-- Revenue up 67%, net income up 65%, and EPS reached $ 0.81 --
-- Revised guidance to $70 million top line; $15.6 million bottom line --
-- Teleconference to begin at 8:00 a.m. EST Thursday, November 12, 2009 --
BEIJING, Nov. 12 /PRNewswire-Asia-FirstCall/ -- China Agritech, Inc. (Nasdaq: CAGC) ("China Agritech", or the "Company"), a leading organic compound fertilizer manufacturer and distributor in the People's Republic of China, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2009.
Financial Highlights
-- Net revenue increased 66.6% year-over-year to a quarterly record $27
million;
-- Gross profit increased 51.3% year-over-year to $9.6 million;
-- Net income increased 64.9% year-over-year to a quarterly record $5.7
million;
-- Fully diluted earnings per share were $0.81 compared with $0.56 in the
2008 third quarter;
-- Almost 34,000 metric tons of organic granular fertilizer sold during
the quarter;
-- Cash and cash equivalents were $19.0 million with a current ratio of
5.7 to 1 and no long-term liabilities; and
-- Revised 2009 guidance to net revenues $70 million and net income of
$15.6 million
Mr. Yu Chang, Chief Executive Officer of China Agritech, commented, "We are encouraged by the initial results from our strategic actions to expand into the much larger market for organic granular fertilizers and extend our geographic reach into new Chinese provinces. As many Chinese farmers are more familiar with granular than liquid fertilizers, we believe that the bundle of our granular with our liquid fertilizers will continue to drive sales volume. We also anticipate our major distribution relationships in the domestic and foreign markets will add to our growth. The additional capital from Carlyle's investment strengthened our cash position and we are financially well equipped for further expansion. Carlyle will help us integrate our marketing by building marketing and distribution channels so we may more quickly penetrate targeted markets.
"Our 'Green Vitality' compound organic granular fertilizer products are a premium line. Green Vitality is an innovative and versatile organic granular fertilizer which can improve the yields of a large variety of crops. On the production front, we have already seen timely contributions from two of our three new production facilities for organic granular fertilizers, and we expect to have the Xinjiang facility commence commercial production by the end of 2009 which will add to our presence in the western markets of China," Mr. Chang concluded.
Third Quarter 2009 Results
Revenue for the third quarter of 2009 grew by 66.6%, or by $10.8 million, to $27 million, a growth record for any quarter, from third quarter 2008 sales of $16.2 million. Sales of the Company's new organic granular fertilizers represented approximately $7.9 million of the 2009 third quarter sales increase, with liquid organic fertilizer sales approximating a $2.9 million gain. The third quarter of 2009 benefited from the commercial production of organic granular fertilizers that began production in the 2009 second quarter at the new facilities in Anhui province, eastern China, and Harbin in the northern Heilongjiang Province, with a combined 150,000 metric tons of capacity. Granular unit sales in the 2009 third quarter were almost 34,000 metric tons versus approximately 11,000 metric tons in the third quarter of 2008. The increase in revenue from organic liquid sales was due to an increase of almost 28% in its average net sales price.
Gross profit for the third quarter of 2009 increased 51.3%, or by $3.3 million, to approximately $9.6 million from $6.3 million in the third quarter of 2008. Gross margin for the quarter was 35.5% compared with 39.1% in the third quarter of 2008. The decline in the gross margin was primarily due to the relatively higher percent of lower-margin organic granular fertilizers sold in this year's third quarter compared with the Company's product sales mix in the third quarter a year ago. In the third quarter of 2009, organic liquid fertilizer sales generated a gross margin of approximately 47.4% compared with a gross margin of approximately 20% for organic granular fertilizers.
Selling expenses during the third quarter of 2009 were $0.73 million, or 2.7% of revenue, down on a percentage basis from $0.65 million, or 4.0% of revenue in the third quarter of 2008. The increased expense was primarily because of higher commissions related to the increased sales of granular fertilizers for the third quarter of 2009 compared to the corresponding quarter of 2008.
Operating and administrative expenses during the quarter were $1.7 million, or 6.3% of revenue, representing an increase of 109.7% compared with $0.81 million, or 5.0% of revenue, for the same period in 2008. The increase was attributable to the payment of Delaware franchise taxes for 2008 and part of 2009, payment of NASDAQ listing fees, payment of directors' and officers' insurance premiums, an increase in the general provision for doubtful accounts, inclusion of non-recurring advisory and professional fees, and higher executive compensation for the addition of independent directors, a chief operating officer and a chief financial officer in the quarter ended September 30, 2009, whereas there was no such expenses and positions in the period ended September 30, 2008.
