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

Q2 2019 Pingtan Marine Enterprise Ltd Earnings Call

FUZHOU Sep 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Pingtan Marine Enterprise Ltd earnings conference call or presentation Monday, August 12, 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 the Pingtan Marine Enterprise Second Quarter 2019 and 6 months Earnings Conference Call. (Operator Instructions) It's now my pleasure to introduce your host, Katherine Yao of The Equity Group, who will read the safe harbor statement and introduction. Katherine, please go ahead.

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

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Thank you, Kevin, and good morning, everyone. Thank you for joining us. (foreign language) Copies of the press release announcing that 2019 second quarter and 6 months 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 will 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) 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 a prepared opening statement in Mandarin, which I will then read in English. I will then turn the conference call to Mr. Roy Yu, Pingtan Marine's CFO, who will continue with the presentation. When he finished, we will open the floor for questions.

(foreign language) 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) 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] Good morning. Thanks for joining our 2019 Second Quarter and 6 Months Conference Call.

In the second quarter of 2019, we continued to achieve overall favorable operational and financial performance while we target an organized implementation of fish fleet maintenance and the vessel modification and rebuilding projects. The company is also actively exploring for other available fish areas in international waters.

The company's management is currently focusing on accelerating the modification and the rebuilding projects of 31 vessels, in particular, 15 light luring seine vessels, 15 squid jigging vessels and 1 transport vessel. Among these rebuilt new vessels, 8 fishing vessels and 1 transport vessel are expected to be put into operation in the near future. 16 fishing vessels are in the process of modification and rebuilding, and the remaining 6 fishing vessels were approved by -- in June by the Ministry of Agriculture and Rural Affairs and will soon start the modification and rebuilding projects. Upon the completion, the 6 fishing vessels are allowed to operate in the international waters of the Indian Ocean.

With these rebuilt kiloton new vessels gradually put into operation, we believe the company will see operational and financial results of these vessels in subsequent quarters.

As always, we'll keep all investors apprised of our development and we welcome any helpful suggestions and introductions.

With that, I would like to turn the call over to our CFO to report 2019 second quarter and 6 months financial results. On behalf of our company, I look forward to meeting all investors in person, and as always, welcome to our facilities in Fuzhou and take a tour. Thank you.

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Katherine Yao, The Equity Group, Inc. - Senior Associate [4]

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I would now like to turn the call over to Mr. Roy Yu, Chief Financial Officer of Pingtan Marine Enterprise. (foreign language)

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Yang Yu, Pingtan Marine Enterprise Ltd. - CFO & Secretary [5]

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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 second quarter earnings press release and the 10-Q we filed last Friday.

Today, I will discuss Pingtan Marine Enterprise 2019 second quarter and 6 months operation and financial results. (foreign language)

For the second quarter of 2019, our sales volumes were 15.4 million kilograms, increasing by 151% from 6.1 million kilograms in the second quarter of 2018. (foreign language)

For the 6 months ended June 30, 2019, our sales volume was 24.2 million kilograms, increasing by 140% from 10.1 million kilograms in the same period of 2018. (foreign language)

Pingtan reports its revenue for the 3 months ended June 30, 2019, at $25.5 million increasing by 87.1% from $13.6 million for the same period in 2018. The increase in revenue is primarily attributable to more vessels in operation, which resulted in an increase in sales volume. And due to the different sales mix, average unit sales price decreased as compared to the same period in 2018. (foreign language)

For the 6 months ended June 30, 2019, the company's revenues were $43.9 million compared to $24.5 million in the first half of 2018. The increase was primarily due to the same reasons described above, mainly due to more vessels in operation. (foreign language)

For the second quarter of 2019, gross profit was $9.3 million compared to gross profit of $7 million in the prior year period. (foreign language)

Gross profit for the 6 months ended June 30, 2019 was $13.3 million compared to gross profit of $12.6 million in the same period of 2018. (foreign language)

