Andatee China Marine Fuel Reports 2011 First Quarter Financial Results

DALIAN, China, May 12, 2011 /PRNewswire-Asia/ -- Andatee China Marine Fuel Services Corporation (NASDAQ: AMCF) ("Andatee" or "the Company"), a leading producer, distributor, and retailer of quality marine fuel for small cargo and fishing vessels in China, today announced financial results for its first quarter ended March 31, 2011.

Q1 2011 Financial Highlights

• Total revenues of $44.3 million, an increase of 48.6% year over year
• Net income attributable to Andatee shareholders of $2.3 million, up 65.0% year over year
• Earnings per share of $0.23

Operational Highlights

• Total sales volume (metric tons of blended fuel) in Q1 increased 21.4% year over year to 57,000 tons
• Construction of new blending facilities in Panjin City, Liaoning province, and Zibo City, Shandong province, scheduled to be completed in May 2011 and June 2011, respectively

Outlook for 2011 (Excludes any acquisitions that the Company may consummate this year)

• Reiterates revenue guidance of between $275 million and $325 million
• Revises net income guidance to between $10 million and $12 million (from $11 million to $13 million) for the year ending December 31, 2011, as a result of rising cost of inventory (rising oil prices) and a conservative approach to potential margin consolidation
• Expects total sales volume to increase between 28% and 52% for the year ending December 31, 2011

Mr. An Fengbin, Chairman, CEO, and President of Andatee China Marine Fuel Services Corporation, stated, "We are pleased to report strong operational and financial growth during the 2011 first quarter, a period that is typically affected by seasonality due to the Chinese New Year holiday. During this time, both cargo and fishing traffic tend to decrease, which directly impacts demand for our marine blended fuel products. Despite this, Andatee's revenues grew over 48% from the prior-year period. We attribute this growth to the rising oil price environment, and, more importantly, our continued focus on improving all aspects of our operations, including raw material procurement through an expanding supplier network, expansion of blending capacity by building and acquiring additional facilities, improved distribution, and a diversified customer base. We continue to closely monitor the demand for our fuel products given a rising cost environment, especially in April 2011, as one of our competitive advantages is the cost efficiency for our customers compared with traditional diesel fuel. Despite these headwinds, we feel that the quality and recognition of our 'Xingyuan' brand continues to resonate with our customers. Our retail operations are expanding, and we are confident that the year and future quarters will show stable and steady growth."

Operational Review

During the first quarter of 2011, the Company's sales volume of its blended fuel products increased 21.4% to 57,000 tons from 47,000 tons in the prior-year period. This increase was primarily the result of increasing demand from the Company's existing distribution network and ongoing efforts in promoting its #1 blended marine fuel product, which is utilized by larger fishing vessels. At May 12, 2011, the Company offered six separate blended fuel products, which service smaller fishing vessels to larger handysize cargo ships.

To continue the growth in sales volume through the remainder of 2011, the Company remains focused on enhancing its marketing efforts tailored to "retail", or individual, operations and expanding its distribution base in Southern China.

The Company continues to make progress on its plan to set up market development offices in large cities, opening offices in Shanghai and Shenzhen during the first quarter of 2011. The Company expects to utilize these offices to establish an effective sales and marketing network to pursue organic expansion possibilities, such as new supply agreements and customer sales, while also providing solid foundations to pursue its acquisition-driven growth strategy in neighboring areas around major cities.

In September 2010, the Company began construction of new blending facilities in Panjin City, Liaoning province, and Zibo City, Shandong province, both of which Andatee expects will improve the Company's production capabilities in blending. The Zibo City facility has tanks with a capacity of 17,000 square meters and is scheduled to be completed in May 2011. This new facility's close proximity to a network of refineries in Shandong province should help to reduce the cost of procuring raw materials and the cost of transportation incurred by shipping products to customers in Shidao City, Shandong province. The Panjin City facility will provide an additional 15,000 square meters in tank capacity and is in close proximity to operations of Andatee's current major suppliers. Construction is scheduled to be completed in June 2011.  

Market Overview

During the 2011 first quarter, the average international oil price increased to $99 per barrel, compared to $82 per barrel in the prior-year period, and this trend continued sharply upward in April 2011. Andatee uses oil refinery by-products as raw materials for production, such as tar and heavy diesel, blends the products at its facilities, and then sells its "Xingyuan" brand to customers at a favorable rate to the market.  

Mr. An continued, "In spite of the first quarter's seasonality and rising oil prices, the Company continued to see stable and strong demand from China's fishing industry throughout this period. Typically, a steady increase in oil prices causes little fluctuation for Andatee from suppliers / customers, as the Company generally purchases its raw material from suppliers on a monthly basis and prices the current cost of these materials onto its customers on a weekly or daily basis. The rise in oil prices had a positive effect on our revenues, and to date, we have been able to mitigate the effects of our increasing raw material costs by increasing the price of our products and passing the entirety of the increase to our customers.  However, a continued sharp increase in oil pricing over an extended period of time, which was the case from January to April 2011, may cause concerns over demand.  We have not seen any shift in demand to date but remain conservative in our outlook."

