HQ Sustainable Maritime Industries, Inc. (NYSE Amex: HQS) ("HQS" or the "Company"), a leading producer of functional, sustainable Tilapia biomass, including fish and personal healthcare products, today reported financial results for the fourth quarter and full year ended December 31, 2009.
Aquaculture product segment net sales decreased 3.2 per cent to $13.6 million, compared to $14.1 million in the fourth quarter of 2008. The aquaculture product segment net sales decrease is primarily related to a reduction in the average market price for the Company's range of products slightly offset by an increase in volume compared to the fourth quarter of 2008. Health and bio-product segment net sales increased 20% to $8.3 million in the fourth quarter of 2009, compared to $7.4 million in the same period last year. In addition, in December of 2009 the Company's new state-of-the-art feed mill began to generate revenue with net sales for the fourth quarter of 2009 of $1.3 million.
Gross profit for the fourth quarter of 2009 decreased two per cent to $9.4 million, compared to $9.6 million in the fourth quarter of the prior year. The Company's gross profit margin decreased to 40.2 per cent in the fourth quarter of 2009 versus 44.4 per cent in the fourth quarter of 2008. The gross profit margin decrease is primarily related to decrease in tilapia prices in 2009 compared to 2008.
Operating income for the fourth quarter of 2009 decreased to $2.1 million, from $7.6 million in the same period of the prior year. The decrease experienced in the quarter was primarily the result of the provision for potential losses in the Company's receivables in its health and bio-product segment, as well as an increase in advertising and marketing expenses within the same segment. EBITDA for the fourth quarter of 2009 decreased to $1.7 million, compared to $7.8 million for the same period last year.
Net income for the fourth quarter of 2009 was $1.6 million, or $0.12 per diluted share compared to net income of $6.4 million, or $0.53 per diluted share in the fourth quarter of 2008. Net income during the fourth quarter of 2009 was affected by increases in doubtful accounts of approximately $2.9 million and an increase in marketing and advertising expenses by approximately $1.8 million from the health and bio-product segment.
"The Company successfully expanded its sales of high quality, health and bio-products made from Tilapia by-products, in response to a landmark shift in China food safety legislation passed in March of 2009, which caused the closure of several of China's health and food product manufacturing facilities. This unprecedented opportunity for our Company in China has resulted in a short term increase in receivables and higher marketing expenses in our health and bio-product segment," said Norbert Sporns, HQ Sustainable Maritime's President and Chief Executive Officer.
"In 2010, we believe our efforts to reposition our Company behind higher margin product categories combined with increased operating efficiencies from our vertically integrated operations will enable us to realise an exceptional period of strong sales, margin expansion, and long-term profitable growth."
For the full year of 2009, net sales increased 6.7 per cent to $72.3 million compared to $67.7 million in the same period last year. The 2009 increase in net sales compared to 2008 is primarily the result of an increase in volume and average sales price originating from new products in the health and bio-product segment.
Aquaculture product segment net sales increased 0.3 per cent to $45.5 million, compared to $45.4 million in the full year of 2008. In 2009, the value of the Company's tilapia sales were reduced mainly due to a reduction in the average market price of the Company's products slightly offset by increased volume compared to 2008. The Company's aquaculture net sales in 2009 and 2008 were realized from three sources including tilapia, shrimp and ocean caught fish. Health and bio-product segment net sales increased 14% to $25.5 million in the year 2009, compared to $22.4 million in the same period last year. The health and bio-product net sales increase is primarily related to an increase in volume from new product introductions.
Gross profit for the full year of 2009 increased 11.3 per cent to $30.2 million, compared to $27.1 million in the full year of 2008. The Company's gross profit margin increased 170 basis points to 41.8 per cent in the full year of 2009 versus 40.1 per cent in the same period last year. The increase in gross profit margin is primarily due to margin expansion in both the aquaculture and bio-product segments.
Operating income for the full year of 2009 decreased to $11.1 million, from $15.0 million in the same period of the prior year. EBITDA for the full year decreased to $12.5 million, compared to $16.5 million for the same period last year.
Net income for the full year of 2009 was $8.1 million, or $0.60 per diluted share compared to net income of $10.0 million, or $0.79 per diluted share in 2008. Net income during the full year of 2009 was affected by increases in doubtful accounts of approximately $3.6 million and an increase in marketing and advertising expenses by approximately $3.1 million from the health and bio-product segment.
HQ Sustainable Maritime Industries Financial Results
US - Results for the fourth quarter show that income and profit have fallen, however the company has managed to expand sales of some Tilapia by-products. Over 2009, net sales increased as did gross profit for the year. Operating income fell, as did net income which was affected by increased marketing and advertising expenses.
