China Marine Reports Q1 2011 Revenues of $26.7 million and Adjusted Net Income of $6.2 million and EPS of $0.21

SHISHI, China, May 9, 2011 /PRNewswire-Asia-FirstCall/ -- China Marine Food Group Limited (NYSE Amex: CMFO) ("China Marine" or the "Company"), a manufacturer of Mingxiang® seafood-based snack foods, "Hi-Power" marine algae-based beverages and a distributor of frozen marine catch, today announced its financial results for its first quarter ended March 31, 2011.

First Quarter 2011 Highlights

• Revenue increased 35.7% year-over-year to $26.7 million
• Expanded "Hi-Power" distribution to 14,000 retail points in total
• Gross margins expanded 250 basis points to 36.1%
• Cash flow from operations up 48.1% due to collections of Q4 2010 receivables

Financial Summary

"Our first quarter results reflect strong demand for our seafood snacks and 'Hi-Power' beverages," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "We made solid progress by expanding distribution for 'Hi-Power' to 14,000 retail points in total. By penetrating more retail outlets, winning a broad customer base and supporting this expansion with enhanced brand building advertisements and marketing, we expect to maintain strong organic sales growth."

First Quarter 2011 Results

Seafood Snack Food Segment

China Marine's sale of processed and packaged seafood snack foods produced $19.9 million in revenue, a 20.4% increase versus the first quarter of 2010 due to strong sales in Fujian and Zhejiang provinces. Seafood snack foods accounted for 74.5% of total revenue in the first quarter of 2011. China Marine has maintained its product line of 29 Mingxiang®-branded seafood jerky snacks sold to consumers at retail locations. Gross profits margins for the seafood snack foods segment were 33.9% compared to 33.5% in the same period last year. Retail points for seafood snack foods include major supermarket chains, convenience store chains, general food stores, campus canteens and local corner shops in Fujian, Zhejiang, Jiangsu, Guangdong, Shandong and major prefectures like Beijing and Shanghai.

"Hi-Power" Beverage Segment

Revenues from the "Hi-Power" algae-based beverage line were $6.7 million compared to $2.8 million in the first quarter of 2010, when the Company acquired "Hi-Power". Sales were driven by orders in the Company's home province, Fujian. Reorder rates from existing customers remained strong and represented most of total "Hi-Power" sales. The total numbers of retail end-points for "Hi-Power" were 14,000 on March 31, 2011. "Hi-Power" beverages are sold and promoted in major international retailers such as Walmart®, China-based supermarkets like Trust-Mart®, convenience stores, bars, restaurants, school canteens and local corner stores which carry "Hi-Power" beverages, and certain locations where Mingxiang®-branded seafood products are also sold.

Gross margin was 42.3% in the first quarter, up 710 basis points from 35.2% in the same period last year. The Company outsources production, bottling and distribution to minimize its working capital and capital expenditures. China Marine continues to invest in sales and marketing events including in store promotions and sporting event sponsorships to drive trial and brand awareness. The sales staff has increased significantly, from 23 at the beginning of 2010 to 172 as of March 31, 2011, to support the retail expansion for "Hi-Power".

Marine Catch Trade Segment

China Marine's frozen marine catch business segment generated $0.1 million sales during the first quarter of 2011 compared to $0.4 million in Q1 2010. A majority of this catch represents similar types of squid the Company uses in the production of its seafood snack foods and thus limits the Company's exposure to price fluctuations. Gross margin was 37.7% in Q1 2011 compared to 27.4% in the same period last year. Management expects annual gross margin of approximately 9.0%-10.0% for its frozen marine catch business.

Total revenue in all segments including Mingxiang®-branded seafood snack foods, "Hi-Power" beverages and marine catch, for the quarter ended March 31, 2011 was $26.7 million, up 35.7% from $19.7 million in the prior year's period.

Costs of goods sold totaled $17.0 million for the quarter, or 63.9% of revenues for the period ended March 31, 2011, which consist of the cost of raw materials, packaging materials, direct labor and manufacturing overhead. In the seafood snack food segment, costs of raw materials account for the greatest percentage of costs and were 73.9% for the quarter, while packaging represented 12.7%. Conversely, in the beverage segment, costs of raw materials were 15.0% of the total costs of goods, with approximately 67.2% spent on packaging. China Marine produces seafood snack foods at its dedicated production facilities in Shi Shi while "Hi-Power" production is outsourced to two blending and bottling facilities in Fujian province.

Gross profit in the first quarter of fiscal year 2011 was $9.6 million, an increase of 45.5% from $6.6 million in the prior year's corresponding period. Consolidated gross margins were 36.1% for the quarter, up 250 basis points from 33.6% for Q1 2010 as a result of utilization of less expensive packaging and raw materials.

