Pingtan Marine Enterprise Reports Unaudited Financial Results for its First Quarter Ended March 31, 2013

FUZHOU, China, May 14, 2013 /PRNewswire/ -- Pingtan Marine Enterprise Ltd. (Nasdaq: PME), ("Pingtan," or the "Company") a provider of dredging services in the People's Republic of China (PRC) and territorial sea fishing globally, today announced its unaudited financial results for the first quarter of 2013.

Operating Highlights

  • Completed landmark business combination in February 2013, creating Pingtan Marine Enterprises, one of the largest U.S.-listed marine services operating company in China
  • Currently operates a fleet that consists of 9 dredgers and 40 fishing vessels (see attached asset table)
  • Dredging segment ("China Dredging") continues transition to primary contractor with a backlog of $214.5 million as of March 31, 2013
  • Fishing segment ("Merchant Supreme") reported 26.4% growth in revenues during Q1 2013 and launched 20 vessels during December 2012 (with revenues beginning to ramp up on those vessels in the second quarter of 2013)

First Quarter 2013 Financial Highlights (A)

($ in millions, except per share data)

3 months ended

3 months ended


March 31, 2013

March 31, 2012

  Dredging Services

$26.7

$59.5

  Fishing

$19.7

$15.6

Total Revenue

$46.4

$75.1

Cost of Revenue

30.3

37.7

Gross Profit

16.1

37.3

Gross Profit Margin

34.7%

49.7%

Net Income

13.8

26.9

Basic and Diluted Weighted Average Shares Outstanding

79.1

79.1

EPS

$0.17

$0.34




Balance Sheet Highlights (A)




3/31/2013

12/31/2012

Cash and Cash Equivalents



$206.1

$175.5

Total Current Assets



297.5

277.7

Total Assets                                                                               



505.7

484.0

Working Capital



225.1

210.6

Total Long-term Debt



17.7

16.7

Shareholders' Equity



415.6

400.3

Book Value Per Share



$5.25

5.06

(A) Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity Investment Limited) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co., Ltd. on January 1, 2012, rather than on February 25, 2013.

Management Comments

Mr. Xinrong Zhuo, Chairman and CEO of the Company, stated, "The last several weeks have been a monumental period in our Company's history, as we believe our team has created a diversified entity in the global marine service market.  We remain very optimistic about the growth opportunity in both of our dredging and fishing segments.  We are very pleased to have generated strong cash flow from operations and profitability in our first quarter during a transitional period for our Company."

Dredging Segment Operating and Financial Review

Mr.  Zhuo continued, "In our dredging business, we continue to leverage our long-term customer relationships, many of whom have worked with China Dredging since its inception. One of our goals in the coming years will be to build upon this strong base of projects and further diversify by transitioning from a sub-contractor for projects in the PRC to the role of a general contractor.  We have invested considerably in our Build-Transfer (BT) strategy, which will expand the pipeline and give China Dredging more control over its projects. Our first project in Kemen Industrial Zone of Lianjiang County, Fujian Province, began in January 2013 and is estimated to continue for 18 months.  While this investment directly affected our first quarter financial results, as a result of incurring advanced payments with minimal revenue contribution, we expect to begin realizing the full impact from this project in the second quarter of 2013." 

For the three months ended March 31, 2013, revenue from our dredging services decreased to $26.7 million from $59.5 million in the same period last year.  This was primarily as a result of decreased dredging volume caused by the Company's termination of the leasing agreement for three dredgers in July 2012 and one in December 2012, as these four dredgers were  not fit for the Company's new BT project, which has a higher unit price.   In addition, four of the Company's vessels working on a project in northern China were operated at only 30% of their dredging capacity due to unusually inclement weather conditions during the first quarter of 2013.  The Company does not believe there will be any impact in future quarters; however, as a result of these factors, China Dredging completed 12.7 million cubic meters of dredging volume in the first quarter of 2013 compared to 32.5 million in the same period last year, a decrease of 60.9%. As of March 31, 2013, the Company has a backlog of $214.5 million, which included $15.6 million in new contracts for the first quarter of 2013.

