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American Lorain Announces Fourth Quarter and Fiscal Year 2008 Results

2009-04-14 03:12 1197

JUNAN COUNTY, China, April 14 /PRNewswire-Asia/ -- American Lorain Corporation (OTC Bulletin Board: ALRC) ("American Lorain" or the "Company"), an international processed foods company based in Shandong Province, People's Republic of China ("PRC"), announced its financial results for the fourth quarter and fiscal year ended December 31, 2008.

Fourth Quarter Highlights

-- Revenue increased 66.6% year-over-year to a record $56.7 million

-- Gross profit increased 49.6% to $14.3 million

-- Gross margin was 25.2%

-- Net income increased 5.4% to $6.4 million, compared to $6.1 million for

the fourth quarter of 2007

-- Diluted earnings per share were $0.25, up from $0.24 a year ago

-- Domestic sales accounted for 56.7% of revenue

Fiscal Year 2008 Highlights

-- Revenue increased 61.2% year-over-year to $132.4 million

-- Gross profit increased 54.5% to $31.1 million

-- Gross margin was 23.5%

-- Net income increased 50.9% to $14.7 million, compared to $9.7 million

for fiscal year 2007

-- Diluted earnings per share were $0.58, up from $0.42 a year ago

-- Met net income guidance of $13 million to $15 million for fiscal year

2008

-- Won bid to enter into $20 million, two-year distribution contract with

Yum! Brands

-- Leased new facility in Dongguan for processed and convenience food

production

-- Appointed independent directors Mr. Welkin Chen, Mr. David Yaudoon

Chiang and Mr. Maoquan Wei

"The fourth quarter is our seasonally strongest quarter as chestnut harvesting and sales peak this time of year," said Mr. Si Chen, Chairman and CEO of American Lorain. "Growth in the quarter was mainly due to our strong domestic sales responding to the demand for our products in China and our strategy to transfer our domestic sales to agents. For the fourth quarter of 2008, our domestic sales increased 135.6% in spite of the economic slowdown in China."

Fourth Quarter 2008 Results

Revenue for the fourth quarter of 2008 increased to $56.7 million, up 66.6% from $34.0 million for the fourth quarter of 2007. Chestnut products accounted for 76.6% of total revenue, compared to 71.7% for the fourth quarter of 2007, increasing by 77.9%. Convenience food products accounted for 14.6% of revenue, compared to 11.4% for the corresponding quarter prior year, increasing by 112.4%. Frozen, canned, and bulk food products accounted for 8.8% of revenue, compared to 16.8% for the same period of 2007, constituting a year-over-year decrease of 12.5%.

American Lorain's revenue growth in the fourth quarter of 2008 was mainly the result of strong domestic sales of both chestnut products and convenience food products. Domestic sales accounted for 56.7% of revenue for the fourth quarter of 2008, compared to 40.1% for the fourth quarter of 2007. Exports increased 20.5% to $24.6 million for the fourth quarter of 2008 from $20.4 million for the fourth quarter of 2007.

Gross profit amounted to $14.3 million for the fourth quarter of 2008, an increase of 49.6% from $9.5 million for the fourth quarter of 2007. Gross margin was 25.2% for the fourth quarter of 2008 compared to 28.1% in the corresponding quarter for 2007, mainly due to increased overhead and increased raw material costs for convenience food and frozen, canned and bulk food products.

Total operating expenses for the fourth quarter of 2008 were $5.7 million, or 10.0% of revenue, compared to $2.3 million, or 6.7% of revenue, in the fourth quarter of 2007. The increase in operating expenses was mainly due to increased selling and marketing expenses due to a shift from exports to domestic sales, the expansion of distribution from 19 provinces to 26 provinces, the introduction of new convenience food products, and marketing and promotional campaigns for chestnut and convenience food products.

Income from operations for the fourth quarter of 2008 was $8.6 million, an increase of 18.7% from $7.3 million for the fourth quarter of 2007. Operating margin was 15.2% for the fourth quarter of 2008 compared to 21.4% for the fourth quarter of 2007.

Earnings before taxes were $8.0 million for the fourth quarter of 2008, an increase of 3.2% from $7.7 million for the corresponding quarter of 2007. The relatively modest year-over-year growth was partially due to the Company receiving $1.0 million in non-operating income from government grants in the fourth quarter of 2007 to cover fire expenses incurred earlier in the year.

Net income for the fourth quarter of 2008 was $6.4 million, or $0.25 per diluted share, compared to $6.1 million, or $0.24 per diluted share, for the fourth quarter of prior year. Basic and diluted weighted average share count was 25.2 million for the fourth quarter of 2008.

Fiscal Year 2008 Results

Revenue for fiscal year 2008 was $132.4 million, an increase of 61.2% from $82.1 million for the same period last year. Gross profit was $31.1 million, or 23.5% of revenue, an increase of 54.5% from $20.2 million, or 24.6% of revenue, for fiscal year 2007. Operating income was $20.9 million, or 15.8% of revenue, an increase of 42.6% from $14.7 million, or 17.9% of revenue, for fiscal year 2007. Net income for fiscal year 2008 was $14.7 million, compared to net income of $9.7 million for the same period a year ago. Diluted earnings per share for fiscal year 2008 was $0.58, compared to $0.42 per diluted share for the same period a year ago.