Selling, general and administrative (SG&A) expenses in the quarter ended March 31, 2011 were $2.2 million compared to $1.0 million in the prior year period. Sales and marketing expenses represented 6.0% and 2.0% of total revenues in the first quarter of 2011 and 2010, respectively, mainly attributed to increased sales and advertising costs associated with brand investments for "Hi Power" and the recruitment and training of new sales personnel for both Mingxiang® and "Hi-Power".

Operating income in the first quarter of 2011 was $6.7 million, with operating margin of 25.1%, compared to $5.0 million and 25.3%, respectively in the prior year period. Excluding the $0.6 million non-cash amortization expense related to the "Hi-Power" acquisition, operating income was $7.3 million.

GAAP net income for the quarter ended March 31, 2011 was $5.6 million, compared to $3.9 million in the prior year's corresponding period, a 43.1% increase year-over-year. Adjusted non-GAAP net income for the first quarter of 2011 excludes the non-cash amortization charges of $0.6 million was $6.2 million, a 38.0% increase year-over-year. Earnings per weighted average diluted shares were $0.19 based on 29.0 million fully diluted shares, while adjusted earnings were $0.21 per share. The Company's 15% preferential tax rate is secured through 2012.

Financial Condition

As of March 31, 2011, the Company had $35.2 million in cash compared to $15.6 million as of December 31, 2010. Cash flows from operations were $21.5 million due to higher net income and improved account receivable collection, partially offset by increased trading inventories that will be sold in the following quarters.

Working capital was $69.3 million, up from $64.8 million as of December 31, 2010. The current ratio was 15.8 to 1 on March 31, 2011 compared to 7.9 to 1 on December 31, 2010. Accounts receivable were $16.4 million, compared to $48.5 million as of December 31, 2010. The accounts receivable days sales outstanding was approximately 65 days, depending on sales volume and any promotions executed throughout the year. Shareholder equity was $120.7 million.

Business Updates:

2011 Guidance

The Company intends to invest approximately 6.0%-7.0% of sales on sales and marketing to promote its Mingxiang® snack foods and expand distribution for its "Hi-Power" beverages.

Fresh Fish Supplies

China Marine has experienced no disruptions in its raw fish and seafood supplies since the tsunamis and nuclear disaster in Japan. Because its marine supplies come from the Taiwan Strait located between Taiwan and Fujian province, China, the radiation contamination poses no threat to its supplies.

Construction Update – Cold Storage Facility

The Company commenced construction of its new cold storage facility in the first quarter of 2010 and anticipates completing this facility in the second half of 2011. The project is expected to contribute approximately $8.0 million in revenues and $4.0 million in net income yearly once fully operational. Capital expenditures year-to-date were $13.3 million compared to a total projected spend of approximately $20.0 million, including the land cost, to complete the build-out. The Company has updated it Website with progress of the construction underway and can be accessed by the link below.

http://www.china-marine.cn/eng/p2.asp?ItemClass1=Cold+Storage+Facilities

First Quarter 2011 Conference Call

Mr. Pengfei Liu, CEO, and Mr. Marco Ku, CFO, will host the conference call. To attend the call, please use the dial in information below. When prompted, ask for the "China Marine Food Group call" and/or be prepared to provide the conference ID.

Please dial in at least 10-minutes before the call to ensure timely participation.

A playback of the call will be available from 12:00 Noon Eastern Time on May 10 until 11:59 pm Eastern Time on May 17, 2011. To listen, call 1-877-870-5176 within the United States or 1-858-384-5517 when calling internationally. Please use the replay pin number 4417209.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=0000858A or at ViaVid's website at http://www.viavid.net, where the webcast can be accessed through May 10, 2012.

About China Marine

China Marine Food Group Ltd. is a food and beverage manufacturer of Mingxiang® seafood-based snack foods and "Hi-Power" marine algae-based health drinks, and a wholesaler of frozen marine catch in six provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its Mingxiang® brand as a category leader in 3,200 retail food sales points and 14,000 beverage sales points in China. The Company has received "The Famous Brand" and "Green Food" awards. Located in Fujian province, it is one of the largest coastal provinces in the PRC and a vital navigation hub between the East China Sea and the South China Sea. The Company is committed to the highest standard of quality control with the ISO9001, ISO14001, HACCP certification and EU export registration.

Forward Looking Statements

This release contains certain "forward-looking statements" relating to the business of China Marine Food Group Limited and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, concentration in a single customer, raw material costs, market acceptance, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. China Marine Food Group Limited is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About Adjusted Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP adjusted net income, and non-GAAP adjusted diluted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance and liquidity by excluding certain expenses and expenditures that may not be indicative of "recurring core business operating results", meaning operating performance excluding non-cash amortization charges for intangibles. China Marine believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to competitors' operating results. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of the business.

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SOURCE China Marine Food Group Limited