FUZHOU, China, Aug. 9, 2013 /PRNewswire/ -- Pingtan Marine Enterprise Ltd. (Nasdaq: PME), ("Pingtan," or the "Company") an integrated marine services company in the People's Republic of China (PRC), today announced its unaudited financial results for the second quarter and first six months of 2013.

Update on Potential Sale of Dredging Subsidiary

As previously announced, Pingtan's Board of Directors (the "Board") received an offer from its Chairman and CEO, Mr. Xinrong Zhuo, to acquire the assets of China Dredging Group, or CDGC, and its PRC operating subsidiaries, Fujian Xinggang Port Service Co., Ltd. The Board retained an independent financial advisor and investment banking firm, Duff & Phelps LLC, to provide a fairness opinion in connection with the proposed transaction. Mr. Zhuo has offered to purchase the CDGC business and assets in exchange for (i) writing off the Company's current $155.2 million promissory note (which matures on June 19, 2015 and bears an interest rate of 4%); (ii) the transfer of certain fishing trawlers to the Company (the number of which will be determined by the difference between the enterprise value of CDGC less the $155.2 million promissory note divided by the average value of each fishing trawler). As part of the Proposed Transaction, the Board will also retain, BMI Appraisals Limited ("www.bmi-appraisals.com") to provide an independent valuation report on the vessels that would constitute a portion of the consideration.

Duff and Phelps is currently undergoing its due diligence process and expects to deliver a fairness opinion to the Board in the coming weeks. In addition, BMI Appraisals Limited will also submit a valuation report on additional fishing trawlers.

The Company intends to provide additional information for investors, including financial metrics used by Duff and Phelps in the evaluation of the transaction and will make public all the valuation reports for vessels delivered as part of this potential transaction.

Second Quarter 2013 Management Comments

Mr. Xinrong Zhuo, Chairman and CEO of the Company, stated, "We remain focused on expanding our fishing enterprise in light of China's increasing consumer demand. During the quarter, we negotiated a transaction to add another 46 vessels to the Company's fleet, which will greatly increase our fish harvest volume and carrying volume, resulting in the Company having a total of 86 vessels. In addition, each of our fishing vessels require an approval from the Ministry of Agriculture of the People's Republic of China to carry out ocean fishing projects in foreign territories. The primary barrier to entry into the ocean fishing industry has been obtaining the necessary licenses to operate these vessels because the number of such licenses is limited by government authorities so as to prevent overfishing. The newly acquired vessels are fully licensed to fish in Indonesian waters and a fishing license can be transferred to a new vessel when an old vessel retires. We believe that there are no other companies building a leading market share in the fishing industry in China like Pingtan.  This is a highly-fragmented market, and we believe this market share will help in our negotiations with distributors and exporters, and also open up the possibility of selling downstream directly to end markets directly. This will increase our margins in the long-term. However, we recognize that growing our asset base is only one element of the equation, as we also must hire and train highly qualified captains and crew to successfully operate these vessels. This will be instrumental in ensuring that we continue to deliver a consistent and quality product to our customers. We feel that the Company is operating in a sustainable and growing sector and we look forward to keeping investors apprised of our progress."

Consolidated Financial and Operating Review

Revenues

For the three months ended June 30, 2013, revenues increased by 2.8% to $71.9 million from $69.9 million for the same period in 2012.

The Company's revenue from its fishing business increased by 106.8% to $21.4 million compared to $10.3 million in the same period last year. This increase was primarily due to an increase in sales volume as a result of the acquisition of 20 new fishing vessels in 2012, 10 of which were acquired in the second half of 2012, and increased unit selling price.  

On June 20, 2013, the Company's fishing segment expanded its fleet from 40 to 86 through the signing of a "Master Agreement" to purchase 46 fishing trawlers in a transaction totaling approximately $410.1 million. The Company immediately began reporting operating results from this transaction for a short period in the current second quarter, with a full quarter beginning in the third quarter of 2013.

An increase in the revenues from the Company's fishing business was offset by lower volume from the Company's dredging business. For the three months ended June 30, 2013, revenue from dredging services decreased to $50.5 million from $59.6 million in the same period of 2012. This decrease was primarily due a decrease in dredging volume as we terminated the leasing agreements of three dredgers in July 2012 and one in December 2012. As a result, Pingtan completed 23.3 million cubic meters of dredging volume in the second quarter of 2013, compared to 32.8 million cubic meters in the same period of 2012.

For the six months ended June 30, 2013, the Company reported revenues for the first half of 2013 of $118.3 million, compared to $145.0 million in the prior year period. 

Gross Margin

The Company's gross margin was 47.9% in the quarter ended June 30, 2013, compared to 47.5% for the same period last year. The increase was largely due to increased margins at the Company's fishing segment, offset by lower gross margins for the dredging segment, which included $6.1 million in reclamation cost for its BT project.

For the six months ended June 30, 2013, gross margin decreased to 42.7% from 48.6% in the same period of 2012, principally due to lower gross margins for the dredging segment. In addition, the Company incurred $10.3 million in reclamation costs during the period.

Selling, General & Administrative Expenses

For the three months ended June 30, 2013, total selling, general and administrative expenses were $3.3 million, or 4.7% of total revenue, compared to $2.8 million, or $4.0% of total revenue, in the same period of 2012. The increase was mainly due to higher administrative costs associated with the company being a publicly listed company, as well as an expanded scale of operations.

For the six months ended June 30, 2013, total selling, general and administrative expenses decreased to $5.0 million from $5.5 million in the same period of 2012. The lower expenses were primarily attributable to lower revenue taxes for dredging services as a result of a decrease in dredging services revenue.

Net Income

For the three months ended June 30, 2013, the Company's net income was $24.8 million, or $0.31 per basic and diluted share, compared to $21.3 million, or $0.27 per basic and diluted share, in the same period of 2012.

For the six months ended June 30, 2013, the Company's net income was $38.6 million, or $0.49 per basic and diluted share, compared to $48.2 million, or $0.61 per basic and diluted share, in the same period of 2012.

About Pingtan

Pingtan is a marine enterprises group, engaging in dredging services and ocean fishing through its wholly-owned subsidiaries, China Dredging Group and Merchant Supreme, and their respective PRC operating subsidiaries, Fujian Xinggang Port Service Co., Ltd., or Fujian Service, Pingtan Xingyi Port Service Co., Ltd., or Pingtan Xingyi and Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd., or Pingtan Fishing. 

Pingtan Fishing primarily engages in ocean fishing with many of its self-owned vessels operating within the Indian Exclusive Economic Zone and the Arafura Sea of Indonesia. Pingtan Fishing is a growing fishing company and provider of high quality seafood in the PRC.

Business Risks and Forward-Looking Statements

This press release may contain forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. In addition, please refer to the risk factors contained in Pingtan's SEC filings available at www.sec.gov, including Pingtan's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Definitive Proxy Statement. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Pingtan undertakes no obligation to update or revise any forward-looking statements for any reason.

CONTACT:
Roy Yu
Chief Financial Officer
Pingtan Marine Enterprise Ltd.
Tel: +86 591 87271753
[email protected]

INVESTOR RELATIONS:
The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
[email protected]

In China
Katherine Yao, Associate
86 10 6587 6435
[email protected]

SOURCE Pingtan Marine Enterprise Ltd.