China Marine Reports Fourth Quarter and Full Year 2012 Financial Results

SHISHI, China, March 26, 2013 /PRNewswire/ -- China Marine Food Group Limited (NYSE MKT: CMFO) ("China Marine" or the "Company"), a manufacturer of Mingxiang® seafood-based snack foods, Hi-Power® marine algae-based beverages and a distributor of frozen marine catch, today announced its financial results for the fourth quarter and full year ended December 31, 2012.

Financial Summary

"We closed 2012 with very strong results from our two primary businesses - Mingxiang® seafood snacks and Hi-Power® beverages," started Mr. Pengfei Liu, Chairman and CEO of China Marine. "For the second consecutive quarter, sales of our seafood snacks increased year-over-year, reflecting strength in our brands and a rebound in the marketplace. We see continued growth opportunities ahead, driven by further improvements in the market for our products and expanded distribution in existing and select new markets."

Fourth Quarter 2012 Results

For the quarter ended December 31, 2012, total net revenues, including Mingxiang®-branded seafood snack foods, Hi-Power® beverages and marine catch was $50.2 million, down approximately 22.0% from $64.3 million in the prior year's period. However, sales grew significantly year-over-year in both the seafood snacks and Hi-Power® beverages businesses.

Seafood Snack Food Segment

China Marine's sale of processed and packaged seafood snack foods generated $15.9 million in revenue, a 41.6% increase from the fourth quarter of 2011, representing the second consecutive quarter of year-over-year growth in seafood snacks revenue. Overall seafood snack food sales have been gradually recovering to pre-earthquake levels. Sales were particularly higher in Fujian province as a result of continuous market penetration efforts and marketing support. Seafood snack foods accounted for 31.7% of total revenues in the fourth quarter of 2012.

China Marine has maintained its product line of 27 Mingxiang®-branded seafood jerky snacks sold to consumers at retail locations. Retail points for seafood snack foods include major supermarket chains, convenience store chains, general food stores, campus canteens and local corner shops in Fujian, Zhejiang, Guangdong, Shandong and major prefectures like Shenzhen.

Hi-Power® Beverage Segment

Revenues from the Hi-Power® algae-based beverage line were $15.0 million in the fourth quarter of 2012, a 154.7% increase compared to $5.9 million in the fourth quarter of 2011. Hi-Power® sales were negatively affected in the year-ago period due to consumer concerns regarding plasticizer contamination in the beverage industry. Sales increased year-over-year both in Fujian and Zhejiang provinces.

The total numbers of retail end-points for Hi-Power® were about 14,000 on December 31, 2012. Since 2011, the Company has focused on increasing sales growth in existing distributors. Hi-Power® beverages are sold and promoted in major international retailers such as Walmart®, China-based supermarkets like Trust-Mart®, convenience stores, bars, restaurants, school canteens and local corner stores which carry Hi-Power® beverages, and certain locations where Mingxiang®-branded seafood products are also sold.

Gross margin was 38.7% in the fourth quarter of 2012, down 0.5% from 39.2% in the same period last year due primarily to the increased costs of raw materials, packaging materials and manufacturing overhead.

Marine Catch Trade Segment

China Marine's frozen marine catch business segment generated $19.3 million in the fourth quarter of 2012 compared to $47.2 million in the same period a year ago. The Company purchases and sells marine catch to distributors on an opportunistic basis. Gross profits were $1.6 million in the marine catch business during the three months ended December 31, 2012 compared to $1.8 million in the same period a year ago.

Consolidated costs of goods sold totaled $37.9 million for the quarter, or 75.5% of net revenues for the period ended December 31, 2012, which consists of the cost of raw materials, packaging materials, direct labor and manufacturing overhead.

Gross profit in the fourth quarter of 2012 was $12.3 million compared to $7.3 million in the fourth quarter of 2011. Consolidated gross margins increased to 24.5% for the fourth quarter of 2012, up from 11.3% for the three months ended December 31, 2011. Gross margin improvements were a direct result of higher sales of seafood snacks and Hi-Power® beverages, and lower sales of marine catch at relatively lower margins.

GAAP net income attributable to China Marine shareholders was $1.7 million in the three months ended December 31, 2012 compared to $1.1 million net income in the same period a year ago. Excluding the non-GAAP financial measure as mentioned above, adjusted net income for the fourth quarter of 2012 were $4.6 million, with adjusted earnings per share of $0.15.

Full Year 2012 Results

Net revenues for the twelve months ended December 31, 2012 were $157.3 million compared to $143.9 million in the corresponding period a year ago, representing a 9.3% increase. The primary reason for the year-over-year growth in net revenues was a 55.7% increase in sales of Hi-Power® beverages. Mingxiang®-branded seafood products, Hi-Power® beverages and marine catch accounted for approximately 32.7%, 29.4% and 37.9% of total sales in fiscal 2012, respectively.