Fishing Segment Operating and Financial Review

Mr. Zhuo continued, "We are very pleased with the development of our fishing business, and are currently selling approximately 30 different species of fish, primarily from India and Indonesia, to over 300 distributors and retailers.  We currently own and operate 38 single trawling vessels and 2 drift netters.  Our goal in the coming months is to continue to opportunistically purchase assets and expand our fleet while diversifying our customer base." 

In the first quarter of 2013, The Company's revenue from its fishing business increased by 26.4% to $19.7 million compared to $15.6 million in the same period last year.  The Company also acquired 20 new fishing vessels in 2012, which began operation in December 2012 and began operating at full capacity in the current second quarter of 2013 after a breaking in period.  The Company and the Company's independent directors have also agreed with Mr. Zhuo, that $48.3 million (due to the Company in accordance with the terms of the share purchase agreement pursuant to which the Company acquired its fishing business) can be repaid with fishing vessels from Fujian Honglong Ocean Fishery Co., Ltd., or Hong Long, a Company owned by Mr. Zhuo.  Hong Long's fishing vessels currently have licenses that will enable the Company's fishing business to increase its harvest volume, revenue and net income rapidly. The fair value of such fishing vessels to be contributed to the Company will be determined by an independent appraisal company hired by the independent directors of Pingtan's Board of Directors.  On May 13, 2013, Pingtan entered into an engagement letter with BMI Appraisals Limited for the performance of such appraisals, which it expects to complete in the next two months. 

Consolidated Financial Review

Revenues

The Company reported revenues during the period of $46.4 million, compared to $75.1 million for the same period in 2012.  An increase in the revenues from the Company's fishing business was offset by lower volume from the Company's dredging business.

Gross Margin

The Company's gross margin decreased to 34.7% in the quarter ended March 31, 2013 from 49.7% for the same period last year, principally due to lower gross margins for the dredging segment.  The Company incurred $4.1 million in advanced fees during the period as part of reclamation for its BT project.  These advanced payments were included in cost of goods sold.  In addition, the Company incurred lower margins in its fishing segment, as 20 vessels launched by the Company in December 2012 did not immediately operate at full capacity.

Selling, General & Administrative Expenses

Total selling, general and administrative expenses were $1.6 million for the three months ended March 31, 2013, or 3.4% of total revenue, compared to $2.7 million, 3.6% of total revenue, for the same in 2012.

Net Income

Net income for the three months ended March 31, 2013 was $13.8 million, or $0.17 per basic and diluted share, compared to $26.8 million, or $0.34 per basic and diluted share, in the same period in 2012.

Outlook for 2013

Mr. Zhuo concluded, "We benefit from having a team of dedicated employees that has considerable experience in operating an integrated company, and believe that we have the right management team in place to continue developing both segments of our business.  The Company's financial position is very strong, with approximately $206 million in cash as of March 31, 2013 and cash from operations during the period of $31.5 million.  We expect to leverage this free cash flow to continue growing our fleet of fishing vessels and expanding our dredging capabilities as a general contractor. We look forward to the future with confidence and will keep shareholders apprised of our progress."

About Pingtan

Pingtan is a marine enterprises group, engaging in dredging services and ocean fishing through two wholly-owned subsidiaries, China Dredging Group, or CDGC, and Merchant Supreme, and their respective PRC operating subsidiaries, Fujian Xing Gang Port Service Co., Ltd., or Fujian Service, PingTan XingYi Port Service Co., Ltd., or PingTan XingYi and Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd., or Pingtan Fishing.

