China Marine Food (NYSE AMEX:CMFO)

SHISHI, China, June 30, 2011 /PRNewswire-Asia-FirstCall/ -- China Marine Food Group Limited (NYSE Amex: CMFO) ("China Marine" or the "Company"), a China-based manufacturer of Mingxiang® seafood-based snack foods, "Hi-Power" marine algae-based beverages, and distributor of frozen marine catch, today provided an update on its two business segments.

China Marine continues to experience solid growth in its Hi-Power algae-based beverages. Increased marketing activities have resulted in growing brand recognition and repeat orders in Fujian province. To increase geographic penetration, the Company has also expanded into the Zhejiang province through a distributor who services the Wenzhou area. The initial focus has been on stocking restaurants and canteens, with approximately 600 points of sales established to date. The Company has launched various marketing initiatives to build brand awareness and anticipates signing additional distributors in the near term. Management has been encouraged by consumer feedback and sell through has been robust.

Sales of the Company's seafood products have been adversely affected by consumers' perception of safety in relation to the nuclear disaster in Japan. Softness in sales that began in late March has persisted through the second quarter of 2011. While China Marine is confident the seafood it uses to produce Mingxiang® snack foods are safe, it is unclear how long it will take for consumer confidence in seafood products to normalize. Management will provide a detailed update when it reports its second quarter 2011 results.

"The long term fundamentals of our businesses remain strong and we are committed to continually investing behind our brands," stated Chairman and CEO, Mr. Pengfei Liu. "While we believe that these sales disruptions in our seafood products are temporary, we are working diligently to ensure the safety of our products to our customers and distributors. Hi-Power continues to gain traction and the product diversification clearly benefit the shareholders at times such as this."

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."

Business Updates:

2011 Guidance

Results for the Year:

• Gross profit was $37.5 million, an increase of 95.8% from $19.1 million in 2009
• Operating income for the twelve months of 2010 was $25.3 million, with operating margin of 20.7%, a 56.8% year-over-year increase from $16.2 million a year ago
• Year-to-date 2010 GAAP net income was $21.1 million, compared to $14.6 million in the prior year's corresponding period, a 45.1% increase. Excluding the non-cash charge of $2.4 million associated to the amortization costs of the "Hi-Power" acquisition,
• adjusted net income for the full year was $23.5 million and exceeded management expectations of $21.5 million in adjusted net income.
• GAAP earnings per weighted average diluted shares were $0.73 based on 29.0 million fully diluted shares, while adjusted non-GAAP earnings per share were $0.81 for the twelve months period ended December 31, 2010

"2010 was a transformational year for China Marine for several reasons," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "First, we entered a new growth business by acquiring 'Hi-Power' beverages in January of 2010. After incorporating improved labeling and packaging, 'Hi-Power' sales exceeded our expectations during its first year where we only penetrated the Fujian market. For the two years leading up to our 'Hi-Power' acquisition, we targeted a complementary marine-based business and this turned out to be the perfect fit. This high margin business will provide further growth in 2011 and remain an important component of our financial results for years to come."

Financial Summary

2011 Guidance

Revenues: $150.0+ million

Sales of China Marine's "Hi-Power" beverages were $2.5 million and $3.0 million in October and November, respectively, driven by strong re-ordering from current distributors. The Company has focused its sales and marketing efforts on increasing new customer trials and brand awareness in the approximately 12,000 retail locations where "Hi-Power" beverages are sold.

"We are pleased with the results from our focused marketing efforts and effective promotions," began Pengfei Liu, Chairman and CEO of China Marine. "As an emerging beverage company in China, enticing shoppers to make initial purchases is vital to building a loyal consumer base. Such promotions have been successfully deployed with our distributors since we re-launched "Hi-Power" with new packaging and positioning as a healthy beverage in January of 2010. We have received steady re-orders from our "Hi-Power" distributors over the past two months and also witnessed healthy growth in our snack food business in the fourth quarter. We anticipate a strong finish to 2010," Liu concluded.

"We are pleased to announce record third quarter results, which benefitted from 31.0% organic growth in seafood snack food products line. We added an additional 100 retail points to our network and experienced year over year growth in the majority of the sales territories for our core product line," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "Sales of our beverage line, 'Hi-Power', exceeded our expectations as we experienced continued demand across our home province of Fujian and gained a solid understanding of the caliber of beverage distributors needed to obtain the same level of success in other markets. We also began a robust marketing campaign to foster distributor loyalty, boost brand awareness and drive new sales.  Accordingly, we increased the number of 'Hi-Power' sales and marketing staffs from 23 at the beginning of the year to 205 as of September 30, 2010. We expect continued sales growth in the fourth quarter and have increased our revenue guidance for "Hi-Power" to $23.0-$25.0 million for the year."  