Income from operations was approximately $7.2 million, a 46.9% increase from almost $4.9 million in the third quarter of 2008. Operating margin for the 2009 third quarter was 26.5% compared to 30.1% in the third quarter last year. The increase in income from operations and decrease in operating margin were generated by the successful organic granular fertilizer sales and higher gross margin on organic liquid fertilizer sales during the second quarter of 2009, partially offset with higher operating and administrative expenses.
The tax rate in the third quarter of 2009 was 20.5% and was lower than the 24.4% tax rate in the third quarter of 2008. The reduced tax rate is due mainly to a subsidiary that generated net income this quarter, but was exempt from Chinese income taxes.
Net income attributable to China Agritech's common shareholders for the third quarter of 2009 was $5.7 million, up 64.9%, and was the highest net income for any quarter. Net income in the third quarter of 2008 was $3.5 million. Diluted net earnings per share were $0.81 versus $0.56 for the same quarter in 2008. Diluted weighted average shares outstanding for the third quarter of 2009 were 7.0 million compared with diluted weighted average shares outstanding of 6.2 million in the third quarter of 2008.
Nine Month Results
For the first nine months ended September 30, 2009, net revenue increased by 50% to $55.4 million from $36.9 million in the corresponding period of 2008. Gross profit increased 32.8% in the first nine months of 2009 to $21.9 million from approximately $16.5 million in the comparable period one year ago. Gross margin was 39.6% in the first three quarters of 2009 compared with 44.7% in the same period of 2008. The decline in gross margin is mainly due to the greater sales of lower-margin organic granular fertilizers in the 2009 period compared with the sales in the year ago corresponding period. Organic liquid fertilizers generated a gross margin of approximately 49.8% and organic granular fertilizers' gross margin was 20.6% for the first nine months of 2009. Income from operations grew by $4.7 million, or 39.5%, to $16.6 million from $11.9 million in the same period one year ago. Net income attributable to common shareholders for the first nine months of 2009, rose by 63.0% or $4.8 million to $12.4 million, with diluted net earnings per share of $1.87, from $7.6 million, or diluted net earnings per share of $1.23 in the first nine months of 2008.
Financial Condition
As of September 30, 2009, China Agritech had $19.0 million in cash and cash equivalents, no long-term liabilities, $72.3 million in net working capital and a 5.6 to 1 current ratio. Accounts receivable were $46.4 million as net revenue increased by 50.0% in the nine months ended September 30, 2009, due primarily to the introduction of the Company's organic granular fertilizers. Days sales outstanding at September 30, 2009 were 198 days, compared to 245 days in the first three quarters of 2008. Shareholders' equity was $79.6 million at September 30, 2009.
Recent Developments
On September 8, 2009, the Company announced that it expanded a sales and distribution partnership with China's largest fertilizer producer and distributor, Sinochem Fertilizer Co., Ltd. ("Sinochem") for the Company's "Green Vitality" granular fertilizer products. This contract is for the supply of 15,000 tons of Green Vitality granular fertilizer and is worth an estimated value of RMB 44 million (approximately US$6.4 million value of sales). This contract runs through December 2010. The Company will continue to supply Sinochem with "Green Vitality" liquid fertilizer under an existing contract.
On September 15, 2009, the Company announced the completion of construction and equipment installation at its new organic granular fertilizer facility in Xinjiang. This facility adds another 50,000 metric tons of capacity for the production of organic granular fertilizer to the Company's existing 150,000 metric tons of capacity which recently began production in Anhui and Harbin. The Xinjiang facility will provide organic granular fertilizers primarily under the "Green Vitality" brand name to the vast agricultural areas in northwestern China. The Company also produces organic liquid fertilizers at Xinjiang with a capacity of up to 2,000 metric tons. Once commercial production of our products commences in Xinjiang by end 2009, we anticipate that China Agritech's total annual organic fertilizer capacity will consist of 200,000 metric tons of organic granular and 13,000 metric tons of organic liquid fertilizers, with application to a large variety of crops.
On October 20, 2009, the Company announced the signing and closing of a $15 million private placement with Carlyle Asia Growth Partners, the growth capital arm of The Carlyle Group. As a result of the transaction, The Carlyle Group, through its affiliates now holds approximately 16.5% of the issued and outstanding China Agritech common stock.
