Pingtan Marine Enterprise's (PME) CEO Xinrong Zhuo on Q1 2017 Results - Earnings Call Transcript

Pingtan Marine Enterprise Ltd. (NASDAQ:PME) Q1 2017 Earnings Conference Call May 16, 2017 8:30 AM ET

Executives

Katherine Yao - Investor Relations

Xinrong Zhuo - Chairman and Chief Executive Officer

Roy Yu - Chief Financial Officer

Operator

Greetings and welcome to Pingtan Marine Enterprise 2017 First Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to the company for opening remarks. Please go ahead.

Katherine Yao

Thanks, Manny and good morning, everyone. Thank you for joining us. Copies of the press release announcing 2017 first quarter financial results are available on Pingtan Marine’s website at www.ptmarine.com. You are also welcomed 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.

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 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.

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 will now turn the call over to Pingtan Marine’s Chairman and CEO, Mr. Xinrong Zhuo.

Xinrong Zhuo

Good morning. Thanks for joining our 2017 first quarter conference call. We were pleased to deliver strong operating and financial results during the first quarter of 2017. And through our efforts, we were able to exceed or previously provided first quarter EPS guidance of between $0.08 to $0.10, with EPS of $0.13. As a result of the management’s unremitting efforts throughout prior year as our previous deployed fishing vessels have begun to harvest a steady stream of fish from rich new territories expanded and delivered higher margin fishing products.

In March, we were pleased to announce that Pingtan has expanded its fleet through the purchase of 4 internationally licensed squid jigging vessels and 1 refrigerated transport vessel as China is the main importer of squid worldwide. We were committed to expanding our fishing territories while seeking various methods to increase our production capacity on each product category. As always, we will keep our investors apprised of development and we welcome any hopeful suggestions and introduction. Also during the first quarter, as a result of our hard work, we were very pleased that Pingtan has achieved two major successes towards entering the food consumer market. The first major step is that the company in which we have an equity investment has finally began construction of the fish processing factory in Pingtan Comprehensive Experimental Area of Fujian Province and we expect that construction will be completed in 2018. The processing factory will be used for cold storage, processing and distribution of the deep ocean fish landings of Pingtan’s vessels.

Secondly, we recently announced that Pingtan has signed a tripartite framework agreement with two major companies to enter directly the e-commerce and restaurant chain. This marks the introduction for Pingtan brand products to be sold through a major e-commerce platform to consumers across China and will allow us to expand more into the Southern China region and cooperate with a major catering business. We are convinced that the rapid expansion of market demand in China for quality fish products will continue to provide a tailwind on Pingtan growing into a market leading position as a fully integrated fishery enterprise.

Pingtan is committed to steady reward our investors and in April we have announced 2017 second quarter cash dividend of $0.01 per share of common stock outstanding to shareholders of record on April 30, 2017 and the dividend was paid in cash on or about May 15, 2017. This marks Pingtan’s our 10th consecutive quarterly dividend to our shareholders. We anticipate continuing such payment of cash dividend on a regular quarterly basis and expect to announce our third quarter dividend in mid-July. In the previous earnings conference call we have stated that Pingtan will adjust quarterly dividend rate in accordance with our earnings performance. We expect to deliver solid operating results to further reward our investors in upcoming quarters.

On behalf of our company I look forward to meeting our investors in person and as always welcome to our facilities in Fuzhou and take a tour. Thank you. I would now like to turn the call over to Mr. Roy Yu, Chief Financial Officer, Pingtan Marine Enterprise. Please go ahead sir.

Roy Yu

Thanks Katherine. Good morning and welcome everyone. Today I will discuss Pingtan Marine’s 2017 first quarter operation and financial results. As we previously disclosed Pingtan’s financial results was due 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 to fight illegal fishing activities. In November 2015, the Indonesian government announced that the moratorium had concluded. The company’s expectation is the government will implement new fishing policies and resume the 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 operate 140 fishing vessels, 13 are operating in the Pacific waters, 12 are operating in the Bay of Bengal in India, 9 are operating in international waters and 2 will be deployed to international water after regular maintenance. And the remaining vessels are licensed to operate in the Arafura Sea in Indonesia, but temporarily not operating due to the moratorium.

Now I would like to move to financial results. For the first quarter of 2017 our sales volume was 2.22 million kilogram increased 27% from 1.74 million kilogram in the first quarter of 2016. Pingtan reports its revenues for the three months ended March 31, 2017 at $5.6 million compared to $4.12 million for the same period in 2016. The increase was primarily due to an increase in sales volumes resulting from business expansion for more fishing vessels put in operation as well as an increase in average unit sales price from the different sales mix.

For the first quarter of 2017, gross profit was $63,000 compared to gross loss of $3.1 million in the prior year period. The gross margin increased to 1.1% from three months ended March 31, 2017 from minus 8.5% in the same period in the prior year. The increase was primarily due to the decrease in our unit cost of fish resulting from the increase in our fishing activity by deploying more fishing vessels into our pricing.

Our selling expense mainly includes shipping and handling fee, insurance, customer service charge, storage fees and advertising 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.

For the three months ended March 31, 2017, our general and administrative expenses were $1.09 million compared to $1.47 million in the prior year period.

Pingtan reported a net income of $10.8 million for the first quarter of 2017 or $0.13 per basic and diluted share compared to net loss of $5.5 million or minus $0.06 per basic and diluted share in the prior year period.

On the balance sheet, as of March 31, 2017, Pingtan’s cash and cash equivalents were $0.57 million, total assets were $213.5 million, total long-term debt was $22 million and shareholders’ equity was $121.3 million compared to $0.82 million, $226.5 million, $21.8 million and $139.7 million respectively at December 31, 2016.

To conclude, we will continue and be obligated to cooperate with the Indonesian government in hopes of accelerating implementation of new fishing policies to license fishing companies like Pingtan. We continue actively seeking to expand our fishing territories and production capacity to increase our harvest volume and diversify our product mix. We continue to develop and strengthen both new and existing sales and distribution channels to further expand into yielding provinces, direct retail markets and presence in major e-commerce platforms.

Katherine Yao

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

Question-and-Answer Session

Operator

Roy Yu

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 to our office 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.