Pingtan Marine Enterprise Ltd.
Q3 2016 Earnings Call Transcript

Published: 10 Nov 2016

[Operator:]

Welcome to the Pingtan Marine Enterprise 2016 Third Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Katherine Yao of Equity Group who will read the Safe Harbor Statement and the introduction. Thank you, ma'am. You may begin.

[Katherine Yao:]

Thank you, Ilene and good morning, everyone. Thank you for joining us. Copies of the press release announcing 2016 third quarter financial results are available on Pingtan Marine's website at www.ptmarine.com. You are also welcome to contact our office at 212-836-9600 and we will 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. The company filed its Quarterly Report on Form 10-Q yesterday. I would now like to take a moment to outline the format for today's call. The company's Chairman and CEO, Mr. Xinrong Zhuo, will read our prepared opening statements in Mandarin, which I will then read in English. I will then turn the conference call over 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. With that I will now like to turn the read the opening statements from Pingtan Marine's Chairman and CEO, Mr. Xinrong Zhuo.

[Xinrong Zhuo:]

Good morning everyone and thanks for joining our 2016 third quarter conference call. In the third quarter and first nine months of 2016 our operating results were still affected by the moratorium and even the Indonesian government has concluded the suspension in November 2015, t had not yet implemented new fishing policies or resumed fishing in Indonesian waters as of today. We continue to cooperate with the Indonesia Government and our management also seeks alternative revenue resources by fish products from third party suppliers to maintain the relationship both the existing and the new customers and treat [indiscernible] different countries and regions to expand our fishing territory. We announced certain [indiscernible] have transition licenses from the ministry of agriculture and fisheries from the Democratic Republic of Timor-Leste. We’re also pleased to announce that these certain fishing vessels have completed their modification process to improve fishing method in order to meet the Timor-Leste requirements and adjust right now. These certain ships are on their operating destination in the sea area of Timor-Leste. We’re dedicated to establishing fishing companies with global prices and our management team is already looking into opportunities outside of Asian Pacific while we’re presenting our financial results in this conference call. A group of our senior managers are in the process of negotiating the companies from several countries for participation resources. In this regard we always welcome any thought suggestions and introductions and we will keep our investors appraised. In the previous conference call we have stated that Pingtan is committed in steady reward on investors despite the recent challenges. October 20, Pingtan announced a quarterly dividend of record date on October 31, 2016 and the payable in cash on or about November 16, 2016 which marks our 8th consecutive dividend to shareholders. We are also intend to continue paying dividend on a quarterly basis as we’re confident in keeping operational and financial footprints and all the more potential including China's leading fishery company. On behalf of our company I look forward to meeting many of you in person and as always welcome each of your to [indiscernible]. Thank you. I would now like to turn the call over to Mr. Xinrong Zhuo, Chief Financial Officer of Pingtan Marine Enterprise. Please go ahead, sir.

[Roy Yu:]

Thank you, Katherine. Good morning and welcome everyone. Today, I will discuss Pingtan Marine's 2016 third quarter operational and financial results. As we previously disclosed and Chairman Zhuo noted, Pingtan's financial results were still affected by the Indonesian Government's moratorium on 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. In November 2015 the Indonesian Government announced that the moratorium had concluded. The company's expectation is that the Indonesian Government will implement new fishing policies and resume this license renewal process, although this has not yet occurred. In the interim, Pingtan's financial results will continue to be materially adversely affected by this moratorium. We currently 134 fishing vessels and most of these vessels operate in our policy of Indonesia. To cooperate and remain in compliance with the Indonesian Government's fishing license check procedures, in January 2015 we have reduced our operations, and from February 2015 Pingtan ceased operations of all vessels which are licensed to operate in Indonesian waters. As a result, our sales for the three and nine months ended June 30, 2016 decreased significantly as compared to the three and nine months ended September 30, 2015. However, since the December 2015, we started to purchase fish from third-party to satisfy our customer demands. The resale generated a positive gross margin on such sales. The positive gross margin in these reselling activities partially offset the decrease in the Company's overall gross margin for the nine months ended September 30, 2016. Now I'd like to move to financials results. For the third quarter of 2016, due to moratorium our sales volumes decreased 60.7% to 0.46 million kilograms from 0.93 million kilograms in the third quarter of 2016. For the third quarter ended September 30, 2016 Pingtan report its revenue of $1.2 million compared to $2.7 million for the same period in 2015. The decrease was primarily due to significant decrease in sales volumes. As we mentioned earlier, we seized our operations in Indonesia waters since February 2015 due to the moratorium described above. For the third quarter ended September 30, 2016, our gross loss was $12.3 million compared to gross profit of $6.5 million in the prior year period. The gross margin decreased significantly primarily due to change in inventories reserved and reduced scale of operations resulting in overall revenue which is reflected in the allocation of fixed costs, mainly consisting of depreciation to cost of revenue, partially offset by the positive gross margin from our fish resale activities. Our selling expenses including storage fees, insurance, shipping and handling fees, customer service charge, and advertising expenses and fishing vessels [indiscernible] fees. Our sales activity are conducted through direct sales 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. Therefore, our selling expenses have been a small percentage of our revenue. For the third quarter ended September 30, 2016 selling expenses were $0.09 million compared to $0.3 million in the prior year period. For the third quarter ended September 30, 2016 and 2015, our general and administrative expenses were $0.7 million. For three months ended September 30, 2016 Pingtan reported a net loss was $12.8 million or $0.16 for basic and diluted shares compared to net income of $20.7 million or $0.26 per basic and diluted share in the prior year period. For the nine months ended September 30, 2016 Pingtan's revenue were $7.4 million compared to $46.7 million for the first nine months of 2015. Net loss for the first nine months of 2016 was $22.2 million or $0.28 for basic and diluted shares compared to net income of $27.4 million or $0.35 per basic and diluted share in the first nine months of 2015. On the balance sheet as of September 30, 2016 Pingtan's cash and cash equivalents were $0.6 million. Total assets were $225 million. Total long-term debt was $31 million and shareholders' equity was $136 million compared to $11 million, $231 million, $22 million and $166 million respectively at December 31, 2015. To conclude, we will continue to be obligated to cooperate with the Indonesian Government in hopes of accelerating implementation of new fishing policies to licensed fishing companies like Pingtan. We are actively exploring new revenue resources and expanding into new fishing territories to increase our production, we forecast strengthening our sales channels and geographic coverage and building Pingtan's brand to support our entry to direct retail. Thank you.

[Katherine Yao:]

With that, operator, let's open it up for any questions.

[Roy Yu:]

Thanks again to all of you who joined us today. We look forward to speaking with you again in March 2017 after we report our fourth quarter and year-end financial results. As always we welcome any visitors to our facilities in Fuzhou, China. Thank you.

[Operator:]

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a great day.