Pingtan Marine Enterprise Reports Financial Results For The First Quarter Ended March 31, 2017; Exceeds Previously Provided EPS Guidance

Company Reports First Quarter EPS of $0.13; Exceeds Previously Announced 2017 First Quarter EPS Guidance of Between $0.08 and $0.10


Company to Hold Conference Call Tuesday, May 16, 2017, at 8:30 AM ET

FUZHOU, China, May 15, 2017 /PRNewswire/ — Pingtan Marine Enterprise Ltd. (Nasdaq: PME) (“Pingtan” or the “Company”), a global fishing company based in the People’s Republic of China (PRC), today announced financial results for its first quarter ended March 31, 2017.

The Company’s recent notable events are as follows:

  • March 15, 2017: The Company announced that it will enter the consumer food market as its invested entity has begun development of a new processing factory in Pingtan Comprehensive Experimental Area, Fujian, PRC.
  • March 29, 2017: The Company announced it has expanded its fleet through the purchase of 5 internationally licensed vessels, including 1 refrigerated transport vessel and 4 squid jigging vessels, from Fuzhou Honglong Ocean Fishery Co., Ltd.
  • April 13, 2017: The Company announced a quarterly cash dividend of $0.01 per ordinary share outstanding, payable in cash on or about May 15, 2017 to shareholders of record on April 30, 2017.  This marks the tenth consecutive quarterly dividend paid by Pingtan. The Company intends to continue paying a cash dividend on a quarterly basis, and expects to adjust its quarterly dividend rate in accordance to its earnings performance.
  • May 12, 2017: The Company announced it has taken a second step to enter the consumer food market, and has signed a tripartite framework agreement with Shanghai City Supermarket Co., Ltd and Shenzhen Honglicun Restaurant Co., Ltd to provide its fish products.

Management Comments

Mr. Xinrong Zhuo, Chairman and CEO of the Company, commented, “We were pleased to deliver strong operating and financial results, as our previous deployed fishing vessels have begun to harvest a steady stream of fish and we have exceeded our previously provided first quarter EPS guidance of between $0.08 and $0.10 with EPS of $0.13. In the first quarter, as a result of our team’s  continued unremitting efforts, Pingtan has achieved two major success towards entering the food consumer market. The first major step is that the company in which we have an equity investment has finally begun construction of a 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 2 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 South 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.”

Factors Affecting Pingtan’s Results of Operation – The Indonesian government’s moratorium on fishing licenses renewals:  

As previously disclosed in our Forms 10-K and 10-Q filed since 2015, in early December 2014, the Indonesian government introduced a six-month moratorium on issuing new fishing licenses and renewals so that the country’s Ministry of Maritime Affairs and Fisheries (“MMAF”) could monitor the operations of existing fleets and fight illegal fishing activities. As a result, all licensed fishing vessels operating in Indonesian waters were informed by the Indonesian government to operate within strict guidelines and subsequently to cease operation, in order to avoid potential enforcement actions by the Indonesian Navy, such as boat seizures. To cooperate and comply with the Indonesian government’s fishing license check procedures, the Company reduced its operations in January 2015. Since February 2015, Pingtan has ceased operations of its vessels in Indonesian waters.  Since the Company derives a majority of its revenue from this area, this ban caused a significant drop in production.

In November 2015, the Indonesian government announced that the moratorium had concluded. The Company’s expectation is that the MMAF will implement new fishing policies and resume the license renewal process, although this has not yet occurred. In the interim, the Company’s financial results will continue to be materially adversely affected by this moratorium.

In the meantime, the Company deployed 13 vessels to the Indo-Pacific waters and 2 squid jigging vessels to the international waters of Southwest Atlantic and Southeast Pacific Oceans in the second half of fiscal 2016. In the first quarter of 2017, the Company deployed 4 longline fishing vessels, 2 squid jigging vessels and 1 refrigerated transport vessel to international waters, and expects to deploy 2 more squid jigging vessels after regular maintenance. 