Fujian Service provides specialized dredging services exclusively to the PRC marine infrastructure market and is, based on the number and capacity of the dredging vessels it operates, one of the leading independent (not state-owned) providers of such services in the PRC. Since its inception, it has functioned exclusively as a specialist subcontractor, performing dredging services for other companies licensed to function as general contractors.  PingTan XingYi's Build-Transfer ("BT") strategy, commenced in 2012, is expected to expand the pipeline and provide more control over its projects as it assumes the role of a general contractor.

Pingtan Fishing primarily engages in ocean fishing with many of its self-owned vessels operating within the Indian Exclusive Economic Zone and the Arafura Sea of Indonesia. Pingtan Fishing is a growing fishing company and provider of high quality seafood in the PRC.

Business Risks and Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. These include statements regarding Pingtan's ability to accelerate growth of its business segments, Pingtan's future financial position, the impact of weather on the dredging business, diversification of customer base, and leverage of free cash flow, Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. In addition, please refer to the 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 and Definitive Proxy Statement. 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 87271753
ryu@ptmarine.net

INVESTOR RELATIONS:

The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com

In China
Katherine Yao, Associate
86 10 6587 6435
kyao@equityny.com

 

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(IN U.S. DOLLARS)






For the Three Months Ended March 31,



2013


2012 (A)






Revenue


$ 46,408,547


$ 75,055,734






Cost of revenue


(30,314,630)


(37,731,229)






Gross profit


16,093,917


37,324,505






Selling and marketing expenses


(194,688)


(209,674)





.

General and administrative expenses


(1,407,815)


(2,472,715)






Operating income


14,491,414


34,642,116






Other income/(expense)





   Subsidy income


35,387


-

   Interest income


170,132


150,269

   Interest expenses


(685,377)


(464,614)

   Sundry income


2,003


-

   Gain on foreign exchange, net


207,984


51,538

   Gain/(loss) on derivative


1,764,249


(192,957)

Total other income/(expense)


1,494,378


(455,764)






Income before income taxes


15,985,792


34,186,352






Income tax expense


(2,203,251)


(7,329,896)






Net income

$ 13,782,541


$ 26,856,456

 Earnings per ordinary share





    - Basic and diluted


$ 0.17


$ 0.34






 Weighted average number of ordinary shares outstanding



    - Basic and diluted


79,055,053


79,055,053






 

 


PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN US DOLLARS)







 For the Three Months Ended March 31,





2013


2012 (A)















Net income



$                    13,782,541


$                         26,856,456








Other comprehensive income






   Foreign currency translation gain


1,552,499


92,635

Total comprehensive income 



$                     15,335,040


$                        26,949,091







(A) Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly
known as China Growth Equity Investment Limited) completed its merger with China Dredging Group Co., Ltd.
and the share purchase of Merchant Supreme Co., Ltd. on January 1, 2012, rather than on February 25, 2013.

 

 

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)


March 31, 2013


December 31, 2012


(Unaudited)


(A)

Assets






Current assets







Cash

$

206,108,221


$

175,488,715


Notes receivable (banker's acceptances)







