Pingtan Marine Enterprise Ltd.
Q2 2018 Earnings Call Transcript

Published: 10 Aug 2018

[Operator:]

Hello, and welcome to Pingtan Marine Enterprise 2018 Second Quarter and Six Months Financial Results 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]. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Katherine Yao. Please go ahead.

[Katherine Yao:]

Thanks and good morning, everyone. Thank you for joining us. [Foreign Language] Copies of the press release announcing the 2018 second quarter and six months financial results are available on Pingtan Marine’s website at www.ptmarine.com. [Foreign Language] You are 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. [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 prospects and results of operation. Such risks are fully detailed in Pingtan Marine’s filings with the Securities and Exchange Commission. [Foreign Language] 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. [Foreign Language] For the question-and-answer session, please allow us a moment to translate the question and then we will respond to everyone on the call in both English and Chinese. [Foreign Language] With that, I will turn the call over to Pingtan Marine’s Chairman and CEO, Mr. Xinrong Zhuo. Please go ahead, Mr. Zhuo. [Foreign Language]

[Xinrong Zhuo:]

[Foreign Language] Good morning. Thanks for joining our 2018 second quarter and six months conference call. [Foreign Language] In the second quarter 2018, our overall financial results declined compared to the same period last year. On the one hand, five of our large-scale vessels were sent to shipyard for maintenance. On the other hand, both the sales volume and the unit selling price dropped for this quarter, especially the prices of species with high added value, which were significantly lower than last year. Once the vessels that were sent to shipyard completed maintenance and are put into operation, which should be by the end of this year, along with the addition of the anticipated operation of the 27 rebuilt new vessels, the company expects there will be a significant increase in both fishing capacity and the sales volume. [Foreign Language] Meanwhile, we continue focusing on business expansion through seeking new fishing territories and the new fishing vessels with advanced technology to harvest products with higher added value. As always, we will keep our investors upgrade of our development, and we welcome any helpful suggestions and introduction. [Foreign Language] On July 17, we announced 2018 second quarter cash dividend as our fifteenth consecutive quarterly dividend at the rate of $0.01 per share of common stocks outstanding to shareholders of record on July 31, 2018. And dividend will be paid in cash on or about August 15th next week. [Foreign Language] Including this quarterly cash dividend, the cumulative quarterly cash dividends paid to shareholders by the company will exceed $11.8 million [indiscernible] has been a long-term practice by Pingtan Marine. However, the company reviews its dividend policy regularly and any future dividends will be at the discretion of the Board of Directors after taking into account of company’s cash flow, earnings, investment updates, financial position and other relevant matters. [Foreign Language] With that, I would like to turn the call over to Roy Yu,[indiscernible] to report 2018 second quarter and six months financial results. On behalf of our company, I look forward to meeting our investors in person and as always welcome to our facility in Fuzhou and take a tour. Thank you. And now I'd to like to turn the call over to Mr. Roy Yu, Chief Financial Officer of Pingtan Marine Enterprise. [Foreign Language]

[Roy Yu:]

