BEIJING, May 16, 2012 /PRNewswire-Asia-FirstCall/ -- Deyu Agriculture Corp. (OTC: DEYU.PK) (the "Company"), a Beijing, China based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, today announced its financial results for the first quarter ended March 31, 2012.
First Quarter (Q1) Highlights:
Summarized First Quarter 2012 Results:
Q1 2012 | Q1 2011 | CHANGE | |
Revenue | $62.7 million | $36.6 million | +71.2% |
Gross profit | $12.4 million | $7.8 million | +58.4% |
Net Income* | $6.2 million | $3.3 million | +85.7% |
EPS (Diluted)** | $0.50 | $0.24 | +108.3% |
* Represents net income available to common stockholders.
** Earnings per diluted share for the quarter of $0.50 on 12.6 million shares. For Q1 2011, the Company reported fully diluted earnings per share of $0.24 on 14.6 million shares.
"I am very pleased with our solid revenue, cash flow and earnings growth," said Jianming Hao, Deyu's Chief Executive Officer. Our corn division continued to drive results, our grain division sustained its progress, and we further developed the bulk trading division. In particular, we were especially delighted to see the Taizihu Group, which we acquired in February 2012, generate $4.3 million in sales revenue. In terms of our products, we are excited to see that the incorporation of new and rare grain varieties which have provided us with higher gross margins."
"With our corn sales network expanding from 7 of China's provinces to 15 provinces since the first quarter of last year, and our retail distribution network doubling to approximately 20,000 supermarkets and convenience stores during the same time period, we were able to provide our products to a broader spectrum of customers across the nation," added Mr. Hao. "Our new processing center has considerably enhanced our storage and turnover capabilities, and has facilitated our supply to our growing customer base. We believe we are off to a great start this year and we look forward to continuing to provide customers with our quality grain products."
First Quarter 2012 Financial Results
Revenue
The Company had sales of $62.7 million in Q1 2012 compared to sales of $36.6 million in Q1 2011, an increase of $26.1 million or 71.2%.
Net sales from the Company's corn division increased $22.7 million or 110.8%, from $20.5 million in Q1 2011 to $43.2 million in Q1 2012. This growth was attributable to the expansion of the Company's sales network, the increase in storage capacity and turnover, as well as the Company obtaining sufficient working capital.
Revenue from the Company's grain division increased $7.9 million or 117.5%, from $6.7 million in Q1 2011 to $14.6 million in Q1 2012. This increase consisted of an increase of $3.6 million or 53% attributable to the Company's sustaining Grain Division sales and $4.3 million of sales revenue added by the Taizihu Group, which the Company acquired in February 2012. Through the Taizihu Group, the Company now offers and sells bean-based products, fruit vinegars and juices, and grain beverages. The increase in the Company's sustaining grain sales was primarily due to growth of market share through the expansion of the Company's sales network and promotional activities.
Sales from the Company's bulk trading division decreased $4.5 million, from $9.4 million in Q1 2011 to $4.9 million in Q1 2012. This decrease was mainly attributable to the Company shifting its strategies towards reducing transactions with lower margins. In Q1 2012, the Company focused on exploring diversified grain varieties with higher gross margins such as kidney beans, green beans and sunflower seeds instead of rapidly expanding its sales scale in spite of low margins.
Gross Profit & Gross Margin
The Company's gross profit increased $4.6 million or 58.4%, from $7.8 million in Q1 2011 to $12.4 million in Q1 2012. The increase included $2.4 million in its corn division and $2.3 million in its grain division. This improvement was mainly attributable to the Company's growth in sales volume. Total sales volume for the three months ended March 31, 2012 increased to 141,696 tons from 87,288 tons for the three months ended March 31, 2011.
The Company's gross margin decreased to 19.8% for Q1 2012 from 21.4% for Q1 2011. The decrease in gross margin was the combined result of a decrease in gross margin in the corn division and in the grain division, partially offset by an increase in the bulk trading division.
Gross profit in Corn Division was $7.1 million, contributing to 57.3% of total gross profit for Q1 2012. Gross margin for our Corn Division was 16.5% for Q1 2012, down from 22.9% for Q1 2011. The decrease in gross margin was mainly attributable to the continuous increase in the purchase price of raw corn and supplemental procurement from suppliers.
Gross profit in the Grain Division was $4.7 million, contributing to 38.1% of total gross profit for the first quarter of 2012. Gross margin for the Grain Division was 32.3% for the first quarter of 2012, down from 36.7% for the same quarter of prior year. The decrease in gross margin was mainly attributable to the diversification of the Company's product lines during the first quarter of 2012 with the additions of new products containing mixed gross margins, which targeted a wider scope of end consumers. The majority of gross margin for the Grain Division was still primarily driven by the Company's sustaining grain products having a steady gross margin quarter over quarter.