Among the Company’s 140 vessels, 13 are operating in Indo-Pacific waters; 12 are operating in the Bay of Bengal in India; 9 are operating in international waters, 2 will be deployed to international waters after regular maintenance and the remaining vessels are licensed to operate in the Arafura Sea in Indonesia but are temporarily not operating due to the moratorium discussed above.

First Quarter 2017 Financial Highlights (all results are compared to prior year period)

  • As a result of increase in the Company’s fishing vessels put in operation, revenue increased 37.6% to $5.66 million from $4.12 million.
  • Gross profit was $63,333 compared to gross loss of $3.31 million.
  • Net income attributable to owners of the Company was $9.92 million, or $0.13 per basic and diluted share, compared to net loss attributable to owners of the Company of $5.10 million, or ($0.06) per basic and diluted share. The increase was primarily due to the same reasons described above.

First Quarter 2017 Selected Financial Highlights

($ in millions, except shares and per share) data )

Three Months ended March 31,

2017

2016

Fishing Business

Revenue

$5.7

$4.1

Cost of Revenue

5.6

7.4

Gross Profit (Loss)

0.1

(3.3)

Gross Margin

1.1%

(80.5) %

Net Income (Loss)

10.8

(5.5)

Basic and Diluted Weighted Average Shares

79.1

79.1

EPS (in $)

$0.13

($0.06)

Balance Sheet Highlights 

($ in millions, except for book value per share)

3/31/2017

12/31/2016

Cash and Cash Equivalents

$0.6

$0.8

Total Current Assets

38.5

60.8

Total Assets

213.5

226.5

Total Current Liabilities

70.2

64.9

Total Long-term Debt, net of current portion

22.0

21.9

Total Liabilities

92.1

86.8

Shareholders’ Equity

121.3

139.7

Total Liabilities and Shareholders’ Equity

213.5

226.5

Book Value Per Share (in $)

$1.53

$1.77

Consolidated Financial and Operating Review

Revenues

Revenues from the fishing business for the three months ended March 31, 2017 was $5.66 million, an increase of $1.54 million, or 37.6%, from $4.12 million for the same period in 2016.

The increase was primarily due to an increase in sales volume resulting from  business expansion of more fishing vessels put in operation, as well as an increase in average unit sale price from the different sales mix.

Gross Margin

The Company’s gross margin was 1.1% for the three months ended March 31, 2017, compared to (80.5)% in the prior year period. 

The increase was primarily due to a significant decrease in unit cost of fish resulting from the increase in fishing activities by deploying more fishing vessels into operation.

Selling Expenses

For the three months ended March 31, 2017, selling expenses for the fishing business was $0.39 million compared to $0.34 million in the prior year period.

General & Administrative Expenses

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

Net Income (Loss) Attributable to Owners of the Company

Net income attributable to owners of the Company for the three months ended March 31, 2017 was $9.92 million, or $0.13 per basic and diluted share, compared to net loss attributable to owners of the Company of $5.10 million, or $(0.06) per basic and diluted share, in the same period of 2016. The increase was primarily due to the reasons described above.

Conference Call Details

Pingtan also announced that it will discuss financial results in a conference call Tuesday, May 16, 20178:30 a.m. ET.

The dial-in numbers are:

Live Participant Dial In (Toll Free):                    877-407-0310
Live Participant Dial In (International):            201-493-6786

To listen to the live webcast, please go to http://www.ptmarine.com and click on the conference call link at the top of the page, or go to: http://ptmarine.equisolvewebcast.com/q1-2017 . This webcast will be archived and accessible through the Company’s website for approximately 30 days following the call.

About Pingtan

Pingtan is a global fishing company engaging in ocean fishing through its subsidiary, Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd., or Pingtan Fishing.

