Andatee China Marine Fuel Services Corporation, the leading independent operator engaged in the production, storage, distribution, wholesale purchase and sale of blended marine fuel oil for cargo and fishing vessels in Northern China, has announced that net income during the first quarter of 2010 declined to $1.4 million from $1.5 million during the corresponding period last year.
Revenues for the first quarter 2010 were $29.8 million, or 18.0 percent higher than the $25.2 million achieved during the same period in 2009. This increase was attributable to the increase in retail sales due to the expansion of the company's sales network and higher international crude oil price.
Total sales volumes for the first quarter were down 14 percent to 47,000 tonnes compared with 55,000 tons in 2009. This was said to be primarily attributable to the decrease in sales due to cold weather conditions in ports that represent a substantial portion of the company's sales.
Sales of #4 marine fuel, mainly used by fishing boats, represented 66.5 percent of Andatee's total sales; volumes of #3 made up 10 percent of sales and #2 marine fuel represented 10.2 percent of total sales. Meanwhile, sales of 180-cst and 120-cst were 6.9% and 6.3% of sales, respectively.
The company's gross profit increased by 19.3 percent to $3.6 million from $3.0 million in first quarter of 2009. The gross profit margin was 12.0 percent for the first quarter of 2010, compared with the 11.9 percent achieved in the year-earlier period. The increase in gross profit margin was said to be primarily due to an increase in sales of higher margin products to retail customers.
Sales to retail customers increased from 36 percent of total sales in the first quarter of 2009 to 44 percent in first quarter of 2010 as the result of Andatee's expansion and the acquisition of retail distribution facilities.
Selling, general and administrative expenses were approximately $1.4 million during the first three months of this year, compared with $1.0 million in 2009. The increase was primarily due to increased expenses related to maintaining the company's status as a public company in the United States.
As a result, income from operations in the first quarter of 2010 was $2.2 million, representing an 11.7 percent increase from the $2.0 million earnt last year. The company's operating margin was down to 7.4 percent in the first quarter of 2010 from 7.9 percent the previous year.
Commenting on the results,
Fengbin An, Chairman and CEO of Andatee China Marine Fuel Services Corporation, said: "We are pleased to deliver another quarter of solid financial results despite the impact from a longer winter season, which resulted in a decrease in sales volume during the first quarter of 2010. Nonetheless, we were able to maintain healthy growth and favorable gross margins, as our strategy to focus our sales into the less price sensitive retail market has proven successful.
"As we prepare for the busy quarters ahead, we remain confident with the outlook for our business in 2010, as our customers continue to show increasing demand for our blended marine fuel products," added Mr. An.
Financial Condition
Following the completion of its January 2010 IPO, as of March 31, 2010 Andatee had $21.2 million in cash and cash equivalents, and approximately $25.4 million in working capital, compared to $3.9 million for the quarter ended December 31, 2009. Stockholders' equity as of March 31, 2010 was $40.0 million, an increase of 127.3 percent over the $17.6 million recorded as of December 31, 2009.
Business Outlook
As the leading supplier in the highly fragmented small- and medium-sized fishing vessel market, Andatee said it is well positioned to take advantage of the expected growth in demand for marine fuel in China.
The company intends to leverage the quality of its products as well as its brand recognition to continue to expand its geographic footprint by building or acquiring new facilities. The company anticipates an increase in demand for its marine fuel products as it addresses the quality and pricing volatility issues faced by the local fishing and cargo operators, and expects to continue to focus on retail sales customers in order to maintain strong margins.
"Given our strong balance sheet position, we will continue our effort to expand to more facilities closer to end markets, through business acquisitions, partner cooperation and building local platforms for our products," concluded Mr. An.
