China New Borun Announces Fourth Quarter and Full Year 2010 Financial Results

BEIJING, March 3, 2011 /PRNewswire-Asia-FirstCall/ -- China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced unaudited financial results for the fourth quarter and full year of 2010.

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented, "We are very pleased to report a strong set of fourth quarter and full year 2010 financial results.  Driven by higher prices for edible alcohol and our strong capacity utilization, we achieved record fourth quarter revenue and profits that exceeded our previously stated guidance. Our consistent growth in revenue for both edible alcohol and by-products, as well as our stable gross margin, again demonstrate the advantages of our business model. With the expanded capacity from our Daqing Phase III, Borun has become the second largest edible alcohol producer in China."

Mr. Wang continues, "We are also proactively focused on enhancing our ability to pre-purchase corn at lower prices.  During the recent peak harvest season, we continued to engage granaries to secure sufficient lower-priced corn and store for later use in non-harvest season.  This strategy not only reduces our input costs but also improves our capacity utilization and operating efficiency.  Fuelled by the strong demand of Chinese Baijiu market, we continue to be excited with our growth prospects, and we believe that our technical strengths and leading market position will enable us to seize more growth opportunities.  I am very proud of our achievements and successes during this quarter, and I look forward to our continued success in 2011."

Fourth Quarter 2010 Financial Highlights

• Total revenue increased 24.1% to RMB475.0 million ($71.7 million¹) from RMB382.7 million in the fourth quarter of 2009.

• Gross profit increased 24.3% to RMB115.4 million ($17.4 million) from RMB92.8 million in the fourth quarter of 2009.

• Net income increased 13.7% to RMB69.6 million ($10.5 million) from RMB61.2 million in the fourth quarter of 2009.

• Diluted earnings per American Depositary Share ("ADS") were RMB2.71 ($0.41) for the quarter ended December 31, 2010. Each ADS represents one of the Company's ordinary shares.

Fourth Quarter 2010 Financial Performance

Fourth quarter 2010 revenue increased by 24.1% year-over-year to RMB475.0 million ($71.7 million) from RMB382.7 million in the same period of 2009.  The increase was primarily due to the following:

• Revenue from edible alcohol increased by 29.4% to RMB334.5 million ($50.5 million) in the fourth quarter of 2010 compared to RMB258.6 million in the fourth quarter of 2009 primarily as a result of the increase in price of edible alcohol and also an increase in volume during this period, driven by the strong demand of the edible alcohol market. Sales price increased by 22.4% to RMB5,082 per ton  and sales volume increased by 5.7% to 65,818 tons in the fourth quarter of 2010.

• Revenue from DDGS Feed decreased by 10.0% to RMB71.2 million ($10.7 million) in the fourth quarter of 2010, compared to RMB79.0 million in the prior year period, due to the decrease in sales price per ton. Sales price decreased by 9.9% to RMB1,641 per ton in the fourth quarter of 2010.

• Revenue from Corn Germ increased by 26.7% to RMB55.5 million ($8.4 million) in the fourth quarter of 2010 compared to RMB43.8 million in the fourth quarter of 2009, primarily driven by the increase in sales price per ton and the increase in sales volume during this period. Sales price increased by 17.6% to RMB3,549 per ton and sales volume increased by 7.7% to 15,644 tons in the fourth quarter of 2010.  

• Liquid carbon dioxide, a new by-product, began contributing revenue in July 2010. Revenue from liquid carbon dioxide was RMB13.8 million ($2.1 million) in the fourth quarter and the sales volume was 28,051 tons at a price per ton of RMB493.

During the fourth quarter of 2010, gross profit increased by 24.3% to RMB115.4 million ($17.4 million) from RMB92.8 million in the prior year period.  Gross margin for the fourth quarter of 2010 remained stable at 24.3 % compared to the fourth quarter of 2009.

Operating income increased by 21.8% to RMB100.1 million ($15.1 million) in the fourth quarter of 2010, from RMB82.2 million in the same period of 2009, reflecting of the Company's strong revenue growth.

Selling expenses, increased by 199.3% to RMB1.1 million ($0.2 million) in the fourth quarter of 2010 compared to RMB0.4 million in the same period in 2009. The higher expenses in the fourth quarter of 2010 were primarily due to promotional activities targeting new customers.    

General and administrative expenses increased by 38.6% to RMB14.2 million ($2.1 million) in the fourth quarter of 2010 compared to RMB10.2 million in the same period of 2009, reflecting an increase in administrative staff costs, professional fees and other expenses in connection with maintaining the Company's status as a publicly-traded company.  

Income tax expenses in the fourth quarter of 2010 were RMB24.0 million ($3.6 million), representing an effective tax rate of 25.6%, increasing from RMB22.8 million in the same period of 2009. As the effective tax rate remained relatively stable, the increase was consistent with the increase of income before income tax expenses.

Net income increased 13.7% to RMB69.6 million ($10.5 million) in the fourth quarter of 2010, compared to RMB61.2 million in the same quarter of 2009.  Diluted earnings per share and per ADS were RMB2.71 ($0.41) in the fourth quarter of 2010.  The Company had approximately 25.7 million weighted average diluted shares outstanding during the quarter ended December 31, 2010.

As of December 31, 2010, the Company had cash and bank deposits of RMB341.0 million ($51.5 million), compared to RMB105.8 million as of December 31, 2009.  Cash flows provided by operating activities for the year ended December 31, 2010 were approximately RMB194.3 million ($29.3 million) due to strong operating results.

Full Year 2010 Financial Performance

For the year ended December 31, 2010, total revenue increased 61.6% to RMB1,713.9 million ($258.8 million) from RMB1,060.5 million for the year ended December 31, 2009. Gross profit increased by 63.1% to RMB405.6 million ($61.2 million) from RMB248.6 million for the year ended December 31, 2009. Operating income increased 59.2% to RMB359.9 million ($54.3 million) from RMB226.1 million for the year ended December 31, 2009. Net income increased 55.9% to RMB259.4 million ($39.2 million), or RMB11.07 ($1.67) per diluted share or ADS, from RMB166.4 million, or RMB8.32 per diluted share or ADS, in the prior year. Weighted average number of diluted shares outstanding was approximately 20.9 million in 2010, up from 14.8 million in 2009.

Financial Outlook

The Company estimates that its revenue for the first quarter of 2011 will be in the range of RMB543 million ($82.0 million) to RMB563 million ($85.0 million), an increase of approximately 39.7 % to 44.8% over the same quarter of 2010.

This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call

The Company will hold an earnings conference call at 8:00 am ET on March 3, 2011 to discuss the results and highlights from the fourth quarter and full year 2010 and answer questions from investors.  The dial-in number and passcode for the conference call are as follows:

A telephone replay will become available beginning two hours after the conclusion of the call and will be available through March 10, 2011. The dial-in number and conference ID to access the replay are as follows:

Additionally, a live and archived webcast of the conference call will be available in the Investor Relations section of Borun's website at http://ir.chinanewborun.com.

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol in China.  Borun's edible alcohol products are primarily sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage that is sold throughout China in retail stores, restaurants and bars. The Company also produces DDGS Feed, Corn Germ, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production.  China New Borun is based in Shouguang, Shandong Province.  Additional information about the company can be found at http://www.chinanewborun.com and in documents filed with the U.S. Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.