Business Risks and Forward-Looking Statements

This press release may contain forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward looking statements include, but are not limited to, expectations to continue paying quarterly cash dividends and recognizing sales and commencing fishing activities in the first quarter of 2017. Although forward-looking statements reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Risks include anticipated growth and growth strategies; need for additional capital and the availability of financing; our ability to successfully manage relationships with customers, distributors and other important relationships; technological changes; competition; demand for our products and services; the deterioration of general economic conditions, whether internationally, nationally or in the local markets in which we operate; legislative or regulatory changes that may adversely affect our business; operational, mechanical, climatic or other unanticipated issues that adversely affect the production capacity of the Company’s fishing vessels and their ability to generate expected annual revenue and net income; construction delays, cost overruns and inability to obtain proper permits for the processing factory; inability to sell products to the end-customer at the levels anticipated; and other risk factors  contained in Pingtan’s SEC filings available at www.sec.gov, including Pingtan’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q. . Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Pingtan undertakes no obligation to update or revise any forward-looking statements for any reason.

CONTACT:

Roy Yu
Chief Financial Officer
Pingtan Marine Enterprise Ltd.
Tel: +86 591 8727 1753
ryu@ptmarine.net

INVESTOR RELATIONS COUNSEL:

The Equity Group Inc.

Katherine Yao, Senior Associate
Tel: +86 10 6587 6435
kyao@equityny.com

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(IN U.S. DOLLARS)

For the Three Months Ended March 31,

2017

2016

REVENUE

$

5,661,140

$

4,115,098

COST OF REVENUE

5,597,807

7,427,810

GROSS PROFIT (LOSS)

63,333

(3,312,712)

OPERATING EXPENSES:

Selling

388,718

343,020

General and administrative

1,087,872

1,467,471

Total Operating Expenses

1,476,590

1,810,491

LOSS FROM OPERATIONS

(1,413,257)

(5,123,203)

OTHER INCOME (EXPENSE):

Interest income

147,383

2,367

Interest expense

(703,076)

(522,265)

Foreign currency transaction gain

98,451

20,797

Grant income

12,719,275

154,447

Loss on equity method investment

(6,252)

(10,316)

Other expense

(264)

Total Other Income (Expense), net

12,255,781

(355,234)

INCOME (LOSS) BEFORE INCOME TAXES

10,842,524

(5,478,437)

INCOME TAXES

413

NET INCOME (LOSS)

$

10,842,524

$

(5,478,850)

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST

922,370

(378,471)

NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE COMPANY

$

9,920,154

$

(5,100,379)

COMPREHENSIVE INCOME (LOSS):

NET INCOME (LOSS)

10,842,524

(5,478,850)

OTHER COMPREHENSIVE GAIN

Unrealized foreign currency translation gain

641,048

879,423

COMPREHENSIVE INCOME (LOSS) 

$

11,483,572

$

(4,599,427)

LESS: COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST

973,026

(309,448)

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE COMPANY

$

10,510,546

$

(4,289,979)

NET INCOME (LOSS) PER ORDINARY SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

Basic and diluted

$

0.13

$

(0.06)

WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING:

Basic and diluted

79,055,053

79,055,053

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

March 31,

December 31,

2017

2016

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash

$

571,305

$

820,396

Restricted cash

3,362,660

2,911,922

Accounts receivable, net of allowance for doubtful accounts

11,215,424

11,322,726

Inventories, net of reserve for inventories

16,829,601

8,811,111

Advances to suppliers

2,508,289

3,969,351

Prepaid expenses

8,145

Prepaid expenses – related party

1,126,753

522,337

Other receivables

2,142,573

31,835,456

Other receivables – related party

705,296

639,917

Total Current Assets

38,461,901

60,841,361

OTHER ASSETS:

Cost method investment

3,043,787

3,027,245

Equity method investment

28,932,614

28,493,273

Prepayment for long-term assets

10,964,418

11,913,912

Property, plant and equipment, net

132,050,274

122,196,594

Total Other Assets

174,991,093

165,631,024

Total Assets

$

213,452,994

$

226,472,385

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

949,344

$

916,737

Accounts payable – related parties

4,452,059

2,560,760

Short-term bank loans

23,578,267

21,554,636

Long-term bank loans – current portion

17,393,069

17,298,544

Accrued liabilities and other payables

5,757,308

4,399,536

Accrued liabilities and other payables – related party

16,856,783

18,147,152

Due to related parties

1,203,354

43,354

Total Current Liabilities

70,190,184

64,920,719

OTHER LIABILITIES:

Long-term bank loans – non-current portion

21,958,749

21,839,412

Total Liabilities

92,148,933

86,760,131

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:

Equity attributable to owners of the company:

Ordinary shares ($0.001 par value; 225,000,000 shares authorized; 79,055,053

shares issued and outstanding at March 31, 2017 and December 31, 2016)

79,055

79,055

Additional paid-in capital

81,906,871

111,008,085

Retained earnings

26,567,818

17,438,215

Statutory reserve

9,391,827

9,391,827

Accumulated other comprehensive loss

(12,288,659)

(12,879,051)

Total equity attributable to owners of the company

105,656,912

125,038,131

Non-controlling interest

15,647,149

14,674,123

Total Shareholders’ Equity

121,304,061

139,712,254

Total Liabilities and Shareholders’ Equity

$

213,452,994

$

226,472,385

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN U.S. DOLLARS)

For the Three Months Ended March 31,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

10,842,524

$

(5,478,850)

Adjustments to reconcile net income (loss) from operations to net cash

provided by operating activities:

Depreciation

2,112,525

1,682,985

Increase in allowance for doubtful accounts

96,399

277,982

Increase in reserve for inventories

277,017

1,550,335

Loss on equity method investment

6,252

10,316

Changes in operating assets and liabilities:

Accounts receivable

73,099

3,406,211

Inventories

(8,262,638)

(2,967,993)

Advances to suppliers

1,485,594

170,802

Prepaid expenses

8,205

1,266

Prepaid expenses – related party

(602,715)

1,860,757

Other receivables

29,923,685

(17)

Other receivables – related party

(97)

Accounts payable

27,651

(37,895)

Accounts payable – related parties

1,880,905

656,067

Accrued liabilities and other payables

677,512

(507,011)

Accrued liabilities and other payables – related party

(18,281,290)

Due to related parties

(20,000)

NET CASH PROVIDED BY OPERATING ACTIVITIES

20,244,725

624,858

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment

(9,763,774)

(113,479)

Payment made for acquisition of fishing vessels from related party

(12,252,689)

Prepayments made for long-term assets

(20,108,663)

Payments for equity method investment

(290,440)

Proceeds from transferring equity method investment share

15,291,759

NET CASH USED IN INVESTING ACTIVITIES

(22,306,903)

(4,930,383)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loans

5,100,335

3,156,505

Repayments of short-term bank loans

(3,190,832)

(7,214,044)

Increase in restricted cash

(435,660)

(611,670)

Advances from related parties

1,180,000

200,000

Payments made for dividend

(790,551)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

1,863,292

(4,469,209)

EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS

(50,205)

(90,453)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(249,091)

(8,865,187)

CASH AND CASH EQUIVALENTS – beginning of period

820,396

11,448,684

CASH AND CASH EQUIVALENTS – end of period

$

571,305

$

2,583,497

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for:

Interest

$

587,221

$

556,138

Income taxes

$

$

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Acquisition of property and equipment by decreasing prepayment for long-term assets

$

1,016,541

$

10,551,314

Property and equipment acquired on credit as payable

$

658,827

$

Fishing vessels acquired on credit as payable – related party

$

16,889,095

$

Offset other receivables – related parties against due to related parties

$

$

1,560,000

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SOURCE Pingtan Marine Enterprise Ltd.