Including the $2.0 million September sales, year-to-date sales of Hi-Power beverages were $17.3 million as of September 30, 2010.

Based on projections for the fourth quarter of 2010, China Marine has increased its revenue guidance on Hi-Power beverage sales to $23.0 to $25.0 million for the 2010 year. Hi-Power retail locations now total 12,000 retail points throughout Fujian province, an increase of 20% since the Company last reported retail end-point count.

"Sales of Hi-Power were strong the summer since consumers typically drink more liquids in these hot months," began Pengfei Liu, Chairman and CEO of China Marine.  "As we move into winter, distribution and customer base expansion is our goal for Hi-Power and our Mingxiang®-branded foods. Cost-effective promotions, when managed in coordination with distributors, have proven to be an effective method to build our brand, expand our customer network, maintain distributor loyalty and drive sales.  We were pleased to see the results of this promotion increase our end-user network and achieve consumer recognition from our collective sponsorship of marketing campaigns during the third quarter.  We are confident in our revised revenue guidance for the year."

Second Quarter 2010 Highlights:

• Revenue was $27.6 million, up 86.8% from Q2 2009.
  
• The Company expanded its retail footprint for seafood snack food  products by 400 sales points to 2,900 and sales grew 36.1% year over year.
  
• Retail locations for "Hi-Power", the Company's marine algae-based beverage, crested over 10,000 retail points by the close of the second quarter 2010 while quarterly revenues grew 183.6% sequentially to $7.8 million.
  
• Gross margins expanded by 379 basis points to 37.0% with operating margins of 29.0% for the quarter.
  
• GAAP net income was $6.8 million, up 83.1% from Q2 2009
  
• Adjusted net income was $7.4 million.
  
• Earnings per diluted share were $0.26 based on 26.4 million shares; Adjusted EPS was $0.28.

"We are very pleased with our second quarter results, which was driven by 36.1% organic growth in seafood snack food products line. We added an additional 400 retail points to our network and experienced year over year growth in every sales territory for our core product line," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "Sales of our new beverage line, "Hi-Power", exceeded our expectations, as we experienced strong demand across our home province of Fujian. We expect continued sales growth for our beverage segment in the second half of the year. Accordingly, we increased the number of "Hi-Power" sales and marketing staff from 23 at the beginning of the year to 188 currently as of June 30, 2010. In our recruiting effort, we have also retained top marketing talent from well-known international beverage brands to enable us a competitive edge in this fast-growing sector. "

"Based on the Company's second quarter and year-to-date performance, China Marine is confident it will exceed its revenue guidance of $20.0 million in "Hi-Power" sales for 2010 and will update investors with an increased guidance number after it consolidates its forecasts for the second half of the year."

China Marine Food issue a release confirming our alert on July 6, 2010.

On July 2 and July 8, China Marine filed two separate SEC Form 4 documents detailing Chairman Liu's share purchases of a total of 245,500 shares between at average of $3.91 and $4.34. SEC Form 4 documents must be filed with the SEC when any 10% or greater shareholder purchases or sells shares. The number of shares and price of shares are detailed on each Form 4 in addition to the name and address of the shareholder. As a result of the Chairman's purchase of shares, Mr. Liu's ownership in the Company increased from 41.4% to 42.3%.

"I am very confident in the long-term growth of our Company and firmly believe that our Company's shares are always an excellent investment," Pengfei Liu, Chairman and CEO of China Marine stated. "I am confident that equity markets in the US will improve over time while our business will also grow at a very fast rate this year and next. We have forecasted revenues from our seafood snack food business will increase more than 30% in 2010. The organic growth of our snack food segment will be accompanied by meaningful revenues and earnings contributions from our algae-based beverage, 'Hi-Power'. In the first couple of weeks of July, we have been informed that the pace of our distributors re-orders has continued into the third quarter. Our CFO and I have made a commitment to update our investors on a regular basis and look forward to detailing our upcoming orders for our beverage segment and the expansion of our distributor network in the near future."

"Our acquisition of Xianghe complements our product line and gives us entry into new markets. Xianghe's "Hi-Power" algae-based drink is popular among health conscious consumers, a growing market segment in China," said Mr. Liu. "China Marine management will take over and manage Xianghe, and we intend to develop additional sales of "Hi-Power" algae-based drink through our Mingxiang(R) existing and expanding distribution network," Liu concluded.

After acquiring Xianghe, the Company increased its fiscal year 2010 guidance to $100.0 million in revenues and $21.5 million in net income. These guidance numbers are subject to change and before any non-cash amortization charges associated with intangible assets generated from the Xianghe acquisition.

Source: PR Newswire (March 22, 2010)