China Fishery profits up by 12.5% due to increased catch

China Fishery Group Ltd. announced Wednesday its net profit went up 12.5 percent to US$18.3 million from US$16.2 million.

The increase was recorded for the first quarter of the financial year ending 28 September 2010 (1QFY2010).

Even as the Mainboard-listed industrial fishing company incurred additional operating expenses of US$5.0 million attributable to the South Pacific expansion, net profit margin also improved from 15.5 percent to 18.0 percent.

In line with the increase in net profit, earnings per share rose to 2.12 US cents from 1.89 US cents.

Group revenue meanwhile declined marginally by 3.2 percent from US$104.8 million to US$101.4 million. In terms of profitability, gross profit was up 32.2 percent to US$33.8 million.

China Fishery’s trawling operations also garnered an increase of 18.2 percent in revenue from US$74.6 million to US$88.2 million due largely to increased catch from unutilised fishing quota from previous quarters.

Sales volume for fishmeal however decreased 81.0 percent from 32,800 MT to 6,200 MT due to lower inventory carried forward from 4QFY2009. The high quarter-end inventory was due to the timing effects of sales and logistics.

Fishmeal production remained stable at 33,400 MT (1QFY2009: 33,700 MT). Significantly higher fishmeal prices made up for the reduction in sales volume resulting in a smaller reduction in fishmeal revenue to US$13.3 million.

On the balance sheet level, non-current assets increased 3.4 percent from US$672.3 million to US$695.2 million due to the acquisition of an additional catcher vessel and capitalisation of progress payments for the refurbishment of a factory vessel for the Group's South Pacific operations.

Net debt to equity ratio likewise increased from 84.3 percent to 92.9 percent due mainly to higher working capital requirements for the fishing season.

Managing Director Mr Ng Joo Siang said, "In the North Pacific, total allowable catch of our major harvest species has increased by 13.5 percent, which equates to higher expected catch volume in 2010. Meanwhile, our Peruvian fishmeal operation will continue to benefit from anticipated rising fishmeal prices. The Group has contracted to sell 54,485 MT of fishmeal at an average price of US$1,415 per MT, compared to the average selling price of about US$900 per MT in 2009.

He added, "This is expected to have a positive impact on the Group's revenue and profitability. Our South Pacific operation is also expected to commence significant revenue contributions from the second half of FY2010 as the major fishing season begins in March till October. As of now, we have secured sales contracts to supply 200,000 MT (subject to catch volume) of Jack Mackerel at US$1,060 per MT in 2010."

"On top of focusing on further strengthening our operations, we will continue to explore options to improve the Group’s liquidity position and strengthen its balance sheet. The proposed secondary listing of the Group’s shares on the Oslo Børs is expected to further enlarge its equity base and provide access to international capital markets. This, in turn, can strengthen the Group’s capital base and its position to pursue acquisition and expansion opportunities, and diversify access to new fishing grounds," Ng concluded.