The gross margin was 36.4% for the 3 months ended June 30, 2019, decreased from 51.1% in the same period in the prior year. The decrease in gross margin for the 3 months ended June 30, 2019, as compared to 3 months ended June 30, 2018 was primarily attributable to a drop of average unit sales price by 25.7% due to different catch mix delivered from the new fishing vessels that were deployed in the different waters of high seas. (foreign language)

For the 6 months ended June 30, 2019, gross margin decreased to 30.4% from 51.3% in the same period of 2018. The decrease was primarily due to the same reason described above, namely a drop of average unit sales price by 25.1%. (foreign language)

For the second quarter of 2019, selling expenses were $0.5 million compared to $0.4 million in the prior year period. The increase was primarily attributable to the increase in insurance due to the different insured fishing vessel mix and the increase in other miscellaneous selling expense partially offset by the decrease in storage fees, shipping and handling fees, customs clearance charge and advertising fees. (foreign language)

For the 6 months ended June 30, 2019, selling expenses were $1.2 million compared to $0.9 million in the same period of 2018. The increase was primarily due to the increase in other miscellaneous selling expense as a result of higher satellite communication fees and pilotage fees, increase in insurance due to different insured fishing vessel mix as well as increase in storage fees, partially offset by decrease in shipping and handling fees, customs clearance fees and advertising expenses. (foreign language)

For the 3 months ended June 30, 2019, our general and administrative expenses were $2.1 million compared to $3 million in the prior year period. The decrease was primarily due to the decrease of $0.7 million in depreciation in relation to nonoperating vessels as, upon launch of the vessel modification and rebuilding projects, the number of nonoperating vessels decreased by 30 in the second quarter of 2019 as compared to the same period in 2018. Compensation and related benefits and professional fees also showed a large drop of $0.6 million. The decrease was partially offset by the increase in impairment loss on vessels in the second quarter of 2019. (foreign language)

For the 6 months ended June 30, 2019, the general and administrative expenses was $6.9 million compared to $6.1 million in the same period of 2018. The increase was primarily due to an impairment loss on vessels, which totaled $2.5 million for the 6 months ended June 30, 2019. The increase was partially offset by the big decrease in depreciation in relation to nonoperating vessels, compensation and related benefits and professional fees. (foreign language)

Pingtan reported a net income attributable to owners of the company of $4.6 million for the second quarter of 2019 or $0.06 per basic and diluted share compared to net income attributable to owners of the company of $2.9 million or $0.04 per basic and diluted share in the prior year period. (foreign language)

Net income attributable to owners of the company for the first half of 2019 was $2.7 million or $0.03 per basic and diluted share compared to net income attributable to owners of the company of $3.8 million or $0.05 per basic and diluted share in the first half of 2018. (foreign language)

On the balance sheet, as of June 30, 2019, Pingtan's cash and cash equivalents were $3.2 million. Total assets were $361.6 million. Current portion of long-term debt was $22.3 million and shareholders' equity was $154.5 million compared to $2 million, $247 million, $8.5 million and $151.6 million, respectively, at December 31, 2018. (foreign language)

To conclude, Pingtan continues focusing on territorial and fleet expansion and increase fishing matters to further increase production capacity and enrich product mix. We are actively planning and preparing for expansion the business to sea deep processing market and reach directly to end customers, both online and off-line. Meanwhile, we will further explore e-commerce seafood retail business to enhance the entire industry chain and develop new distribution channels to penetrate China's inland provinces. (foreign language)

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Katherine Yao, The Equity Group, Inc. - Senior Associate [6]

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With that, operator, let's start the Q&A. 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) Go ahead, Kevin.

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Operator [7]

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(Operator Instructions) At this time, I'd like to turn the floor back over to management for closing comments.

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Yang Yu, Pingtan Marine Enterprise Ltd. - CFO & Secretary [8]

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Thank you. Thanks again to all of you for joining us today. We look forward to speaking with you again in November after we report our third quarter financial results. As always, we welcome any visitors to our office in Fuzhou, China. Thank you. (foreign language)

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Operator [9]

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That does conclude today's teleconference. You may disconnect your lines at this time, and have wonderful day. We thank you for your participation today.

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