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Income Statement
3QFY2011 (3 months ended 28 June 2011) vs 3QFY2010 (3 months ended 28 June 2010)
Group revenue increased by 32.5% from HK$2,237.9 million to HK$2,965.4 million.
Revenue from the frozen fish supply chain management ("frozen fish SCM") division, which accounted for 50.0% of revenue, was up by 49.1% from HK$994.7 million to HK$1,483.2 million. The increase was mainly due to higher sales volume in the PRC and Africa.
Revenue from the fishing division, which accounted for 50.0% of total revenue, increased by 19.2% from HK$1,243.1 million to HK$1,482.2 million. The increase was primarily contributed by stronger revenue contribution from the Peruvian fishmeal operations and the factory vessel fleet. This was however partially offset by lower revenue contribution from the North Pacific trawling operations due mainly to lower sales volume but higher inventory carried forward for sale in the next quarter.
Revenue from the Peruvian fishmeal operations increased due mainly to higher total allowable catch for the first fishing season in 2011 compared to 2010, and higher inventory carried forward for sale from previous quarter.
The Group has fully utilised its fishing quota in the 2011 first fishing season in Peru with catch volume of Peruvian Anchovy up by 56.6% from 139,429 MT to 218,274 MT. Production volume of fishmeal and fish oil rose from 51,108 MT to 76,825 MT in tandem with the higher catch volume.
In order to maximise the utilisation of its factory vessel fleet, the Group deployed two fishing vessels to operate in the South Pacific during the quarter under review, whilst the rest of the vessels continue to operate the North Atlantic Ocean. The factory vessel fleet generated HK$153.7 million of revenue, an increase of 193.9% from HK$52.3 million during the same period last year.
The following outlines the geographical breakdown of the Group's revenue:
Gross profit increased by 19.0% from HK$586.7 million to HK$698.0 million in tandem with higher revenue though gross profit margin decreased from 26.2% to 23.5%. The decrease in gross margin was largely due to higher fuel cost and higher repair and maintenance costs of vessels.
Selling expenses increased by 11.9% from HK$106.7 million to HK$119.4 million. The increase was attributable mainly to the higher selling expenses in the Peruvian fishmeal operations, in line with higher sales volume for the quarter.
Administrative expenses increased by 20.7% from HK$48.2 million to HK$58.2 million mainly as a result of higher manpower costs in the expanding fishing division. Higher provisions for statutory employees profit share in Peru as a result of increased taxable profit also contributed to the increase.
Finance expenses increased by 26.8% from HK$96.3 million to HK$122.1 million as a result of a higher level of working capital loans to finance the Group's fishing operations and increased bank advances drawn on bills and trade receivables in relation to the frozen fish SCM operation.
Earnings before interest, tax, depreciation and amortisation ("EBITDA") increased by 25.7% from HK$597.1 million to HK$750.3 million.
Income tax expense for the 3QFY2011 increased by 99.3% from HK$23.7 million to HK$47.3 million. The higher tax expenses was directly attributable to the higher taxable earnings of the Peruvian fishmeal operations.
As a result of the above, profit attributable to owners of the Company increased by 17.0% from HK$217.9 million to HK$254.8 million.
9MFY2011 (9 months ended 28 June 2011) vs 9MFY2010 (9 months ended 28 June 2010)
The Group recorded revenue growth of 14.8% from HK$6,228.8 million to HK$7,153.5 million.
Revenue from the frozen fish SCM division, which accounted for 46.6% of total revenue, rose 17.4% from HK$2,836.5 million to HK$3,331.1 million on the back on higher sales volume.
Revenue from the fishing division, which accounted for 53.4% of total revenue, increased by 12.7% from HK$3,392.3 million to HK$3,822.3 million. This was mainly attributable to increased revenue contributions from the Peruvian fishmeal operations as a result of higher prices achieved on fishmeal and fish oil, as well as improved contributions from the factory vessel fleet.
The following outlines the geographical breakdown of the Group's revenue:
Gross profit increased by 9.8% from HK$1,543.5 million to HK$1,695.0 million. Gross profit margin decreased slightly from 24.8% to 23.7%. The decrease in gross margins mainly reflected the higher vessel operating cost in relation to higher fuel cost and depreciation expenses.
Selling expenses increased by 3.6% from HK$254.1 million to HK$263.2 million due primarily to higher sales volume of fishmeal and fish oil.
Administrative expenses increased by 35.3% from HK$138.6 million to HK$187.5 million mainly as a result of higher manpower costs and bank charges required for the expanding fishing division. Higher provisions for statutory employees profit share in Peru as a result of increased taxable profit also contributed to the increase.
Other operating expenses increased by 393.8% from HK$9.8 million to HK$48.3 million, mainly due to the closure of a fishmeal plant in Peru and the expenses associated with the proposed secondary listing of China Fishery Group in Oslo (the application was withdrawn in 2010).
Finance expenses increased by 19.0% from HK$264.7 million to HK$315.0 million due to higher total borrowings to fund working capital requirements for the North Pacific trawling operations and increased bank advances drawn on bills and trade receivables to support the frozen fish SCM operation.
EBITDA increased by 12.6% from HK$1,607.7 million to HK$1,810.6 million.
Profit attributable to owners of the Company decreased by 5.6% from HK$663.4 million to HK$626.4 million. Net profit contribution from the fishing division was lowered as a result of the dilution effect after a share placement by China Fishery Group in July 2010.
Statement of Financial Position
28 June 2011 vs 28 September 2010
Non-current assets increased by 10.9% from HK$9,663.5 million to HK$10,712.1 million due mainly to an investment of a 19.7% stake in The Tassal Group in February 2011 and the acquisition two catcher vessels by the fishing division to increase its fishing capacity in a new fishing ground.
Current assets increased by 36.7% from HK$6,501.9 million to HK$8,888.4 million due mainly to an increase in inventory in the frozen fish SCM division and Peruvian fishmeal operation.
Non-current liabilities increased by 39.5% from HK$3,162.1 million to HK$4,410.5 million. The increase was mainly attributable to (1) The 4-year club loan facility that China Fishery Group entered into in November 2010, and (2) The issuance of CNH 600 million fixed rate unsecured bond in May 2011. Proceeds raised from the CNH bond issue will be used for general corporate purposes, to fund working capital, capital expenditures and strategic acquisitions and investments, as well as to refinance a portion of the Group's existing indebtedness.
Current liabilities increased by 37.4% from HK$3,763.2 million to HK$5,169.6 million, this was due mainly to the classification of outstanding convertible bonds and the increase in bank advances drawn down on bills and trade receivables to support the frozen fish SCM operations.
Net assets went up 8.4% from HK$9,240.1 million to HK$10,020.4 million and net debt to equity ratio increased from 61.3% to 74.3%.
Prospects and Outlook
The Group will continue to search for new and sustainable fishing grounds with rich resources.
With the persistent strong demand for fishmeal in the PRC market, the Group expects fishmeal and fish oil price to remain strong. The Group intends to capitalize on this by releasing the significantly high fishmeal and fish oil inventory in the next quarter.
The Group's frozen fish SCM division is rapidly expanding its business in the African market, with sales to the region recording a year-on-year growth from HK$62.4 million to HK$467.9 million. Propelled by growing demand for frozen fish in Africa, the Group expects its sales to Africa to grow further.
On the corporate front, the Group is currently monitoring the global markets closely before deciding specifically the way forward for the proposed TDR listing.
With respect to acquisitions, the Group is continuing to pursue transactions that fit its strategic criteria and will be accretive to revenues and profits.
Barring unforeseen circumstances, the Group is expected to deliver positive results for the current financial year.