Other Events
On September 7, 2009, the Company announced a 1 for 4 reverse split of its common stock effective on September 8, 2009. The effect of the reverse split reduced the number of shares of common stock outstanding to approximately 7.0 million from 28.2 million shares.
China Agritech began trading on the NASDAQ Global Market starting on September 21, 2009 under the symbol "CAGC". Company management re-emphasized China Agritech's growth plan through building geographically diversified production facilities, expanding its sales network and introducing innovative product technology.
Business Outlook
The Company is now expecting net revenue for the year 2009 to be approximately $70 million versus the previous guidance of over $60 million. The revised guidance for net income is increased to approximately $15.6 million. The new guidance reflected business seasonality in the fourth quarter and some of the year-end expenses. Diluted earnings per share are now expected to approximate $2.25, based on the current average number of diluted shares outstanding. The new guidance represents almost a 55% increase for net revenues and around a 62% rise for net income over the year 2008 results.
These targets are based on the Company's current views on the operating and market conditions, which are estimates and subject to change.
"In the first nine months of 2009, we have generated over $10 million in positive operating cash flow, as compared with a negative figure in the corresponding period in 2008. With our strong sales growth, our accounts receivable increased also. However, we believe our strengthened accounts receivable risk management has begun to show improvement which will be more evident by the end of the 2009 fourth quarter. Going forward, the increase of granular product sales will help reduce the accounts receivable cycle as granular sales run on shorter payment terms," Mr. Yu Chang concluded.
Conference Call
The Company will host a conference call, to be simultaneously web cast, on Thursday, November 12 at 8:00 a.m. Eastern Standard Time, or 9:00 p.m. Beijing Time.
To participate, please call the following phone numbers:
United States 1-866-519-4004
China, Domestic 800-819-0121-Landline
Hong Kong 852-2475-0994
Canada 1-800-407-1908
International Toll Dial-In Number: 656-735-7955
Conference ID # 41129467
A live web cast of the conference call will be available on China Agritech's website at http://www.chinaagritechinc.com . Please visit the website at least 15 minutes early to register for the web cast and download any necessary audio software.
A web cast replay will be available on the Company's website, and the call replay will be available through Thursday, November 19, 2009 at 11:59 p.m. EST. To access the replay, please call the following phone numbers:
United States Dial-In #: 1-866-214-5335
Canada Dial-In #: 1-800-301-5423
China North Dial-In #: 10-800-714-0386
China South Dial-In #: 10-800-140-0386
Hong Kong Dial-In #: 800-901-596
International Dial-In #: +61 2 8235 5000
Conference ID # 41129467
About China Agritech, Inc.
China Agritech, Inc. is engaged in the development, manufacture and distribution of liquid and granular organic compound fertilizers and related products in China. The Company has developed proprietary formulas that provide a continuous supply of high-quality agricultural products while maintaining soil fertility. The Company sells its products to farmers located in 28 provinces of China.
For more information about the Company, please visit http://www.chinaagritechinc.com .
Safe Harbor Statement
This release may contain certain "forward-looking statements" relating to the business of China Agritech and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "estimates" or similar expressions , including, but not limited to, statements regarding the continued demand for China Agritech's products, China Agritech's ability to sustain growth for the balance of the year and China Agritech's ability to generally meet all of its objectives. Such forward-looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, concentration in a single customer, raw material costs, market acceptance, future capital requirements, and competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the SEC. Except as required by law, China Agritech is under no obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
For more information, please contact:
In China:
Mr. Gareth Tang
Chief Financial Officer
China Agritech, Inc.
