Pingtan Marine Enterprise Ltd.
Q1 2015 Earnings Call Transcript

Published: 12 May 2015

[Operator:]

Greetings and welcome to the Pingtan Marine Enterprises' 2015 First Quarter 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. I would now like to turn the conference over to Ms. Katherine Yao, the Equity Group. Thank you, Ms. Yao. You may now begin.

[Katherine Yao:]

Thanks Mannie, and good morning everyone. Thank you for joining us. Copies of the press release announcing the 2015 first quarter financial results are available on Pingtan Marine's website at www.ptmarine.com. You are also welcome to contact our office at 212-836-1600 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 statement 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'd now like to take a moment to outline the format of today's call. I will read our prepared opening statements in English on behalf of the company's Chairman and CEO, Mr. Xinrong Zhuo, then I will 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 try to read the opening statements from Pingtan Marine's Chairman and CEO, Mr. Xinrong Zhuo.

[Xinrong Zhuo:]

Good morning, everyone and thanks for joining our 2015 first quarter conference call. I would like to begin by providing some background on recent developments that impacted our results for the period specifically anti-illegal fishing matters enacted by the Indonesia government, in compliance with these guidelines, our fishing vessels operating in the Arafura Sea of Indonesia where force to maintain a minimum level of operation, which significantly impacted our harvest volume and sales for the quarter. However, we believe these temporary revolution caused by the Indonesian government effort to legal fishing activity were ultimately benefit from the other fully licensed fishing companies over the long term. As we cooperated with the Indonesian Navy to accelerate the elimination of illegal fishing vessels from the waters, we continue to seek and establish new fishing territories and to further invest in our operations to maintain our leading market position in China. Our CFO Mr. Roy Yu, will discuss this topic in greater detail later on this call. Moved by the challenges, we are able to achieve some operating results in the first quarter of 2015. We maintained our gross margin levels and generated cash flow from operating activity. On February 18, we'll take our second quarterly cash dividend which had a record of January 15, 2015 [indiscernible] to grow our business and generating the current for investors. Our confidence drive from our strong balance sheet, and we expect to announce our next quarterly dividend payment in the coming week. With that I'd now like to turn the call over to our CFO, Mr. Roy Yu, and on behalf of our Company I will look forward to meeting many of you in person, and as always welcome to this organization and take a tour. Thank you. I would now like to turn the call over to Mr. Roy Yu, Chief Financial Officer of Pingtan Marine Enterprise.

[Roy Yu:]

Thanks, Katherine. Good morning, and welcome everyone. Today I will discuss Pingtan Marine's 2015, first quarter operational and financial results. Before I get started, I would like to extend out on some of the information Chairman Zhuo, shared regarding recent factors that impacted our operations during the period. In early December 2014, the Indonesia Government introduced a six months moratorium on issuing new fishing licenses and renewals so that country's Ministry of Maritime Affairs and Fishers could monitor the operations of existing fleets in an effort to curb illegal fishing activity on its waters. Indonesia Government has also announced that it will revise its fishery policy with all neighboring countries. As a result, all licensed fishing vessels including the Company's fishing vessels are operating on Arafura Sea of Indonesia are permitted to only operate within strict guidelines in order to avoid potential enforcement actions by the Indonesian Navy such as boat seizures. Fishing is a highly regulated industry. And our operations and operating results are subject to the support of the governmental policies. As the Chairman, mentioned earlier, our fishing vessels have maintained minimum operating levels in cooperation with the Indonesian Navy to accelerate the elimination of illegal fishing vessels from the waters. Now, I'd like to move to financials. Despite of the challenge I just mentioned, we maintained gross margin levels, and generated positive cash flow from operating activities during the three months ended, March 31, 2015. However, our sales volumes decreased by 64% to 11 million kilograms in the first quarter of 2015 from 23 million kilograms in the first quarter of 2014. The Company reported revenues from our fishing business of $29 million for the three months ended March 31, 2015 compared to $66 million for the same period in 2014. The decrease was primarily due to the decrease the average unit sales price from a different sales mix as well as the company’s minimum operations in Arafura Sea during the first quarter of 2015 in compliance with Indonesian government efforts to curb illegal fishing in its waters, which resulted in decreased sales volumes. For the first quarter ended March 31, 2015 gross profit from our fishing business was $12 million compared to $26 million in the prior year period. The gross margin was 39.9% compared to 39%. The slight increase in gross margin was primarily due to the different sales mix we expect to maintain our gross margin levels in the near-term. Our selling expenses include storage and shipping fees, insurance and other expenses. Our sales activities are conducted through direct sales by our internal sales staff. Because of the strong demand for our products and services, our selling expenses have been - a small percentage of our revenue as we do not incur most expense related to marketing and distribution. For the first quarter ended March 31, 2015 selling expenses was $0.7 million or 2.4% of revenue for the three months ended March 31, 2015 compared to $0.6 million, a 1% of revenue in the prior year period. For the three months ended March 31, 2015 our general and administrative expenses were $1.4 million or 5% of revenue compared to $0.8 million or 1.2% of revenue in the prior year period. Pingtan reported net income from its fishing business for the first quarter of 2015 of $8.4 million or $0.10 per basic and diluted share compared to net income of $23.4 million or $0.30 per basic and diluted shares in the prior period. Moving quickly through the balance sheet at March 31, 2015 Pingtan's cash and cash equivalent were $67 million. Total assets were $317 million. Total long-term debt was $39 million and shareholders equity was $223 million compared $13 million, $249 million, $39 million and $149 million respectively at December 31, 2014. We'll continue to cooperate with Indonesian government new hopes of accelerating the successful conclusion of it's anti-illegal fishing matters as we cannot predict the timing of when this matters may be lifted, we’re unable to provide financial projections for full year 2015 at this time. But we remain focused on the factors that we can control. This includes actively but methodically seeking and establishing new fishing territories, building Pingtan’s brand and exploring retail channels and expanded geographic coverage. We’re maintaining a straight operating cost structure. Thank you.

[Katherine Yao:]

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

[Operator:]

[Operator Instructions] Our first question is from [Damian Fulton] [ph], Private Investor. Please go ahead.

[Unidentified Analyst:]

We'd like to look the status of the processing plant and exactly how much revenue you’re expecting from that plant?

[Roy Yu:]

Currently we are negotiating with the government for the land which is in progress now. We expect to get the land and start the construction within this year. And as soon as the building finished we will start the operation for the processing plant which we have a internal projection for the revenue and net income. But with that, I think we currently taking three steps for the processing plant of the building up to in our expected capacity. But for the first step, we expect to have at least 50,000 metric tons of capacity.

[Unidentified Analyst:]

Okay. And as far as revenue?

[Roy Yu:]

That really depends on the market price of the seafood. With the current market price - let me do a simple calculation, so about $2000 per ton now, so it's 50 - right, about $500 million in revenue.

[Unidentified Analyst:]

Okay. All right. Thank you.

[Roy Yu:]

Thanks.

[Operator:]

[Operator Instructions] Okay. I would now like to turn the conference back over to management for any additional or closing remarks.

[Roy Yu:]

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

[Operator:]

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.