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Edited Transcript of PME earnings conference call or presentation 10-May-19 12:30pm GMT

Q1 2019 Pingtan Marine Enterprise Ltd Earnings Call

FUZHOU Jul 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Pingtan Marine Enterprise Ltd earnings conference call or presentation Friday, May 10, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Xinrong Zhuo

Pingtan Marine Enterprise Ltd. - Chairman & CEO

* Yang Yu

Pingtan Marine Enterprise Ltd. - CFO & Secretary

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Conference Call Participants

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* Katherine Yao

The Equity Group, Inc. - Senior Associate

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Presentation

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Operator [1]

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Greetings, and welcome to Pingtan Marine Enterprise 2019 First Quarter Financial Results. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Katherine Yao of The Equity Group.

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Katherine Yao, The Equity Group, Inc. - Senior Associate [2]

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Thanks, and good morning, everyone. Thank you for joining us. (foreign language) Copies of the press release announcing 2019 first quarter financial results are available on Pingtan Marine's website at www.ptmarine.com. (foreign language) You're also welcome to contact our office at (212) 836-9600, and we'll be happy to send you a copy. In addition, this broadcast will be made available at Pingtan Marine's website.

(foreign language) 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. (foreign language) 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.

(foreign language) And now I'd 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 a prepared opening statement 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.

(foreign language) For the question-and-answer session, please allow us a moment to translate questions. Then we will respond to everyone on the call in both English and Chinese.

(foreign language) With that, I will turn the call over to Pingtan Marine's Chairman and CEO, Mr. Xinrong Zhuo. Please go ahead, Mr. Zhuo.

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Xinrong Zhuo, Pingtan Marine Enterprise Ltd. - Chairman & CEO [3]

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[Interpreted] Thank you, Katherine. Good morning, everyone. Thanks for joining Pingtan Marine Enterprise's 2019 First Quarter Earnings Call.

In the first quarter of 2019, we continued focusing on recovery of production capacity by deploying more fishing vessels to international waters for operation, which increased our harvest volume. In early March, the last batch of our first group of 27 modified and rebuilt fishing vessels have left the port of Fuzhou and sailed to the designated international waters for [production]. Thus, all these fishing vessels are in operation.

Also, during the first quarter 2019, the Ministry of Agriculture and Rural Affairs approved the modification and rebuilding of our other 24 of our fishing vessels, which indicates our second group of vessels to be modified and rebuilt. After the completion of the modification and rebuilding projects, these vessels will be allowed to operate in the international waters of the Indian Ocean, North Pacific Ocean, Southeast Pacific and the Southwest Atlantic Oceans, including Argentina, which will further increase our production capacity and enrich our product mix.

In the first quarter of 2019, we have 31 fishing vessels operating in their respective designated waters. 16 vessels are under [repair] and maintenance and 32 vessels are currently in the different stage of modification and rebuilding [projects]. The company will always make relentless efforts in expanding fishing grounds and increasing the number of operating vessels to demonstrate Pingtan's capability. As always, we will keep our investors updated of all developments, and we will welcome any constructive suggestions and introductions.

Now our CFO, Mr. Roy Yu, will discuss the first quarter of 2019 operation and financial results. On behalf of our company, I look forward to meeting all investors in person, and as always, welcome to our headquarters in Fuzhou and take a tour. Thank you. I would like to turn the call over to Mr. Roy Yu, Chief Financial Officer of Pingtan Marine Enterprise. Mr. Yu?

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Yang Yu, Pingtan Marine Enterprise Ltd. - CFO & Secretary [4]

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Thank you, Katherine. Good morning, and welcome everyone. Regarding the factors affecting Pingtan's results of operation, please refer to our 2019 first quarter earnings press release and the 10-Q we filed yesterday. Today, I will discuss Pingtan Marine Enterprise 2019 first quarter operation and financial results. (foreign language)

For the first quarter of 2019, our sales volumes were 8.7 million kilograms, an increase by 123% from 3.9 million kilograms in the first quarter of 2018. (foreign language)

Pingtan reported its revenue for the 3 months ended March 31, 2019, at $18.4 million compared to $10.9 million for the same period in 2018, an increase of 69.3%. The increase was mainly attributable to significant increase in both harvested volume and sales volume due to more fishing vessels operating in international waters. (foreign language)

For the first quarter of 2019, gross profit was $4.1 million compared to $5.6 million in the prior year period. (foreign language)

The gross margin decreased to 22.1% for the 3 months ended March 31, 2019, from 51.5% in the same period in the prior year. As new fishing vessels are deployed in different waters of high seas, a different catch mix led to a drop of average unit sales price by 24%. And more importantly, 8 of our first group of 27 modified and rebuilt fishing vessels set their sail towards -- to designated waters by the end of the first quarter of 2019, driving up the refueling cost and other related costs of revenue, while no revenue was generated because the vessels were not yet in operation in the reporting period, which primarily accounts for the decrease in gross margin. (foreign language)

For the first quarter of 2019, selling expenses were $0.7 million compared to $0.5 million in the prior year period. The increase was primarily due to the increase in insurance due to the different insured fishing vessels mix, the increase in storage fees and shipping and handling fees as a result of larger warehouse rented and an increased number of deliveries to warehouse, partially offset by the decrease in customs clearance charge and other selling expenses. (foreign language)

For the 3 months ended March 31, 2019, our general and administrative expenses were $4.8 million compared to $3.1 million in the prior year period. The increase was primarily due to impairment loss on the vessels for the 3 months ended March 31, 2019, as well as the increase in professional fees, rent and related administrative service charge and travel and entertainment expenses. The increase was partially offset by the decrease in depreciation related to nonoperating vessels and in compensation and related benefits. And no bad debt expense is recorded as compared to $0.17 million for the 3 months ended March 31, 2018. (foreign language)

For the 3 months ended March 31, 2019, the company dismantled one transportation vessel and deregistered 6 fishing vessels and applied to the MOA for building 7 new vessels. Due to the modification and rebuilding projects of the 7 vessels, the company recorded a nonrecurring noncash impairment loss of $2.23 million. (foreign language)

Pingtan reported a net loss of $1.97 million for the first quarter of 2019 compared to net income of $0.98 million in the prior year period. (foreign language)

Net loss attributable to owners of the company for 3 months ended March 31, 2019, was $1.9 million or $0.02 per basic and diluted share compared to net income attributable to owners of the company of $0.9 million or $0.01 per basic and diluted share in the same period of 2018. (foreign language)

On the balance sheet, as of March 31, 2019, Pingtan's cash and cash equivalents were $76.9 million, total assets were $333.4 million, total long-term debt was $92.6 million and shareholders' equity was $152.5 million compared to $2 million, $247 million, $22.3 million and $151.6 million, respectively, at December 31, 2018. (foreign language)

We continue to focus on territory and fleet expansion and increase fishing vessels to further increase production capacity and enrich product mix. We are actively planning and preparing for expansion in the business [to deeper] sea processing and reach directly to end customers, both online and off-line. Meanwhile, we will further explore e-commerce retail business to enhance the entire industry chain and develop new distribution channels to the China inland provinces. (foreign language)

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Katherine Yao, The Equity Group, Inc. - Senior Associate [5]

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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. (foreign language) Ella, please.

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Operator [6]

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(Operator Instructions) Okay. There are no questions in the queue at this time. I'd like to turn it back to management for closing remarks.

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Yang Yu, Pingtan Marine Enterprise Ltd. - CFO & Secretary [7]

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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. (foreign language)

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Operator [8]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]