Financial Condition

As of December 31, 2008, American Lorain had $2.8 million in cash and equivalents, short term bank loans and notes payable of $24.8 million and $0.6 million in long-term debt. At quarter end, the Company had a current ratio of 1.6 and $24.1 million in working capital. Days sales outstanding for the fiscal year ended December 31, 2008 were 80, while days inventory outstanding were 77 for the same period, compared to 99 days and 89 days respectively for the fiscal year ended December 31, 2007. For the fiscal year ended December 31, 2008, the Company's inventories totaled $24.8 million, due to accumulation of inventories after chestnut harvest season in August. Shareholders' equity stood at $62.6 million as of December 31, 2008 compared to $44.5 million at year-end 2007.

During the year ended December 31, 2008, the Company generated $19.5 million in cash from operating activities, mainly due to net income and lower receivables. Net cash used in investing activities totaled $20.3 million in fiscal year 2008, primarily due to construction of refrigerated storage, vegetable tents and of comprehensive workshops for the processing of chestnut and other food products in 2008.

Business Outlook

American Lorain anticipates further expanding domestic distribution of its high-end chestnut products while simultaneously adding more products into its convenience food product portfolio. During 2009, the Company expects to promote new convenience food products, such as bean products and meal combo products to reduce the seasonality of revenue.

Going forward in 2009, the Company plans to focus on cash flow management. Part of the strategy involves transferring sales to agents, while simultaneously tightening payment terms.

"In terms of domestic distribution, we plan to continue our cooperation with third parties, which includes transferring the majority of domestic sales to agents by the end of 2009. Utilizing agents enables us to expand the reach of our distribution, while improving cash flow management. Agents in general do not pay us by credit." said Mr. Chen. "We expect lower double-digit or high single-digit revenue growth in fiscal year 2009, with the main driver of growth being domestic chestnut and convenience food sales. We are currently running 21 production lines at capacity and plan to focus on optimizing our production in 2009. Instead of constructing new production and deep-freezing lines, we plan to meet any capacity expansion needs by leasing production capacity or utilizing an Original Equipment Manufacture ("OEM") business model, allowing us to maintain the flexibility of our production while reducing additional investment needs."

Conference Call

The Company will conduct a conference call on Tuesday, April 14, 2009, at 9:00 AM EDT, to discuss its financial results for the fourth quarter and fiscal year ended December 31, 2008.

To participate in the event by telephone, please dial 1-800-688-0796 five minutes prior to the start time (to allow time for registration) and reference the conference ID 700 950 61. International callers should dial +1-617-614-4070.

A digital replay of the call will be available from Tuesday, April 14 at 11:00 a.m. EDT for 14 days. To listen to the replay, dial 1-888-286-8010 and enter the conference ID number 97493067. International callers should dial +1-617-801-6888 and enter the same conference ID number. The replay will also be available on the Company's website http://www.americanlorain.com .

About American Lorain Corporation

American Lorain Corporation ("American Lorain" or the "Company") is a Delaware corporation that develops, manufactures and sells various food products. The Company's products include chestnut products; convenience foods (including cut fruit and premixed salads, ready-to-cook meals, and ready-to-eat meals); and frozen, canned and bulk foods. The Company currently sells over 234 products to 26 provinces and administrative regions in China as well as to 42 foreign countries. The Company operates through its four direct and indirect subsidiaries and one leased factory located in China. For more information about American Lorain, please visit our website at http://www.americanlorain.com .

Forward-Looking Statements

Statements contained herein that relate to the Company's future performance, including statements with respect to forecasted revenues, margins, cash generation and capital expenditures are "forward-looking statements." Such statements involve a number of risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from those anticipated. Such statements are based on current expectations only, and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions, particularly the current downturn in the worldwide economy; our ability to obtain adequate supplies of raw materials; our ability to manage our expansion strategy; changes in foreign currency exchange rates; government regulation; difficulties in new product development; changing consumer tastes in disparate markets worldwide and our ability to address those changes; our ability to attract and retain highly qualified personnel; and other factors affecting our operations that are set forth in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

AMERICAN LORAIN CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED FOR THE YEAR ENDED

DECEMBER 31 DECEMBER 31

(Stated in US Dollars)

2008 2007 2008 2007

Revenue $56,680,197 $34,018,844 $132,360,317 $82,094,963

Cost of

revenues (42,394,020) (24,469,354) (101,213,340) (61,932,474)

Gross profit $14,286,177 $9,549,490 $31,146,977 $20,162,490

Operating

expenses

Selling and

marketing

expenses (4,100,092) (1,375,835) (6,166,248) (2,623,138)

