HQS, a leading producer of functional, sustainable tilapia biomass, including fish and personal health-care products, has reported financial results for the first quarter ended 31 March 2010.
For the first quarter of 2010, sales increased 33% to $14.4 million, compared to $10.8 million for the first quarter of the prior year. The increase in sales was primarily the result of strength across each segment including aquaculture products, health and bio-products, as well as the new feed products added in late 2009.
Aquaculture product segment sales increased six per cent to $7.7 million, compared to $7.3 million in the first quarter of 2009. The increase is primarily related to an increase in volume and the price of processed ocean-caught fish. Aquaculture product segment sales were partially offset by fluctuations in the market price of tilapia fillets, resulting in a 16.2 per cent decrease in the average selling price of tilapia in the first quarter of 2010 compared to the first quarter in the prior year.
Health and bio-product segment sales increased two per cent to $3.6 million in the first quarter of 2010, compared to $3.5 million in the same period last year. In addition, the Company's new state-of-the-art feed mill generated sales of $3.1 million. This compares to sales of $1.3 million in the fourth quarter of 2009, which was the first time the feed product segment began to generate revenue.
Gross profit for the first quarter of 2010 decreased three per cent to $4.4 million, compared to $4.5 million in the first quarter of the prior year. Gross profit margin decreased to 30.5 per cent in the first quarter of 2010 versus 41.5 per cent in the first quarter of 2009. The gross profit margin decrease is primarily related to a the lower gross profit margin in the feed product segment as compared to the gross profit margin in the aquaculture and health and bio-product segments. It is expected that the gross profit margin from the feed product segment will improve in the coming periods as the increased volumes processed will support the fixed costs more favourably.
For the first quarter of 2010, operating income increased 61 per cent to $1.6 million from $1.0 million in the same period of the prior year. The increase experienced in the quarter was primarily due to the net recovery of the Company's doubtful accounts in its health and bio-product segment as well as a decrease in advertising and marketing expenses within the same segment. EBITDA for the first quarter of 2010 increased 42 per cent to $2.1 million, compared to $1.5 million for the same period last year.
Net income for the first quarter of 2010 was $1.5 million, or $0.09 per diluted share compared to net income of $1.1 million, or $0.09 per diluted share in the first quarter of 2009. Net income during the first quarter of 2010 was positively impacted by the net recovery in doubtful accounts of approximately $0.7 million and a decrease in marketing and advertising expenses by approximately $0.4 million from the health and bio-product segment.
Norbert Sporns, HQ Sustainable Maritime's President and Chief Executive Officer, commented: "We are pleased to report a strong improvement in our sales and profitability. In the first quarter, we successfully recovered more than 80 per cent of our doubtful accounts. The provisions for doubtful accounts were made in prior quarters as a result of a planned, strategic investment in our health and bio-product segment, in order to capture greater market share.
"We continue to focus on being leaders in the value-added use of tilapia fillet and tilapia by-products. We are building strong international partnerships across each of our product segments through the credibility and efficacy of our products and brands. These partnerships give us great confidence in our business model and our long-term growth opportunities."
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