Gross profit in the Bulk Trading Division was $0.6 million, contributing to 4.6% of total gross profit for Q1 2012. Gross margin for the Bulk Trading Division was 11.7% for the three months ended March 2012 which was relatively lower compared to the Company's other divisions, which was mainly due to its business nature of high turnover rate and relatively lower cost maintenance. Gross margin increased to 11.7% from 7.3% for Q1 2011. The increase was mainly attributable to the trading of certain rare grain varieties with higher gross margins such as kidney beans, green beans and sunflower seeds, driven by anticipation of the demand and pricing trends in the market.
Net Income
In Q1 2012, the Company's net income available to common stockholders and earnings per diluted share were $6.2 million and $0.5, respectively, compared to $3.3 million and $0.24, respectively, in Q1 2011, an increase of $2.9 million or 85.7%. The increase was a combined result of the increase of sale revenue and gross profit as described above, and a decrease of $1.2 million of loss derived from discontinued operations which was no longer within the consolidation scope in 2012.
Recent Updates
In February 2012, the Company acquired the Taizihu Group, which has a well-established grain product line that includes over 100 types of bean-based products, fruit vinegars and juices and other grain products. By leveraging the Taizihu Group's product lines, Deyu looks to capture a more substantial share of market for health food and drinks through integrating its sales network of approximately 20,000 supermarkets and retail stores with the Taizihu Group's sales channels, which consist of 100 distributors in more than 10 provinces in China, as well as export channels to Germany, Japan, and other countries.
Additionally, in April 2012, we introduced a new product line under the "Deyu" brand name that features a variety of noodle products, including smooth surfaced noodles, mushroom noodles, egg noodles and high gluten noodles. The Company is working with leading noodle OEM (Original Equipment Manufacturing) producers, in offering these products through its extensive distribution channels in China.
Business Outlook
"We are confident that we will continue to build on our success in upcoming quarters," remarked by Mr. Hao. "Our ample resources, improved warehouse capacity, advanced production lines, exclusive logistics, and extensive sales networks are key competitive advantages that we will look to continue to leverage in 2012. In particular, we plan to continue to work with leading noodle Original Equipment Manufacturers to provide our new noodle products through our extensive distribution channels in China. We believe these products will quickly gain popularity in China, as noodles are staple Chinese diet and our brand name is established among consumers in the nation. While we strive to increase our market share, we are carefully considering other vertical and horizontal acquisitions to help us further grow our business, as well as developing more large feed manufacturers as customers of our corn division."
"In regards to our sales and marketing strategies for the rest of 2012, we plan to continue shifting our focus away from rapidly increasing the number of stores selling our products as a whole, to continue to promote our brand name and our products regionally, and to increase customer sales on a per store basis. With our acquisition of the Taizihu Group, we are looking to considerably build up our export business as well. For our bulk trading division, we anticipate we will continue diversifying our grain varieties, particularly to include more rare grain types based on market demand. While we are pleased with our progress, we are confident that we have sound strategies in mind that will help us further improve our results in future quarters."
Conference Call
The Company will host a conference call on May 17, 2012 at 8:30 AM EDT to discuss the Company's results for the first quarter ended March 31, 2012.
To join the conference call, use the dial-in information below. When prompted, ask for the "Deyu Agriculture Call" and/or be prepared to provide the conference ID.
Date: 05/17/2012
Time: 8:30 AM Eastern
Conference Line Dial-In (US): 877-407-9205
International Dial-In: 201-689-8054
Conference ID#: 394583
Webcast Link: http://www.investorcalendar.com/IC/CEPage.asp?ID=168617
Dial in at least 10 minutes before the call to ensure timely participation. A playback will be available until 11:59 PM May 31, 2012. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally.
Utilize the pass code below for replay (both required)
Account#: 286
Conference ID#: 394583
About Deyu Agriculture Corp.
Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province of the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. Deyu has an extensive wholesale network in over 15 provinces and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. The Company's facilities include advanced production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company's website is located at www.deyuagri.com.
Safe Harbor Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of the Company's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company's ability to maintain its competitive position. Additional Information regarding risks can be found in the Company's quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov.
Investor Contact:
Mr. Kevin Fickle, President
NUWA Group LLC.