General and

administrative

expenses (1,567,748) (910,085) (4,047,988) (2,864,813)

Operating

Income $8,618,337 $7,263,570 $20,932,741 $14,674,539

Investment

income -- 4,769 -- 4,769

Government

subsidy

income 291,052 980,383 328,687 1,373,280

Interest

income 30,799 209,010 99,411 209,010

Other income 31,490 120,229 251,317 155,467

Other expenses (113,445) (69,637) (161,726) (1,445,780)

Interest

Expense (868,751) (767,859) (2,769,597) (2,376,088)

Earnings

before tax $7,989,482 $7,740,465 $18,680,833 $12,595,196

Income tax (1,214,863) (1,162,657) (3,003,265) (2,134,916)

Income before

minority

interests $6,774,619 $6,577,808 $15,677,568 $10,460,279

Minority

interests (378,978) (508,500) (974,190) (715,359)

Net income 6,395,641 6,069,308 14,703,378 9,744,920

Earnings per

share

basic $0.25 $0.24 $0.58 $0.43

diluted 0.25 0.24 0.58 0.42

Weighted

average

shares

outstanding

basic 25,177,644 24,923,179 25,172,640 22,554,210

diluted 25,177,644 25,626,780 25,172,640 23,177,268

AMERICAN LORAIN CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2008 AND 2007

(Stated in US Dollars)

2008 2007

ASSETS

Current assets

Cash and Cash equivalents $2,841,339 $6,769,973

Restricted Cash 3,715,998 2,021,839

Short-term Investment 113,069 7,246

Trade accounts receivable 25,293,326 32,859,688

Other receivables 5,107,719 7,552,976

Inventory 24,827,922 17,903,344

Advance to Suppliers 415,009 5,357,951

Prepaid Expenses and Taxes 1,228,648 916,774

Total current assets $63,543,030 $73,389,790

Property, plant and equipment, net 40,201,686 24,022,181

Land use rights, net 3,950,927 3,047,021

TOTAL ASSETS $107,695,643 $100,458,992

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Short-term bank loans $14,414,996 $24,077,504

Notes payable 5,208,485 2,734,444

Accounts payable 6,072,883 6,251,833

Income tax payable 2,682,658 1,121,528

Current maturities of long term debts -- --

Accrued liabilities and other

payables 10,291,237 16,784,108

Customers deposits 748,732 957,642

Total current liabilities $39,418,991 $51,927,058

Long-term bank loans 576,975 102,542

TOTAL LIABILITIES $39,995,966 $52,029,600

2008 2007

Minority interests $5,122,021 $3,887,021

STOCKHOLDERS' EQUITY

Common Stock, $0.001 par value,

200,000,000 shares authorized;

25,172,640 and 24,923,178 shares

issued and outstanding as of

December 31, 2008 and 2007,

respectively 25,172 24,923

Additional paid-in-capital 24,187,019 24,187,268

Statutory reserves 5,438,723 4,497,647

Retained earnings 27,748,126 13,985,824

Accumulated other comprehensive

Income 5,178,616 1,846,708

$62,577,656 $44,542,370

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY $107,695,643 $100,458,992

AMERICAN LORAIN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

(Stated in US Dollars)

2008 2007

Cash flows from operating activities

Net income $14,703,377 $9,744,920

Minority interest 974,191 964,666

Fire Loss -- 1,392,379

Depreciation 1,273,935 802,927

Amortization 158,428 17,798

(Increase)/decrease in accounts &

other receivables 14,642,687 (23,809,252)

(Increase)/decrease in inventories (6,924,578) (8,560,781)

Increase/(decrease) in accounts

and other payables (5,319,600) 15,862,094

Net cash (used in)/provided by

operating

activities $19,508,440 $(3,585,249)

Cash flows from investing activities

Purchase of plant and equipment (13,928,921) (7,657,346)

Purchase of biological assets -- (2,784,136)

Increase of construction in progress (3,524,520) (2,258,097)

(Increase)/decrease in restricted

cash (1,694,159) 527,482

Payment of land use rights (1,062,334) (287,344)

Investments in securities (105,823) 19,374

Net cash used in investing activities $(20,315,757) $(12,440,067)

Cash flows from financing activities

Issue of common stock -- 17,347,638

Dividend paid --

Proceeds from notes 2,474,041

Bank borrowings 35,327,917 25,645,795

Bank repayment (45,936,138) (23,329,333)

Net cash provided by/(used in)

financing

Activities $(8,134,180) $19,664,100

Net in cash and cash equivalents

(used)/sourced (8,941,497) 3,638,784

Effect of foreign currency

translation on cash

and cash equivalents 5,012,863 840,513

Cash and cash equivalents-beginning

of year 6,769,973 2,290,676

Cash and cash equivalents-end of year $2,841,339 $6,769,973

Supplementary cash flow information:

Interest received $99,411 $209,010

Interest paid 2,769,597 2,293,442

Taxes Paid 3,003,265 740,943

Source: American Lorain Corporation
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