transferred from related parties


-



3,645,817


Accounts receivable - third parties


6,594,416



34,924,685


Cost and estimated earnings in excess of billings







on contracts in progress


9,531,476



8,133,021


Other receivables


8,868,730



34,074


Advance to related parties


60,318,092



49,802,821


Prepaid expenses


1,444,979



410,966


Inventories


4,647,929



5,223,984

Total current assets


297,513,843



277,664,083







Other assets







Prepaid other deposits


4,830



4,430


Prepaid dredger deposits


23,346,429



23,274,105


Security deposits


21,204,998



25,087,880


Long-term investment


3,381,207



3,328,789


Deposit on setting up of Joint Venture


-



6,090,302


Deposit for BT project


67,060,604



66,852,860


Dredger, fishing vessel, motor vehicle, machinery and equipment, net


93,225,303



81,707,388

Total other assets


208,223,371



206,345,754







Total assets

$

505,737,214


$

484,009,837








Liabilities and equity






Current liabilities






      Short-term loans

$

12,020,599


$

25,169,260

      Long-term loans - current portion


7,499,034



8,094,308

      Accounts payable - third parties


7,462,804



3,761,149

      Accounts payable - related parties


4,956,093



5,765,632

      Advance from related parties


19,147,153



714,177

      Derivative liability


-



1,764,249

      Receipt in advance - third parties


793,244



-

      Receipt in advance - related parties


4,908,426



12,681,102

      Income tax payable


1,584,914



5,333,519

      Accrued liabilities and other payables


4,645,682



3,738,134

      Deferred income


9,410,382



-

Total current liabilities


72,428,331



67,021,530







Other liabilities






        Long-term loans, net of current portion


17,674,857



16,689,321

Total other liabilities


17,674,857



16,689,321

Total liabilities


90,103,188



83,710,851







Shareholders' equity






      Ordinary shares, 225,000,000 shares authorized with $0.001 authorized
            with $0.001 per share; 79,055,053 shares issued and outstanding
            as of March 31, 2013 and December 31, 2012


79,055



79,055

      Statutory reserves


19,481,703



19,386,642

      Additional paid-in capital


141,381,098



141,381,098

      Retained earnings


230,911,700



217,224,220

      Accumulated other comprehensive income


23,780,470



22,227,971

Total shareholders' equity


415,634,026



400,298,986








Total liabilities and shareholders' equity

$

505,737,214


$

484,009,837


(A) Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as
China Growth Equity Investment Limited) completed its merger with China Dredging Group Co., Ltd. and the share
purchase of Merchant Supreme Co., Ltd. on January 1, 2012, rather than on February 25, 2013.

 

 


PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN U.S. DOLLARS)



For the Three Months Ended March 31,



2013


2012 (A)








Cash flows from operating activities







Net income



$

13,782,541


$

26,856,456

Adjustments to reconcile net income to net








cash provided by operating activities








Depreciation of dredger, fishing vessel, motor vehicle,
  
machinery and equipment


2,648,376



2,701,825


(Gain)/loss on derivative


(1,764,249)



192,957









Changes in operating assets and liabilities








Accounts receivable - third parties



28,555,829



2,247,242


Accounts receivable - related parties



-



(2,168,154)


Cost and estimated earnings in excess of billings on contracts

 in progress


(1,371,834)



6,956,820


Other receivables



(8,825,504)



(24,668)


Prepaid expenses



(1,026,911)



3,703,227


Inventories



594,162



(1,593,977)


Accounts payable - third parties



3,685,453



750,194


Accounts payable - related parties*



5,280,689



4,822


Receipt in advance - third parties



792,465



(1,162,810)


Receipt in advance - related parties*



(7,964,540)



-


Income tax payable



(3,761,484)



(958,004)


Accrued liabilities and other payables



883,230



(1,260,362)

Net cash provided by operating activities



31,508,223



36,245,568











Cash flows from investing activities








Deposit paid for other fixed assets



(386)



-


Changes in security deposits



3,956,956



-


Proceeds from deferred income**



9,401,148



-


Purchase of dredger, fishing vessels, motor vehicle

machinery and equipment


(13,342,866)



(1,587,377)


Advance to related parties



(9,962,327)



(9,096,655)

Net cash used in investing activities



(9,947,475)



(10,684,032)











Cash flows from financing activities








Proceeds from short-term loans



9,727,422



9,117,597


Repayment of short-term loans



(23,259,126)



(7,607,248)


Advance from related parties



22,355,241



12,330,083

Net cash provided by financing activities



8,823,537



13,840,432











Net increase in cash



30,384,285



39,401,968











Effect of exchange rate



235,221



(32,402)











Cash at the beginning of period



175,488,715



114,204,340











Cash at the end of period


$

206,108,221


$

153,573,906







 

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED

(IN U.S. DOLLARS)










 For the Three Months Ended March 31,






2013


2012 (A)











Supplemental disclosure of cash flow information:







Cash paid:









Income tax paid


$

5,964,685


$

8,287,901










Interest paid


$

685,377


$

464,614









Supplemental disclosures of non-cash transactions:






Deferred income


$

7,550,451


$

-


*Note 1: Deposit on setting up Joint Venture netted off with accounts payable – related parties.