Email: gareth@chinaagritech.com
In the U.S.:
Mr. Kevin Theiss
Investor Relations
Grayling
Tel: +1-646-284-9409
Email: kevin.theiss@us.grayling.com
UNAUDITED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 and 2008 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
2009 2008 2009 2008
Net revenue $27,043,952 $16,236,573 $55,379,939 $36,929,747
Cost of revenue (17,447,653) (9,896,393)(33,460,130) (20,429,067)
Gross profit 9,596,299 6,340,180 21,919,809 16,500,680
Operating expenses
Selling expenses (727,593) (646,861) (1,758,305) (1,862,586)
General and
administrative
expenses (1,694,715) (808,710) (3,550,228) (2,732,601)
Total operating
expenses (2,422,308) (1,455,571) (5,308,533) (4,595,187)
Income from operations 7,173,991 4,884,609 16,611,276 11,905,493
Other income (expense)
Interest income 9,065 22,006 15,089 85,902
Exchange gain (loss) 299 127,277 (2,757) (47,562)
Total other income
(expense) 9,364 149,283 12,332 38,340
Income before income
taxes 7,183,355 5,033,892 16,623,608 11,943,833
Provision for income
taxes (1,473,260) (1,225,991) (3,789,496) (3,375,985)
Net income 5,710,095 3,807,901 12,834,112 8,567,848
Net income attributable
to non-controlling
interest in a subsidiary -- (345,579) (481,452) (990,577)
Net income attributable
to common stockholders 5,710,095 3,462,322 12,352,660 7,577,271
Other comprehensive
income
Foreign currency
translation
adjustment 110,815 158,711 (13,526) 3,273,889
Comprehensive income 5,820,910 3,621,033 12,339,134 10,851,160
Comprehensive income
attributable to
non-controlling
interest in a
subsidiary -- (43,610) 8,403 (378,513)
Comprehensive income $5,820,910 $3,577,423 $12,347,537 $10,472,647
Basic and diluted
weighted average
shares outstanding 7,048,063 6,174,904 6,619,803 6,174,904
Basic and diluted net
earnings per share $0.81 $0.56 $1.87 $1.23
CHINA AGRITECH, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
SEPTEMBER DECEMBER
30, 2009 31, 2008
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 19,013,822 $ 11,952,235
Accounts receivable, net 46,411,842 34,773,115
Inventories 15,191,194 6,452,618
Advances to suppliers 5,667,032 10,795,357
Prepayments and other receivables 1,908,293 2,484,346
Total Current Assets 88,192,183 66,457,671
Property and equipment, net 6,629,315 4,496,045
Deposit for equipment -- 749,799
Construction in progress 387,262 961,551
Total Assets $ 95,208,760 $ 72,665,066
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 11,284,462 $ 3,327,281
Accrued expenses and other payables 2,308,092 221,954
Taxes payable 2,265,549 1,388,897
Total Current Liabilities 15,858,103 4,938,132
Stockholders' Equity
Common stock; $0.001 par value,
100,000,000 shares authorized,
7,048,063shares issued and outstanding 7,048 24,700
Additional paid-in capital 30,579,555 26,148,879
Statutory reserves 6,629,315 5,425, 407
Accumulated other comprehensive income 5,824,391 5, 837,917
Retained earnings 36,510,349 25,361,597
Total China Agritech's stockholders'
equity 79,550,658 62,798,500
Non-controlling interest in a subsidiary -- 4,928,434
Total stockholders' equity 79,550,658 67,726,9 34
Total Liabilities and Stockholders'
Equity $ 95,208,760 $ 72,665,066
CHINA AGRITECH, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
SEPTEMBER 30,
2009 2008
Cash flows from operating activities:
Net income $ 12,834,112 $ 8,567,850
Adjustments to reconcile net income
to net cash provided (used) in
operating activities:
Stock based compensation 2,703 --
Depreciation 508,312 470,198
Provision for doubtful debts 452,958 --
(Increase) decrease in current assets:
Accounts receivable (12,080,214) (22,235,689)
Inventories (8,731,639) (6,146,191)
Advances to suppliers 5,874,503 7,994,813
Prepayments and other receivables 579,412 (740,955)
Increase (decrease) in current
liabilities:
Accounts payable 7,950,480 3,256,144
Taxes payable 875,900 714,935
Accrued expenses and other payable 1,880,903 171,714
Net cash provided (used) in operating
activities 10,147,430 (7,947,183)
Cash flows from investing activities:
Acquisition of 10% interest in Pacific
Dragon (1,000,000) --
Restricted cash -- 11,415
Acquisition of property & equipment (2,201,642) (1,299,156)
Construction in progress 155,780 (877,800)
Net cash used in investing activities (3,045,862) (2,165,541)
Cash flows from financing activities:
Net cash provided by financing
activities -- --
Net increase (decrease) in cash and cash
equivalents 7,101,568 (10,112,724)
Effect of exchange rate change on cash
and cash equivalents (39,981) 3,536,977
Cash and cash equivalents, beginning of
period 11,952,235 11,841,221
Cash and cash equivalents, end of
period $ 19,013,822 $ 5,265,474
Supplemental disclosure of cash flow
information:
Income taxes paid $ 3,013,389 $ 3,362,504
Non-cash Investment and Financing
Activity:
Offset of amounts due to/from
stockholders $ -- $ 330,032
