Andatee China Marine Fuel Services Corporation, a 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 it achieved a 38.7 percent rise in net income in 2010.
The company posted a net income of $8.9 million, or $0.95 per diluted share, in 2010 compared to a net income of $6.4 million, or $1.11 per diluted share the previous year.
Revenues of $191.2 million were achieved last year, representing an increase of 53.8 percent compared to the $124.3 million recorded in 2009.
Gross profit increased by 49.4 percent to $21.0 million from $14.1 million the previous year. Gross margin was 11.0 percent compared to 11.3 percent in 2009, which was said to be largely as a result of a shift in the company's product mix.
Fourth Quarter 2010 Results
Andatee achieved a $0.5 million year-on-year rise in net income during the fourth quarter of 2010. Net income rose to $2.2 million, or $0.24 per diluted share compared to $1.7 million, or $0.28 per diluted share in the prior year period.
The company reported revenues for the 2010 fourth quarter of $59.8 million, an increase of $20.8 million, or 53.5 percent, compared to $39.0 million in the fourth quarter of 2009. The increase was said to be largely due to total sales volume increasing during the period to 88,000 tonnes in the fourth quarter of 2010 from 44,000 tonnes in the prior year period in addition to rising oil costs that the company passed through to its customers.
Gross profit during the fourth quarter climbed 64.7 percent to $6.4 million from $3.9 million in the corresponding period in 2009. The gross margin increased to 10.7 percent for the three months ended December 31, 2010, from 10.0 percent the previous year.
Commenting on the results, Mr.
An Fengbin, Chairman, CEO and President of Andatee China Marine Fuel Services Corporation, said: "We are pleased to report solid operating results, which included strong cash generation and stable growth. Our focus has been on improving all aspects of our operations, including raw material procurement through an expanding supplier network, improved distribution, and a diversified customer base. As the result of these initiatives and a rising oil price environment, our revenues increased over 50% in 2010. Throughout the year, the demand for our portfolio of blended fuel products remained strong, which we feel is an indication that a fragmented market is beginning to recognize and trust our 'Xingyuan' brand. We also continued to make progress in expanding our retail customer base through actively building and acquiring port space and distribution infrastructure. Our goal remains becoming a 'one-stop shop' for all marine port services—providing petroleum products, maintenance, payment services, and marine supplies for boat operators."
Operational Review
The company's sales volume of its blended fuel products increased by 100 percent during the fourth quarter of 2010 to 88,000 tonnes from 44,000 tonnes the previous year. Andatee said it continued to see improved sales volumes from its retail customer base, which includes individual or small-fleet fishing operations.
In addition, the company said it has continued to expand its offering of #1 blended marine fuel (utilized by larger fishing vessels), which was not offered in the prior-year period. On March 30, 2011, Andatee offered six separate blended fuel products, which service smaller fishing vessels to larger handysize cargo ships.
In 2010 sales volumes of its blended fuel products increased by 22.1 percent to 293,000 tonnes from 240,000 tonnes for the prior year. The primary drivers behind the increase in annual sales volume were said to be the company's continued expansion of marketing efforts tailored to 'retail', or individual operations, the expansion of its distribution base in Southern China and the contribution from
Mashan Xingyuan and
Hailong, both acquired in 2010.
"The company is also making progress on its plan to set up market development offices in large cities; it opened its first in Shanghai in the first quarter of 2011. The Company expects to utilize these offices to establish an effective sales and marketing network to pursue organic expansion possibilities, such as new supply agreements and customer sales, while also providing solid foundations to pursue its acquisition-driven growth strategy in neighboring areas around major cities," Andatee said.
Market Overview
In its market review Andatee said the average international oil price rose to $81 per barrel in 2010 versus $64 per barrel the previous year.
Andatee uses oil refinery byproducts such as tar and heavy diesel as raw materials for production. The company then blends the products at its facilities and sells its "Xingyuan" branded products to clients.
"Typically, a steady increase in oil prices causes little fluctuation for Andatee from suppliers / customers, as the Company generally purchases its raw material from suppliers on a monthly basis and prices the current cost of these materials onto its customers on a weekly or daily basis," Andatee said.
Mr An added: "The company continues to see stable and strong demand from China's fishing industry throughout this period of oil price fluctuations. Depending on the timing of Andatee's fuel purchases, a rapid rise in prices is typically very positive for the Company as long as demand stays high. The recent increase will continue to impact our raw material costs; however, we can mitigate this in the short term by increasing the price of our products and passing the entirety of the increase to our customers. Our goal is to leverage our supply and distribution network to expand our additional service offerings, including maintenance services, supply procurement, and payment services, to help decrease the impact of oil price fluctuations. The Company is also continuing to explore the potential of additional service offerings that would further enhance the growth of its customers' business operations."
Outlook for 2011
In 2011, Andatee forecasts that revenue will be between $275 million and $325 million and net income between $11 million and $13 million. The prediction excludes any acquisitions that the company may carry out during the course of the year, Andatee said.
Mr. An concluded: "We are optimistic about the outlook of the marine fuel market in China because of growing demand, improving brand recognition, and balanced fleet growth. Andatee is continuing to generate excess cash flow and is well positioned to continue organic growth through the opening of new regional facilities, new products, and expanded service offerings such as direct refueling at sea. Finally, we also will strategically identify, research, and if appropriate, look to acquire target companies with desired facilities in areas that fit into Andatee's growth plans. We continue to remain cautious, as we are not willing to pay premium multiples for retail locations unless we can acquire a strong and growing customer base. We have attempted to geographically position our company with the ability to achieve stable growth through a variety of means."
