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Andatee China Marine Fuel Services Corporation, a leading independent operator engaged in the production, storage, distribution, trading of blended marine fuel oil for cargo and fishing vessels in China, has reported a net los of $3.42 million for the first quarter of 2014, down from a net income of $334,972 during the corresponding period in 2013.

Revenue decreased by $11.7 million, or 22%, from $53.6 million in the three months ended March 31, 2013 to $42 million in 2014. The decrease in revenue was mainly attributed to a decrease in the quantity sold and a decrease in the selling price.

The quantity sold decreased from 63,193 tonnes in the first quarter of 2013 to 54,205 tonnes in the first three months of 2014, which was primarily said to have been caused by decreased sales demand for the company's #2, #3 and #4 blended fuel oils due to reduced fishing activities as a result of the holiday season and severe winter weather in 2014.

The average selling price for #1 fuel decreased from RMB 6,375 per tonne in the first quarter of 2013 to RMB 4,480 per tonne in the corresponding period in 2014, representing a decrease of 29.7%. The average selling price for marine fuel #3 decreased by 13.7% from RMB 4,953 per tonne to RMB 4,275 per tonne between the first quarter of 2013 and the first three months of 2014.

The decrease in selling price for these products led to an overall decrease in sales revenue. For the three months ended March 31, 2014, #1 marine fuel represented 24.4% of sales, #2 marine fuel represented 8.6% of sales, #3 marine fuel represented 5.9% of sales, #4 marine fuel represented 50% of sales, 180 cst represented 5.8% of sales and 120 cst represented 5.4% of sales, while during the first three months of 2013, #1 marine fuel represented 14.4% of sales, #2 marine fuel represented 11.7% of sales, #3 marine fuel represented 12.4% of sales, #4 marine fuel represented 58.5% of sales, 180 cst represented 0.8% of sales and 120 cst represented 2.2% of sales.

Cost of revenue decreased by $11 million, or 22%, from $50.2 million for the first three months of 2013 to $39.1 million for the three months ended March 31, 2014, primarily due to a decrease in sales volumes and global oil price fluctuations, Andatee said.

Gross margins decreased by $0.60 million, or 17%, primarily due to decreased revenue. However, the gross profit percentage increased from 6.5% in the first quarter of 2013 to 6.8% in 2014.

The increase in gross profit percentage for the quarter ended March 31, 2014 was affected by product mix sales changes (normally 120 cst and 180 cst only have a gross profit percentage of 1% to 2%, #1 and #2 fuel have a gross profit percentage of 6% to 7%, and #3 and #4 have a gross profit percentage of 3% to 5%), because different products have a different selling price, cost of sales and gross profit percentage, Andatee said.

For the three months ended March 31, 2014, 24.4% of sales were from higher margin #1 fuel oils, which was higher than the same period in 2013. In addition, Andatee said it strengthened its efforts to import fuel oils from the overseas market since the second half of 2013, which enabled the company to avoid incurring higher purchase costs from domestic suppliers. This led to the costs of purchase decrease and the gross profit percentage to increase.

Commenting on the net loss, Andatee said: "The increase in our net loss was mainly the result of our decrease in revenues, increase in general and administrative expense, and an increase in interest expense."

Mr. Wang Hao, Chairman and Chief Executive Officer of Andatee, said: "The general slow-down of the Chinese economy, seasonality's impact on the fishing industry, as well as the global crude oil price fluctuation in the aggregate resulted in a decrease in our sales in Q1 2014 and caused a net loss of $3.42 million. Notwithstanding the foregoing, however, we intend to remain active in the efforts to increase our share of retail sales, acquire our own retail facilities, build retail points in strategic locations to capture a majority of active local markets and add more products to our current product line.

"Going forward, with the fishing industry back to normal production conditions and our strategic strength being built up, we intend to improve our performance and realize sustainable long-term growth in 2014 and beyond."