Tel: +1-925-330-8315
Email: kevin@nuwagroup.com
Company Contact:
Ms. Amy He, Acting Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-5224-1802 X389
Email: amy@china-deyu.com
Ms. Cynthia Yang, Assistant to Acting CFO
Tel: +1-646-820-8060
Email: deyuintl@gmail.com
- Financial Tables Follow -
DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
| ||||||||
March 31, | December 31, | |||||||
(Unaudited) | (Audited) | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 7,235,245 | $ | 8,741,703 | ||||
Restricted cash | 502,968 | 1,850,999 | ||||||
Accounts receivable, net | 27,880,426 | 36,167,136 | ||||||
Due from related parties | 124,834 | 587,108 | ||||||
Inventory | 30,925,864 | 20,314,090 | ||||||
Advance to supplier | 4,542,194 | 7,233,371 | ||||||
Prepaid expenses | 929,307 | 391,537 | ||||||
Assets held for sale | - | 1,634,274 | ||||||
Other current assets | 1,516,512 | 2,204,934 | ||||||
Total Current Assets | 73,657,350 | 79,125,152 | ||||||
Property, plant, and equipment, net | 20,497,965 | 12,355,946 | ||||||
Construction-in-progress | 1,676,788 | - | ||||||
Long-term Investment | 57,801 | - | ||||||
Other assets | 946,524 | 727,535 | ||||||
Intangible assets, net | 13,377,253 | 10,651,844 | ||||||
Total Assets | $ | 110,213,681 | $ | 102,860,477 | ||||
Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Short-term loan | $ | 21,177,769 | $ | 14,413,480 | ||||
Accounts payable | 2,755,080 | 1,833,190 | ||||||
Note payables | - | 1,588,840 | ||||||
Advance from customers | 2,398,303 | 8,488,272 | ||||||
Accrued expenses | 1,594,801 | 1,149,205 | ||||||
Tax payable | 231,183 | - | ||||||
Preferred stock dividends payable | 110,291 | 219,721 | ||||||
Due to related parties | 5,267,022 | 5,445,115 | ||||||
Other current liabilities | 1,187,517 | 583,196 | ||||||
Total Current Liabilities | 34,721,966 | 33,721,019 | ||||||
Equity | ||||||||
Series A convertible preferred stock, $.001 par value, 10,000,000 | 1,997 | 1,997 | ||||||
Common stock, $.001 par value; 75,000,000 shares authorized, | 10,565 | 10,565 | ||||||
Additional paid-in capital | 20,495,497 | 20,367,138 | ||||||
Other comprehensive income | 4,868,917 | 4,831,353 | ||||||
Retained earnings | 49,699,525 | 43,491,465 | ||||||
Total Stockholders' Equity | 75,076,501 | 68,702,518 | ||||||
Noncontrolling Interests | 415,214 | 436,940 | ||||||
Total Equity | 75,491,715 | 69,139,458 | ||||||
Total Liabilities and Equity | $ | 110,213,681 | $ | 102,860,477 | ||||
DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| ||||||||
For The Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2011 | |||||||
Net revenue | $ | 62,739,469 | $ | 36,645,816 | ||||
Cost of goods sold | (50,319,668) | (28,804,699) | ||||||
Gross Profit | 12,419,801 | 7,841,117 | ||||||
Selling expenses | (4,158,372) | (2,223,403) | ||||||
General and administrative expenses | (1,858,774) | (1,310,160) | ||||||
Total Operating Expense | (6,017,146) | (3,533,563) | ||||||
Operating income | 6,402,655 | 4,307,554 | ||||||
Interest income | 11,538 | 6,415 | ||||||
Interest expense | (484,544) | (78,938) | ||||||
Non-operating income | 568,346 | 40,460 | ||||||
Total Other Income (Expense), Net | 95,340 | (32,063) | ||||||
Income from continuing operations before income taxes | 6,497,995 | 4,275,491 | ||||||
Income taxes | (201,294) | 230,265 | ||||||
Income from continuing operations | 6,296,701 | 4,505,756 | ||||||
Loss from discontinued operations, net of income taxes | - | (1,209,007) | ||||||
Net income | 6,296,701 | 3,296,749 | ||||||
Net loss attributable to noncontrolling interests: | ||||||||
Net loss from continuing operations | 21,434 | - | ||||||
Net loss from discontinued operations | - | 144,183 | ||||||
Total net loss attributable to noncontrolling interests | 21,434 | 144,183 | ||||||
Net income attributable to Deyu Agriculture Corp. | 6,318,135 | 3,440,932 | ||||||
Preferred stock dividends | (110,075) | (97,687) | ||||||
Net income available to common stockholders | 6,208,060 | 3,343,245 | ||||||
Foreign currency translation gain | 37,273 | 371,160 | ||||||
Comprehensive income | 6,245,333 | 3,714,405 | ||||||
Less: Other comprehensive income attributable to noncontrolling interests | 292 | (7,330) | ||||||
Comprehensive income attributable to Deyu Agriculture Corp. | $ | 6,245,625 | $ | 3,707,075 | ||||
Amounts attributable to common stockholders: | ||||||||
Net income from continuing operations, net of income taxes | $ | 6,208,060 | $ | 4,408,069 | ||||
Discontinued operations, net of income taxes | - | (1,064,824) | ||||||
Net income attributable to common stockholders | $ | 6,208,060 | $ | 3,343,245 | ||||