Thanks, Katherine. Good morning and welcome everyone. Today, I'll discuss Pingtan Marine's 2018 second quarter and six months operation and financial results. [Foreign Language] As we previously disclosed, Pingtan's financial results was too affected by the Indonesian Government's moratorium of issuing new fishing licenses and renewals. So that the country's Ministry of Maritime Affairs and Fisheries could monitor the operations of existing fleets and to fight illegal fishing activities. [Foreign Language] In November 2015, the Indonesian Government announced that the moratorium had concluded. As the government has not implemented new fishing policies and resumed the license renewal process, the Company does not know when exactly licensing and renewal will start. Since the Company historically derived a majority of its revenue from this area, this ban has caused a significant drop in production. [Foreign Language] In September 2017, the Company was informed that the fishing licenses of 13 vessels deployed to the Indo-Pacific waters were suspended and the vessels were docked in the port by the Ministry of Agriculture and Fisheries of Democratic Republic of Timor-Leste. The government arrested and investigating rather false statements were made during the licensing process and the vessels were simultaneously registered in Indonesia. The Company disputes these allegations and the Government of Timor-Leste actually agreed to release these vessels as no evidence was presented to support such allegations. These 13 vessels have returned to China for regular maintenance. [Foreign Language] As of June 30, 2018, among the company’s 140 fishing vessels, 12 are operating in the Bay of Bengal in India, 6 are operating in international waters, 5 vessels including 1 transport vessel are licensed to operate in international waters, but returned to China for maintenance; 13 have returned to China from Democratic Republic of Timor-Leste due to the reasons described above and 27 are in the modification and rebuilding project. [Foreign Language] Now, I’d like to move to financial results. [Foreign Language] For the second quarter of 2018, our sales volume was 6.15 million kilogram, increased 30.2% from 8.81 million kilogram in the second quarter of 2017. [Foreign Language] For the six months ended June 30, 2018, our sales volume were 10.06 million kilograms decreased 8.7% from 11.03 million kilograms in the same period of 2017. [Foreign Language] Pingtan reports its revenue for the three months ended June 30, 2018, at $13.6 million, decreased 61.9% from $35.7 million for the same period in 2017. In the three months ended June 30, 2018, as compared to the three months ended June 30, 2017. The decrease was mainly attributable to sales volume decreased by 30.2%. The decrease was mainly due to 5 of our vessels are licensed to operate in international water and 13 vessels from Democratic Republic of Timor-Leste waters have returned to China for maintenance as well as the average unit sales price decrease 42.2% in the three months ended June, 30 2018, adds to fish species, so in the second quarter a lower price fish products. First, the company stocks a large quality of high market fish species including about 4,000 metric tons squeezed to sell higher prices for the following month in conjunction with Chinese [indiscernible]. [Foreign Language] For the six months ended June 30, 2018, the company’s revenue was $24.5 million compared to $41.4 million in the first half of 2017. The decrease was primarily due to the decrease in sales volume because lower vessels are in operation as well as lower average unit sales price due to a different sales mix. [Foreign Language] For the second quarter of 2018, gross profit was $7 million compared to gross profit of $12.3 million in the prior year period. [Foreign Language] Gross profit for the six months ended June 30, 2018 was $12.6 compared to gross profit of $13.5 million in the same period of 2017. The decrease was due to the decrease in sales revenue offset by the decreasing of our unit production cost of fish. [Foreign Language] The gross margin increased to 51.1% for the three months ended June 30, 2018 from 34.5% in the same period last year. This significant increase was primarily due to the decrease in the unit production cost of fish. [Foreign Language] For the six months ended June 30, 2018, gross margin increased to 51.3% from 32.8% in the same period of 2017. The interest was primarily due to the same reason described above. [Foreign Language] Our selling expense mainly including shipping and handling fees, insurance, custom service charge, storage fees and other hiring expenses. Our sales activities are conducted through direct selling by our internal sales staff. Because of the strong demand for our products and services, we do not have to aggressively market and distribute our products. As a result, our selling expenses have been relatively small as a percentage of our revenue. [Foreign Language] For the second quarter of 2018, selling expenses were $0.4 million compared to $0.2 million in the prior year period. The increase was due to increase in shipping and handling fees as a result of an increased number of deliveries from customs to warehouse, and the storage fees occurred during the processing products to be sold to JD.com compared to prior year period. [Foreign Language] For the six months ended June 30, 2018, travelling expenses were $0.9 million compared to $0.6 million in the same period of 2017. The increase was primarily due to the same reasons described above. [Foreign Language] For the three months ended June 30, 2018, our general and administrative expenses were $3 million compared to $2.4 million in the prior year period. The increase was due to an increase in professional fees compensation and related benefits and other general and administrative expenses offset by a decrease in travel and infotainment expense and recorded bad debt recoveries as compared to bad debt expense in the prior year period. [Foreign Language] For the six months ended June 30, 2018, general and administrative expenses were $6.1 million compared to $4.7 million in the same period of 2017. The increase was primarily due to the same reasons described above. [Foreign Language] Pingtan reported a net income attributable to owners of the company of $2.9 million for the second quarter of 2018, or $0.04 per basic and diluted share compared to net income attributable to owners of the company of $9 million or $0.11 per basic and diluted share in the prior year period. [Foreign Language] Net income attributable to the owners of the company for the first half of 2018 was $3.8 million or $0.05 per basic and diluted share compared to net income attributable to owners of the company of $18.9 million or $0.24 per basic and diluted share in the first half of 2017. [Foreign Language] On the balance sheet, as of June 30, 2018, Pingtan's cash and cash equivalents were $1.5 million. Total assets were $206.7 million, long-term debt was $14.1 million and shareholders’ equity was $148.2 million compared to $2 million, $201.1 million, $17.2 million and $147.5 million, respectively at December 31, 2017. [Foreign Language] With that, Kevin, let’s start 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. [Foreign Language] Kevin? Operator I’d like to turn the floor back over to management for any further or closing comments.

[Roy Yu:]

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 investors or visitors to our office in Fuzhou, China. Thank you.

[Operator:]

Thank you. This does conclude today’s teleconference. [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.