Pingtan Marine Enterprise Ltd.
Q2 2019 Earnings Call Transcript

Published: 12 Aug 2019

[Operator:]

Greetings, and welcome to the Pingtan Marine Enterprise Second Quarter 2019 and Six Months Earning Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].It's now my pleasure to introduce your host, Katherine Yao of The Equity Group, who will read today's Safe Harbor Statement and introduction. Katherine, please go ahead.

[Katherine Yao:]

Thank you, Kevin, and good morning, everyone. Thank you for joining us. Copies of the press release announcing 2019 second quarter and six months financial results are available on Pingtan Marine's website at www.ptmarine.com. You're also welcome to contact our office at 212-836-9600, and we'll 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 prospects and results of operation. Such risks are fully detailed in Pingtan Marine's filings with the Securities and Exchange Commission.I would now like 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. Roy Yu, 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 call in both English and Chinese.With that, I will turn the call over to Pingtan Marine's Chairman and CEO, Mr. Xinrong Zhuo. Please go ahead, Mr. Zhuo.

[Xinrong Zhuo:]

Good morning. Thanks for joining our 2019 second quarter and six months conference call. In the second quarter of 2019, we continued to achieve overall favorable operational and financial performance. While we target at organized implementation of fishing fleet maintenance and vessel modification and rebuilding projects, the company is also actively exploring for other available fishing areas in international waters.The company's management is currently focusing on accelerating the modification and rebuilding projects of 31 vessels, in particular

[Roy Yu:]

Thank you, Katherine. Good morning and welcome, everyone. Regarding the factors affecting Pingtan’s results of operations, please refer to our 2019 second quarter earnings press release and the 10-Q we filed last Friday. Today, I will discuss Pingtan Marine Enterprise 2019 second quarter and six months operation and financial results.For the second quarter of 2019, our sales volumes were 15.4 million kilogram, increasing by 151% from 6.1 million kilograms in the second quarter of 2018. For the six months ended June 30, 2019, our sales volume was 24.2 million kilograms increasing by 140% from 10.1 million kilograms in the same period of 2018. Pingtan reports its revenue for the three months ended June, 30, 2019 at $25.5 million increasing by 87.1% from $13.6 million for the same period in 2018. The increase in revenue is primarily attributable to more vessels in operation which resulted in an increase in sales volume. And due to the different sales mix, average unit sales prices decreased as compared to the same period in 2018.For the six months ended June 30, 2019, the company's revenues were $43.9 million compared to $24.5 million in the first half of 2018. The increase was primarily due to the same reasons described above, mainly due to more vessels in operation.For the second quarter 2019, gross profit was $9.3 million compared to gross profit of $7 million in the prior year period. Gross profit for the six months ended June, 30, 2019 was $13.3 million compared to gross profit of $12.6 in the same period of 2018. The gross margin was 36.4% for the three months ended June 30, 2019, decreased from 51.1% in the same period in the prior year. The decrease in gross margin for the three months ended June 30, 2019 as compared to three months ended June 30, 2018 was primarily attributable to a drop of average unit sales price by 25.7% due to different catch mix delivered from the new fishing vessels that were deployed in the different waters of high seas.For the six months ended June 30, 2019, gross margin decreased to 30.4% from 51.3% in the same period of 2018. The decrease was primarily due to the same reason described above, namely a drop of average unit sales price by 25.1%.For the second quarter of 2019, selling expenses were $0.5 million compared to $0.4 million in the prior year period. The increase was primarily attributable to the increase in insurance due to the different insured fishing vessel mix and increase in other miscellaneous selling expense, partially offset by the decrease in storage fees, shipping and handling fees, custom clearance charge and advertising expenses.For the six months ended June 30, 2019, selling expenses were $1.2 million compared to $0.9 million in the same period of 2018. The increase was primarily due to the increase in other miscellaneous selling expense as a result of higher satellite communication fees and pilotage fees, increase in insurance due to different insured fishing vessel mix, as well as increase in storage fees, partially offset by decrease in shipping and handling fees, custom clearance fee and advertising expenses.For the three months ended June 30, 2019, our general and administrative expenses were$2.1 million compared to $3 million in the prior year period. The decrease was primarily due to the decrease of $0.7 million in depreciation in relation to non-operating vessels as upon launch of the vessel modification and rebuilding projects, the number of non-operating vessels decreased by 30 in the second quarter of 2019 as compared to the same period in 2018. Compensation and related benefits and professional fees also showed a large drop of $0.6 million. The decrease was partially offset by the increase in impairment loss on vessels in the second quarter of 2019.For the six months ended June 30, 2019, the general and administrative expenses were $6.9 million compared to $6.1 million in the same period of 2018. The increase was primarily due to an impairment loss on vessels, which totaled $2.5 million for the six months ended June 30, 2019. The increase was partially offset by the big decrease in depreciation in relation to non-operating vessels, compensation and related benefits, and professional fees.Pingtan reported a net income attributable to owners of the company of $4.6 million for the second quarter of 2019, or $0.06 per basic and diluted share, compared to net income attributable to owners of the company of $2.9 million, or $0.04 per basic and diluted share in the prior year period.Net income attributable to owners of the company for the first half of 2019 was $2.7 million, or $0.03 per basic and diluted share, compared to net income attributable to owners of the company of $3.8 million, or $0.05 per basic and diluted share in the first half of 2018.On the balance sheet, as of June 30, 2019, Pingtan’s cash and cash equivalents were $3.2 million; total assets were $361.6 million; current total long-term debt was $22.3 million; and shareholders' equity was $154.5 million compared to $2 million, $247 million, $8.5 million and $151.6 million respectively at December 31, 2018.To conclude, Pingtan continues focusing on territorial and fleet expansion, and increase fishing vessels to further increase production capacity and enrich product mix. We're actively planning and preparing for expansion of the business to seafood deep processing market and reach directly to end customers, both online and offline. Meanwhile, we will further explore e-commerce seafood retail business to enhance the entire industry chain and develop new distribution channels to penetrate China's inland provinces.

[Katherine Yao:]

With that, operator, let's start the Q&A. 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. Go ahead, Kevin.

[Roy Yu:]

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

[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.