2011 First Quarter Financial Review

• The Company reported revenues for the 2011 first quarter of $44.3 million, an increase of 48.6% compared to $29.8 million in the first quarter of 2010. The increase was largely due to total sales volume increasing to 57,000 tons in the first quarter of 2011 from 47,000 tons in the prior-year period, which was the result of expanding its sales network and successful marketing efforts of #1 marine fuel products by finding more reliable distributors. Rising oil costs that the Company passed through to its customers also contributed to the increased revenues during the quarter.

• Gross profit increased 46.4% to $5.2 million from $3.6 million in the prior-year period. Gross margin remained relatively flat at 11.8% for the three months ended March 31, 2011, compared to 12.0% for the prior-year period. The slight decrease was largely due to a similar decrease in sales to higher-margin retail customers, which resulted from the Company's efforts to promote wholesale #1 marine fuel during the 2011 first quarter.

• The Company reported net income for the first quarter of 2011 of $2.3 million, or $0.23 per diluted share based on 9.8 million weighted average diluted shares outstanding, an increase of 65.0% from net income of $1.4 million, or $0.16 per diluted share based on 8.4 million diluted shares outstanding, in the prior-year period.

Balance Sheet Highlights

At March 31, 2011, Andatee's cash and cash equivalents (excluding $18.8 million in restricted cash) were $8.0 million, total debt was $34.8 million, and stockholders' equity was $52.6 million, compared to $10.8 million, $36.3 million, and $49.9 million, respectively, at December 31, 2010.  

Outlook for 2011

Mr. An concluded, "Andatee is reiterating its revenue guidance for 2011 as our operational and financial results during the seasonally slower first quarter were in line with expectations.  We believe growing demand, improving brand recognition, and balanced fleet growth will continue to drive the marine fuel market in China. We will continue to focus on the Company's organic growth through the opening of new regional facilities, new products, and expanded service offerings such as direct refueling at sea.  We are also working to strategically identify, research, and if appropriate, will acquire target companies with desired facilities in areas that fit into Andatee's growth plans.  We remain conservative in our approach to acquisitions and intend to maintain a balanced strategy for overall stable growth.  However, the rising cost of raw material is substantial, as the purchasing cost in April increased by approximately 30% when compared to that of March, and we do not believe that the cost will go down considerably in the coming months. Coupled with the PRC government's policy of controlling inflation, which includes the price of diesel fuel, the increases in raw material costs may lead to margin pressure on our products in the near term.  As a result, in a conservative measure, we have adjusted our internal projections and have revised the corresponding net income and sales volume guidance."

Conference Call

The Company will also discuss these results in a conference call tomorrow morning (May 13, 2011) at 9 a.m. ET.

Participant Dial-In Numbers:

A recorded replay of the call will be available until 11:59 p.m. ET on May 16, 2011.  Listeners may dial (877) 660-6853 (U.S.) or (201) 612-7415 (International). The following replay passcodes are both required for playback:

The call will also be simultaneously broadcast over the Internet.  To listen to the live webcast, please go directly to the Company's website at http://www.andatee.com or click on the conference call link, http://www.investorcalendar.com/IC/CEPage.asp?ID=164282. The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.

About Andatee China Marine Fuel Services Corporation

Andatee China Marine Fuel Services Corporation is a leading independent operator engaged in the production, storage, distribution, wholesale purchase and sale of blended marine fuel oil for cargo and fishing vessels in northern China. Andatee provides customers with value-added benefits, including single-supplier convenience, competitive pricing, logistical support and fuel quality control. Its products are substitutes for diesel used throughout east China fishing industry. Backed by core facilities, such as storage tanks, marine fuel pumps, blending facilities and berths (the space allotted to a vessel at the wharf) and small- to medium-sized cargo vessels, its sales network covers major depots along the towns of Dandong, Shidao and Shipu along the east coast of China.  Additional information about the Company is available at http://www.andatee.com.

Safe Harbor Relating to the Forward Looking Statements

Statements contained in this press release not relating to historical facts are forward-looking statements that are intended to fall within the safe harbor rule under the Private Securities Litigation Reform Act of 1995. All forward-looking statements included herein are based upon information available to the Company as of the date hereof and, except as is expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. To the extent that any statements made here are not historical, these statements are essentially forward-looking. The Company uses words and phrases such as "guidance," "forecasted," "projects," "is expected," "remain confident," "will" and/or similar expressions to identify forward-looking statements in this press release. Undue reliance should not be placed on forward-looking information. The Company may also make written or oral forward-looking statements in its periodic reports filed with the U.S. Securities and Exchange Commission and other written materials and in oral statements made by its officers, directors or employees to third parties. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by these forward-looking statements. Such risk factors include, without limitation, our ability to properly execute our business model, to address price and demand volatility, to counter weather and seasonal fluctuations, to attract and retain management and operational personnel, potential volatility in future earnings, fluctuations in the Company's operating results, our ability to expand geographically into new markets and successfully integrate future acquisitions, our ability to integrate and capitalize on the recent acquisitions in Mashan and other markets, PRC governmental decisions and regulation, and existing and future competition that the Company is facing. Additional risks that could affect our future operating results are more fully described in our U.S. Securities and Exchange Commission filings, including our Annual Report on Form 10-K/A for the year ended December 31, 2010, filed with the SEC on April 4, 2011, and other subsequent filings. These filings are available at http://www.sec.gov. The Company may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the SEC and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

SOURCE Andatee China Marine Fuel Services Corporation