Net income attributable to common stockholders per share - basic: | ||||||||
Income from continuing operations | $ | 0.59 | $ | 0.42 | ||||
Loss from discontinuing operations | - | (0.10) | ||||||
Net income attributable to common stockholders | $ | 0.59 | $ | 0.32 | ||||
Net income attributable to common stockholders per share - diluted: | ||||||||
Income from continuing operations | $ | 0.50 | $ | 0.31 | ||||
Loss from discontinuing operations | - | (0.07) | ||||||
Net income attributable to common stockholders | $ | 0.50 | $ | 0.24 | ||||
Weighted average number of common shares outstanding - basic | 10,564,774 | 10,469,774 | ||||||
Weighted average number of common shares outstanding - diluted | 12,580,609 | 14,581,134 | ||||||
DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| ||||||||
For The Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income available to common stockholders | $ | 6,208,060 | $ | 3,343,245 | ||||
Loss from discontinued operations attributable to Deyu Agriculture Corp. | - | 1,209,007 | ||||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation & amortization | 595,270 | 228,864 | ||||||
Allowance for doubtful accounts | 31,967 | - | ||||||
Share-based compensation | 128,359 | 137,588 | ||||||
Preferred stock dividends accrued | 110,075 | 106,210 | ||||||
Grain on bargain purchase | (499,079) | - | ||||||
Deferred income tax expense (benefit) | 30,327 | (230,265) | ||||||
Noncontrolling interests | (21,434) | - | ||||||
Decrease (increase) in current assets: | ||||||||
Accounts receivable | 8,368,802 | (7,076,584) | ||||||
Related-parties trade receivable | 539,894 | - | ||||||
Inventories | (9,326,178) | 2,900,979 | ||||||
Advance to suppliers | 3,522,357 | (1,920,033) | ||||||
Prepaid expense and other current assets | (557,328) | (1,402,723) | ||||||
Increase (decrease) in liabilities: | ||||||||
Accounts payable | 602,144 | 623,078 | ||||||
Advance from customers | (6,298,935) | 695,488 | ||||||
Accrued expense and other liabilities | 511,846 | 797,243 | ||||||
Net cash (used in) provided by operating activities of continuing operations | 3,946,147 | (587,903) | ||||||
Net cash used in operating activities of discontinued operations | - | (228,600) | ||||||
Net cash (used in) provided by operating activities | 3,946,147 | (816,503) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Consideration paid for acquisition | (5,183,125) | - | ||||||
Purchase of machinery and equipment | (24,524) | (79,906) | ||||||
Construction and remodeling of factory and warehouses | - | (279,112) | ||||||
Cash held by the Taizihu Group at acquisition date | 20,272 | - | ||||||
Advances to related parties | (78,863) | - | ||||||
Net cash used in investing activities of continuing operations | (5,266,240) | (359,018) | ||||||
Net cash used in investing activities of discontinued operations | - | (1,934,613) | ||||||
Net cash used in investing activities | (5,266,240) | (2,293,631) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Cash released from restriction (restricted) for credit line of bank acceptance notes | 1,584,728 | (2,280,224) | ||||||
Net proceeds from short-term loans from bank | 261,494 | - | ||||||
Net repayments of short-term bank acceptance notes | (1,584,811) | - | ||||||
Net proceeds (repayments of) from short-term loans from related parties | (251,834) | 3,451,475 | ||||||
Payment of preferred dividends | (219,290) | (239,407) | ||||||
Net cash (used in) provided by financing activities of continuing operations | (209,713) | 931,844 | ||||||
Net cash provided by financing activities of discontinued operations | - | 2,173,078 | ||||||
Net cash (used in) provided by financing activities | (209,713) | 3,104,922 | ||||||
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS | 23,348 | 39,065 | ||||||
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS | (1,506,458) | 33,853 | ||||||
NET DECREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS | - | (13,778) | ||||||
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS | (1,506,458) | 20,075 | ||||||
CASH & CASH EQUIVALENTS, BEGINNING BALANCE | 8,741,703 | 5,791,418 | ||||||
CASH & CASH EQUIVALENTS, ENDING BALANCE | $ | 7,235,245 | $ | 5,811,493 | ||||
- | ||||||||
SUPPLEMENTAL DISCLOSURES: | ||||||||
Income tax paid | $ | - | $ | - | ||||
Interest paid | $ | 332,094 | $ | 78,878 | ||||
Note: Please refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2012 for additional notes, which are an integral part of these consolidated financial statements
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