**Note 2: Deferred income relates to government grants to construct new fishing vessels.


(A) Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China
Growth Equity Investment Limited) completed its merger with China Dredging Group Co., Ltd. and the share purchase of
Merchant Supreme Co., Ltd. on January 1, 2012, rather than on February 25, 2013.

 

 

Pingtan Marine Enterprises, Ltd. Asset Summary








Pingtan Dredgers (as of March 31, 2013)








Trailer suction hopper dredger


Capacity
(cubic meters per hour)


Leased/Owned


Purchase/Lease Date


Hengshengjun #88


3500


Leased


January 2008


Liya #10


6500


Leased


June 2010


Non-Self-Propelling Cutter
Suction Dredgers


Capacity
(cubic meters per hour)


Leased/Owned


Purchase/Lease Date


Xinggangjun #3


2000


Owned


May 2008


Xinggangjun #66


3500


Owned


March 2008


Xinggangjun #6


2500


Owned


May 2008


Xinggangjun #9


2500


Owned


June 2008 (1)


Honglinjun #19


3800


Leased


April 2011


Grab dredgers


Capacity
(cubic meters per hour)


Leased/Owned


Purchase/Lease Date


Hengshunda #1


350


Leased


June 2011


Hengshengjun #10 (formerly known as Liya #2)


350


Leased


June 2011


(1) Company commenced leasing Xinggangjun #9 in June 2008 and acquired it in January 2011.









Pingtan Fishing Vessels (as of March 31, 2013)






Trawlers


Fishing Area


Carrying Tonnage


Capacity (KW)


FuYuanYu 135


India


264


441


FuYuanYu 136


India


264


441


FuYuanYu 137


India


264


441


FuYuanYu 138


India


264


441


FuYuanYu 139


India


264


441


FuYuanYu 140


India


264


441


FuYuanYu 151


Indonesia


230


441


FuYuanYu 152


Indonesia


230


441


FuYuanYu 155


Indonesia


272


441


FuYuanYu 156


Indonesia


274


441


FuYuanYu 725


Indonesia


297


698


FuYuanYu 726


Indonesia


297


698


FuYuanYu 727


Indonesia


297


698


FuYuanYu 728


Indonesia


297


698


FuYuanYu 729


Indonesia


297


698


FuYuanYu 730


Indonesia


297


698


FuYuanYu 731


Indonesia


297


698


FuYuanYu 732


Indonesia


297


698


FuYuanYu 733


Indonesia


297


698


FuYuanYu 734


Indonesia


297


698


FuYuanYu 735


Indonesia


236


368


FuYuanYu 736


Indonesia


236


368


FuYuanYu 737


Indonesia


192


441


FuYuanYu 738


Indonesia


192


441


FuYuanYu 739


Indonesia


292


810


FuYuanYu 740


Indonesia


292


810


FuYuanYu 741


Indonesia


292


810


FuYuanYu 742


Indonesia


292


810


FuYuanYu 743


Indonesia


292


810


FuYuanYu 745


Indonesia


292


810


FuYuanYu 746


Indonesia


292


810


FuYuanYu 747


Indonesia


292


810


FuYuanYu 748


Indonesia


292


810


FuYuanYu 749


Indonesia


292


810


FuYuanYu 750


Indonesia


270


441


FuYuanYu 751


Indonesia


270


441


FuYuanYu 791


Indonesia


266


552


FuYuanYu 792


Indonesia


266


552


Drifters








FuYuanYu 793


Indonesia


210


287


FuYuanYu 794


Indonesia


207


434

SOURCE Pingtan Marine Enterprise Ltd.



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