Pingtan Marine Enterprise Ltd.
Q2 2020 Earnings Call Transcript

Published: 18 Aug 2020

[Operator:]

Hello and welcome to the Pingtan Marine Enterprises 2020 Second Quarter and Six Months Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Jay Zhou, Entrepreneur of Pure-Rock Communications. Jay, please go ahead.

[Jay Zhou:]

Thanks, operator, and good morning everyone. Thank you for joining us. Copies of the press release announcing the 2020 second quarter and six months financial results are available on Pingtan Marine’s website at www.ptmarine.com. 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. 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. 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. 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. 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. With that, I turn the call over to Pingtan Marine’s Chairman and CEO, Mr. Xinrong Zhuo. Please welcome Mr. Zhuo.

[Xinrong Zhuo:]

Ladies and gentlemen, good morning, thank you for joining our 2020 second quarter and six months conference call. Although the COVID-19 pandemic appears to be under control in China, the situation is still severe in many countries and regions of the world and has adversely affected the global market and economy. In the second quarter of 2020, a second wave of regional spreading of the coronavirus occurred in some cities in China, including Beijing, and some cases were related to seafood markets, which had an impact on the prices of marine catches. In the second quarter of 2020, although we saw a decrease of $1.7 million in revenue during the quarter compared to the same period in 2019, our sales volume peaked to 21.8 million kg, an increase of 41% compared to the same period in 2019 and the highest record of single-quarter sales volume in the last five years. With the regional spreading of the coronavirus contained, the Chinese market is gradually recovering, and the catering and entertainment industry has resumed normal operations. Although we are not able to estimate the future impact of the COVID-19 pandemic at this time, we believe that the Chinese consumers' demand for seafood will return and grow during the second half of 2020. In reaction to the potential market variations and to assist the Company in its development and expansion of catch species, we are building a large-scale Antarctica krill fishing and processing vessel with a gross tonnage of 8,600 and overall length of 107 meters. Upon completion and operation of this vessel, our fishing areas will be expanded to the Antarctic waters and our fishing capacity will be further enhanced. At present, we have a fishing fleet consists of 143 vessels of which 68 are 1,000 tonnage caching vessels, just completed the modification and rebuilding projects in recent years, and the three are largest scale refrigerated transport vessel with the total tonnage of over 120,000 and fishing grounds in roads of oceans. The three new efficient vessels were completed the rebuilding projects in the second quarter of 2020, we will be putting to operations soon. As always, Pingtan Marine will keep investors apprised of all aspects of the development and progress, and we welcome constructive suggestions and effective recommendations. Now, I would like to introduce our CFO, Mr. Liming Yung, who will discuss the operational and financial results for the second quarter and first six months of the 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. Please welcome Mr. Liming Yung, Chief Financial Officer of Pingtan Marine Enterprise. Sir, the floor is yours.

[Liming Yung:]

Thank you, Jay. Good morning and welcome everyone. Regarding the factors affecting Pingtan's results of operation, please refer to our 2020 second quarter and six months earnings press release and 10-Q we filed. Today, I would discuss Pingtan Marine's 2020 second quarter and six months operations and financial results. For the six months ended June 30, 2020, Pingtan reported its revenue $23.5 million, a decrease of $2 million or 7.9% from $25.5 million for the same portfolio in 2019. Sales volume decreased by 41% to 21.8 million kilogram in three months ended, June 30th, 2020 from 15.4 million kilogram in the same period of 2019. Sales volumes increased by a large percentage while revenue decreased slightly for the second quarter of 2020. The decrease in revenue was primarily attributed to the different sales mix and the decrease in average unit sales price. Despite the increasing sales volume due to more vessels in operation, average unit sales price decreased only by 34.5% in the three months ended June 30, 2020 as compared to three months ended June 30, 2019. For the six months ended June 30, 2020, Pingtan reported its revenue of $45.8 million compared to $43.9 million in the first half of 2019, a decrease of 3.1 million or 7.1%. Sales volume in the six months ended June 30, 2020 increased by 46% to 35.3 million kilogram from 24.2 million kilograms in the six months ended June 30, 2019. The average unit sales price decreased by 33.3% in the six months ended June 30, 2020 as compared for the six months ended June, 30, 2019. The decrease is due to the same reason described above. For the three months ended June 30, 2020 Pingtan gross margin was 9.2% compared to 36.4% in the five year period. The decrease in gross margin for the three month ended, June 30, 2020, as compared to the same period of 2019 is due to decrease in average unit sales price by 34.5%, while the cost of unit has slightly decreased. A key species of our sales mix was Indian Ocean squid whose market price was on the low side and the market price of frozen seafood was affected due to the situation of the pandemic, which together led to a decrease in average unit sales price of sales mix. For the six months ended June 30, 2020, gross margin decreased to 19.4% from 30.4% in the same period of 2019. The decrease in gross margin for the six months ended June 30, 2020 is due to the same reasons. For the three months ended June 30, 2020, selling expenses were $1.0 million compared to $0.5 million in the prior year period. The increase was primarily due to the increase in insurance, storage fees and other miscellaneous selling expenses. For the six months ended June 30, 2020, selling expenses were $2.0 million compared to $1.2 million in the same period of 2019, an increase in the same reasons described above. For the three months ended June 30, 2020, general and administrative expenses were 1.6 million compared to 2.1 million for the same period. For the six month ended June 30, 2020, general and administrative expenses were 3.6 million compared to 6.9 million in the five year period, a decrease of 25.1%. The decrease was primarily due to the decrease in compensation and related benefits and other general and administrative expenses. The increase in bad debt recovery and no impairment losses reported for the three months ended June 30, 2020, as compared to an impairment loss of 0.2 million for the three months ended June 30, 2019. Net loss for the three months ended June 30, 2020 was 1.7 million compared to net income of 5 million in the same period of 2019, a decrease of 48.6%. The decrease was primarily due to the decrease in depreciation of non-operating vessels, compensation related benefits and other general and administrative expenses, and no impairment loss recorded for the six months and June 30, 2020, as compared to an impairment loss of 2.5 million for the six months ended June, 30, 2019. Net income for six months ended June 30, 2020 was $6.8 million compared to net income of $3.1 million in the same period of 2019. Net loss attributed to the owners of the Company for the three months June 30, 2020, was $1.6 million or $0.02 per basic and diluted share, compared to net income attributed to the owners of the Company of $3.6 million or $0.06 per basic and diluted share in the same period of 2019. Net income attributed to the owners of the Company for the six months ended June 30, 2020 was $6.1 million or $0.08 per basic and diluted share compared to net income attributed to the owners of the Company of $2.7 million or $0.03 per basic and diluted share in the same period of 2019. On the balance sheet, as of June 30, 2020, Pingtan Marine cash and cash equivalents were $3.4 million, total asset were $567.4 million, total current liability was $183.1 million and shareholders' equity was $160 million compared to $10.1 million, $404.1 million and $88.8 million and $165.1 million respectively at December 31, 2019. To conclude, we continue focusing on expansion of business and exploration of new fishing grounds to harvest diverse catch mix. We are actively planning and exploring for expanding the business to seafood 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.

[Jay Zhou:]

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.

[Jay Zhou:]

Thank you again to all of you for joining us. We look forward to speaking with you again in November after we report our third quarter and nine month financial results. As always, we welcome any visitor to our office in Fuzhou, China. Thank you.

[Operator:]

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