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China Fishery reported a rather surprising set of 2Q 2009 results, with revenue falling 21.7% as the Company decided to shift their vessel allocation for the South Pacific ocean in anticipation of higher fishmeal and fish prices in 4Q 2009. However, for 1H 2009, revenue increased marginally by 6.8%. I will be reviewing China Fishery in the same fashion as per all my other companies; and this review and analysis will be the only one done as I only do two per financial year – one for half-year results and another for full-year results. There is only the requirement to re-look at the Company in the event of any significant corporate events taking place, of which I do not expect.
Profit and Loss Review and Analysis
It is interesting to note that the ITQ system kicked in during April 2009, and was in force throughout the entire 2Q 2009. The financial effects were pretty dramatic in that cost of sales for 2Q 20009 fell by 60.1% against a 21.7% drop in revenues. Charter hire expenses dropped as a result of lower utilization of vessels as some were deferred to 4Q 2009 where they will be deployed to the South Pacific to increase the quota there. However, for 1H 2009 cost of sales increased by 13.6% compared to a 6.8% rise in revenues; but overall cost of sales for FY 2009 is expected to drop further as the ITQ system continues to exert a positive effect on gross margins and to enhance cost effectiveness. Vessel operating costs fell by 29.1% for 2Q 2009 to US$44.6 million due to the drop in oil prices to around US$70 per barrel, compared to nearly US$147 per barrel during last June 2008. Unfortunately, for 1H 2009, there was still a slight increase in vessel operating costs of 7.6% (about US$8 million).
As a result of the reduction in costs, gross profit for 2Q 2009 only fell a marginal 0.6% and gross profit margin improved from 30.3% to 38.5%. For 1H 2009, gross profit also improved marginally from 36.9% to 37.3%. It is expected that with the ongoing ITQ system in place, this will allow for better control and rationalization of costs for CFG and gross margins should improve further moving forward.
Net margin for 2Q 2009 was 23.3% against 17.1% for 2Q 2008, with income tax expense increasing a significant 49.2%. Finance costs only dipped 3.3% and a still very significant worry of mine is the high interest expense they are paying both of their bank loans as well as their senior notes due 2013. Read more...[caption id="attachment_3251" align="alignright" width="150" caption="Photo by stage88"][/caption]
China Fishery reported a rather surprising set of 2Q 2009 results, with revenue falling 21.7% as the Company decided to shift their vessel allocation for the South Pacific ocean in anticipation of higher fishmeal and fish prices in 4Q 2009. However, for 1H 2009, revenue increased marginally by 6.8%. I will be reviewing China Fishery in the same fashion as per all my other companies; and this review and analysis will be the only one done as I only do two per financial year – one for half-year results and another for full-year results. There is only the requirement to re-look at the Company in the event of any significant corporate events taking place, of which I do not expect.
Profit and Loss Review and Analysis
It is interesting to note that the ITQ system kicked in during April 2009, and was in force throughout the entire 2Q 2009. The financial effects were pretty dramatic in that cost of sales for 2Q 20009 fell by 60.1% against a 21.7% drop in revenues. Charter hire expenses dropped as a result of lower utilization of vessels as some were deferred to 4Q 2009 where they will be deployed to the South Pacific to increase the quota there. However, for 1H 2009 cost of sales increased by 13.6% compared to a 6.8% rise in revenues; but overall cost of sales for FY 2009 is expected to drop further as the ITQ system continues to exert a positive effect on gross margins and to enhance cost effectiveness. Vessel operating costs fell by 29.1% for 2Q 2009 to US$44.6 million due to the drop in oil prices to around US$70 per barrel, compared to nearly US$147 per barrel during last June 2008. Unfortunately, for 1H 2009, there was still a slight increase in vessel operating costs of 7.6% (about US$8 million).
As a result of the reduction in costs, gross profit for 2Q 2009 only fell a marginal 0.6% and gross profit margin improved from 30.3% to 38.5%. For 1H 2009, gross profit also improved marginally from 36.9% to 37.3%. It is expected that with the ongoing ITQ system in place, this will allow for better control and rationalization of costs for CFG and gross margins should improve further moving forward.
Net margin for 2Q 2009 was 23.3% against 17.1% for 2Q 2008, with income tax expense increasing a significant 49.2%. Finance costs only dipped 3.3% and a still very significant worry of mine is the high interest expense they are paying both of their bank loans as well as their senior notes due 2013. Read more...
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China Fishery reported a rather surprising set of 2Q 2009 results, with revenue falling 21.7% as the Company decided to shift their vessel allocation for the South Pacific ocean in anticipation of higher fishmeal and fish prices in 4Q 2009. However, for 1H 2009, revenue increased marginally by 6.8%. I will be reviewing China Fishery in the same fashion as per all my other companies; and this review and analysis will be the only one done as I only do two per financial year – one for half-year results and another for full-year results. There is only the requirement to re-look at the Company in the event of any significant corporate events taking place, of which I do not expect.
Profit and Loss Review and Analysis
It is interesting to note that the ITQ system kicked in during April 2009, and was in force throughout the entire 2Q 2009. The financial effects were pretty dramatic in that cost of sales for 2Q 20009 fell by 60.1% against a 21.7% drop in revenues. Charter hire expenses dropped as a result of lower utilization of vessels as some were deferred to 4Q 2009 where they will be deployed to the South Pacific to increase the quota there. However, for 1H 2009 cost of sales increased by 13.6% compared to a 6.8% rise in revenues; but overall cost of sales for FY 2009 is expected to drop further as the ITQ system continues to exert a positive effect on gross margins and to enhance cost effectiveness. Vessel operating costs fell by 29.1% for 2Q 2009 to US$44.6 million due to the drop in oil prices to around US$70 per barrel, compared to nearly US$147 per barrel during last June 2008. Unfortunately, for 1H 2009, there was still a slight increase in vessel operating costs of 7.6% (about US$8 million).
As a result of the reduction in costs, gross profit for 2Q 2009 only fell a marginal 0.6% and gross profit margin improved from 30.3% to 38.5%. For 1H 2009, gross profit also improved marginally from 36.9% to 37.3%. It is expected that with the ongoing ITQ system in place, this will allow for better control and rationalization of costs for CFG and gross margins should improve further moving forward.
Net margin for 2Q 2009 was 23.3% against 17.1% for 2Q 2008, with income tax expense increasing a significant 49.2%. Finance costs only dipped 3.3% and a still very significant worry of mine is the high interest expense they are paying both of their bank loans as well as their senior notes due 2013. Read more...