Gross profits were $35.8 million during the full year of 2012, representing a gross margin of 22.8%, compared to $31.7 million and 22.0%, respectively, during 2011. The Company was able to partially offset higher raw materials and packaging costs through manufacturing efficiencies and an improvement in product mix.

Operating expenses were $39.1 million for the twelve months ended December 31, 2012, up 82.9% compared to $21.4 million in the full year 2011. Sales and marketing expenses increased from $14.0 million in 2011 to $27.0 million in 2012, reflecting ongoing investments in advertising, marketing and promotions. The Company had an operating loss of $3.2 million in 2012 compared to an operating income of $10.4 million in 2011. Excluding $0.6 million of after-tax non-cash stock-based compensation expenses, $2.5 million non-cash amortization expense, $2.6 million of non-cash goodwill impairment and $2.2 million of non-cash intangible assets impairment related to prior acquisition, adjusted operating income for the twelve months ended December 31, 2012 was $4.7 million.

Net loss and net loss per share attributable to China Marine shareholders for the twelve months ended December 31, 2012 were $4.5 million and $0.15, respectively. Non-GAAP adjusted net income was $3.4 million and non-GAAP adjusted earnings per share was $0.12. The weighted average shares outstanding were 29.7 million shares for 2012.

Financial Condition

As of December 31, 2012, the Company had $0.9 million in cash compared to $0.6 million as of December 31, 2011. China Marine had $8.8 million of debt outstanding at December 31, 2012 as a result of short-term loans used for optimal pricing of marine catch purchases and to maintain the effectiveness of the facility lines with the banks. Cash used for operations were $4.2 million during the twelve months of 2012 compared to $8.4 million in the comparable period a year ago. The primary cause of the year-over-year improvement is better accounts receivable collection, partially offset by higher inventories.

Working capital was $72.2 million as of December 31, 2012, up from $70.2 million as of December 31, 2011. The current ratio was 4.7 to 1 on December 31, 2012 compared to 9.0 to 1 on December 31, 2011. Accounts receivable were $54.0 million as of December 31, 2012 compared to $68.6 million as of December 31, 2011. The accounts receivable takes less than three months to collect on average. Shareholders' equity was $126.7 million at December 31, 2012.

Fourth Quarter and Full Year 2012 Conference Call

Mr. Pengfei Liu, CEO, and Mr. Marco Ku, CFO, will host the conference call. To attend the call, please use the dial in information below. When prompted, ask for the "China Marine Food Q4 2012 conference call".

Please dial in at least 10-minutes before the call to ensure timely participation.

A playback of the call will be available until 8:00 am ET on April 3, 2013. To listen, call +1-877-344-7529 within the United States or +1-412-317-0088 when calling internationally. Please use the replay pin number 10026364. The Webcast will be available until March 26, 2014.

About China Marine

China Marine Food Group Limited is a food and beverage manufacturer of Mingxiang® seafood-based snack foods and Hi-Power® marine algae-based health drinks, and a wholesaler of frozen marine catch in five provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its brands as a category leader in 3,500 retail food sales points and 14,000 beverage sales points in China. The Company has received "The Famous Brand" and "Green Food" awards. Located in Fujian province, it is one of the largest coastal provinces in the PRC and a vital navigation hub between the East China Sea and the South China Sea. The Company is committed to the highest standard of quality control with the ISO9001, ISO14001, HACCP certification and EU export registration.

Forward Looking Statements

This release contains certain "forward-looking statements" relating to the business of China Marine Food Group Limited and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, concentration in a single customer, raw material costs, market acceptance, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. China Marine Food Group Limited is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About Adjusted Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP adjusted net income, and non-GAAP adjusted diluted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance and liquidity by excluding certain expenses and expenditures that may not be indicative of "recurring core business operating results", meaning operating performance excluding non-cash amortization charges for intangibles, after-tax non-cash stock-based compensation expenses, and non-cash goodwill and intangible assets impairment. China Marine believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to competitors' operating results. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of the business.

- Financial Statements Follow -

For more information, please contact:

COMPANY

Mr. Marco Hon Wai Ku, CFO

China Marine Food Group Limited
Suite 815, 8th Floor, Ocean Centre, Harbour City, Tsimshatsui, Kowloon, HONG KONG
Tel:              +852-2111-8768
Email:          [email protected]
Web:            www.china-marine.cn

INVESTOR RELATIONS

John Mattio, SVP
MZ North America
Tel:              +1-212-301-7130
Email:          [email protected]
Web:           www.mzgroup.us

SOURCE China Marine Food Group Limited