of 8,000 tons. These vessels are permitted to operate in the international waters of the Indian Ocean and North Pacific and the South Pacific Ocean, as well as the Southwest Atlantic Ocean. Optimistically, we expected that the 11 vessels will be deployed to sea for operations within the next year after completion of the modification and building project.[Foreign Language]As always, Pingtan will keep the investors apprised of all aspects of progress and we welcome constructive competition and effective recommendations.[Foreign Language]Now, I'd like to introduce our CFO, Mr. Liming Yung, who will discuss the operation and the financial results for the first quarter of 2020. On behalf of our company, I look forward to meeting you in person. And as always, welcome to our headquarters in Fuzhou and take a tour. Thank you.[Foreign Language]

[Liming Yung:]

Good morning, Jay. Thank you. Welcome everyone. Regarding the factors affecting Pingtan’s results of operations, please refer to our 2020 first quarter earnings press release and the 10-Q we filed. Today, I will discuss Pingtan Marine’s 2020 first quarter operation and financial results.[Foreign Language]For the three months ended March 31st, 2020, Pingtan reported its revenue of $17.3 million, a decrease of $1.1 million or 6.1% from $18.4 million for the same period in 2019.Sales volume increased by 54.9% to 13.5 million kg in a three-month ended March 31st, 2020 from 8.7 million kg in the same period of 2019. Sales volume increased by a large amount percentage, while revenue decreased slightly for the first quarter 2020. The decrease in revenue were primarily attributed to the difference in sales mix, impact of market versus situation, and the 13.9% decrease in average volume sales price during the three-month ended March 31st, 2020 as compared to the three-month ended March 31st, 2019.[Foreign Language]For the first quarter ended March 31st, 2020, the gross profit was $5.8 million, compared to gross profit of $4.1 million in the prior year period. The gross margin for the first quarter ended March 31st, 2020 was 33.2% compared to 22.1% for the same period in 2019. The increase in gross margin for the three-month ended March 31st, 2020 as compared to the three-month ended March 31st, 2019 was primarily attributed to a drop in unit production by cost, 48% as a result of new fishing vessel that were deployed at the end of first quarter 2019 and [Indiscernible] costs and other related revenue -- related costs of revenue, however, no revenue was generated because the vessel was not yet in operation during that time.[Foreign Language]For the three months ended March 31st, 2020, selling expenses were $0.9 million compared to $0.7 million in the prior year period. The decrease was primarily due to the $0.79 million increase in storage fee and $0.16 million increase in shipping and handling fee as a result of renting larger warehouse and an increase in number of fishing inventory delivered to the warehouse, partially offset by the decrease in insurance fee and custom clearing charge.[Foreign Language]For the three months ended March 31st, 2020, general and administrative expenses were $2.0 million compared to $4.8 million in the prior year period. The decrease was primary due to the 510,728 decrease in the depreciation and non-operating vessel for 41.8% compared to the three-month ended March 31st, 2019, as well as no impairment of assets for the first quarter in 2020 compared to $2.2 million impairment loss that was recorded in the prior year period.[Foreign Language]For the three-month ended March 31st, 2020, net income was $8.42 billion compared to net loss was $1.97 billion in the same period of 2019, an increase of $10.39 million or 526 -- I'm sorry 527.6%.[Foreign Language]Net income attributed to the owner of the company for the three-month ended March 31st, 2020 was $7.66 million or $0.10 per basic and diluted share compared to net loss attributed to the owner of the company of $1.89 million or point $0.02 per basic diluted share in the same period 2019.[Foreign Language]On balance sheet, as of March 31st 2020, Pingtan's cash and cash equivalents worth $32.8 million, total assets were 800 -- I'm sorry, $478.6 million, total current liability was $161 million, and shareholders' equity was $161.8 million compared to $10.1 million, $404.1 million, $88.8 million, and $155.1 million respectively at December 31st, 2019.[Foreign Language]To conclude, we continue focusing on expansion of business and exploring new fishing ground to harvest diverse mixed catch. We are actively planning for exploring or expanding the business to seafood process -- processing market and reach directly to end consumer, both online and offline. Meanwhile, we will further exploit ecommerce seafood retail business to enhance our entire industry chain and develop new distribution channels to penetrate China's inland provincial. Thank you.[Foreign Language]

[Unidentified Company Representative:]

With that operator, let us start the Q&A. For the question-and-answer session, please allow us a moment to translate to the questions and then we will respond to everyone on the call in both English and Chinese.

[Operator:]

If there no questions at this time, I'd like to turn the floor back over to management for any further or closing comments.

[Unidentified Company Representative:]

Okay. Okay. Thanks again for all of you joining us. We look forward to speaking with you again in August when we report our second quarter and six-month 2020 financial results. As always, we welcome any visitor to our office in Fuzhou, China. Thank you[Foreign Language]

[Operator:]

Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.