Launches Initiative to Expand Retail Distribution Network
NEW YORK, Nov. 18 /PRNewswire-FirstCall/ -- China Agri-Business, Inc.
(OTC Bulletin Board: CHBU) a manufacturer and distributor of agricultural application products in China, has released its financial results for the three and nine months ended September 30, 2008.
Revenue for the quarter ended September 30, 2008 totaled $612,301, a decrease of 21.6% as compared to revenue of $781,103 for the quarter ended September 30, 2007. Revenue for the nine months ended September 30, 2008 totaled $2,134,491, a decrease of 2.5% as compared to revenue of $2,190,006 during the comparable period of 2007.
The decrease in revenue was due to an unfortunate confluence of natural disasters in China, including severe winter weather conditions in January and February, a major earthquake in Sichuan province on May 12, 2008, and widespread flooding in the central and southern regions in May and June. The Company's sales in the Sichuan, Hunan and Hubei provinces, which together have traditionally accounted for approximately 30% of the Company's revenues, decreased as a result of the foregoing events.
On a positive note, the Company reported increases in gross profit margin and net income for the three and nine months ended September 30, 2008. Gross profit margin rate for the three months and nine months ended September 30, 2008 was 74.81% and 71.29%, respectively. The gross profit margin rate improved 5.31 and 3.03 percentage points, respectively, as compared to the three and nine months ended September 30, 2007. The improvement in gross profit margin is primarily attributable to a 5-10% increase in the prices of our products.
Net income for the three months ended September 30, 2008 was $389,560, representing an increase of 36%, as compared to the third quarter of 2007. Net income for the nine months ended September 30, 2008 was $1,182,771, representing an increase of 38.2% as compared to the comparable period of 2007. The increase in net income resulted from higher gross profits and lower professional fees as compared to the same periods in 2007.
Liping Deng, President and Chief Executive Officer of China Agri-Business, commented on the Company's performance stating, "We are vulnerable to natural disasters since our business is dependent upon the agricultural industry. Our business has been affected by natural disasters occurring in China during 2008, and we expect the effects of these events to continue to have a negative impact on our results in the fourth quarter. We are planning expand our sales network in China in order to reduce our vulnerability to natural disasters."
In an attempt of expand and strengthen its retail distribution network, the Company has launched an initiative whereby the Company is providing approximately $3,000 to participating retailers as startup cost in return for a commitment to sell a minimum of $14,000 worth of the Company's products per year and not sell any competing products. Approximately 37 retailers in Shaanxi province and 28 retailers in Hunan province have agreed to participate.
China Agri-Business, Inc.
Financial Highlights
September 30, December 31,
2008 2007
Current Assets
Cash and cash equivalents $8,169,272 $5,984,448
Accounts receivable, net of
allowance for doubtful accounts
of $7,344 and $23,991, respectively 43,730 65,118
Inventory 69,881 60,582
Other assets 11,592 12,590
Total Current Assets 8,294,475 6,122,738
Property, plant and equipment, net 244,155 276,000
Investment in Tienwe Technology 883,680 822,540
Deferred financing costs, net 149,965 --
Intangible assets, net 64,728 73,554
Total Assets $9,637,003 $7,294,832
Current Liabilities
Accounts payable and accrued
liabilities $243,117 $166,200
Long Term Liabilities
Convertible notes, net 300,913 --
Stockholders' Equity
Common stock par value $.001 per
share; authorized 100,000,000
shares; issued and outstanding
12,958,574 and 12,278,774 shares,
respectively 12,959 12,959
Additional paid-in capital 4,369,786 4,150,636
Retained earnings 3,491,644 2,308,873
Accumulated other comprehensive
income 1,218,584 656,164
Total stockholders' equity 9,092,973 7,128,632
Total Liabilities and Stockholders'
Equity $9,637,003 $7,294,832
Results of Operation Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Sales of products $612,301 $781,103 $2,134,491 $2,190,006
Cost of goods sold 154,222 238,254 612,799 695,147
Gross profit 458,079 542,849 1,521,692 1,494,859
Selling, general and
administrative expenses 78,118 261,232 360,037 650,140
Income from operations 379,961 281,617 1,161,655 844,719
Interest and other income 9,599 4,844 21,116 10,919
Net income $389,560 $286,461 $1,182,771 $855,638
Earnings per common share:
Basic and diluted $0.03 $0.02 $0.09 $0.07
About China Agri-Business, Inc.
China Agri-Business, Inc., through its operating company in China, Shaanxi Xin Sheng Centennial Agriculture and Technology Co., Ltd. develops, manufactures, and markets biochemical agricultural application products in China. The Company's two primary product groups are organic fungicides and bactericides.
Within these two groups, China Agri-Business produces more than 50 different proprietary applications including products designed to function as botanical growth and vitality stimulants soil conditioners, and as a plant nutrient supplements. The Company's products are designed to prevent and treat plant diseases and parasites in a variety of crops, including but not limited to potatoes, vegetables, cotton and fruit plants, and orchard trees. The Company owns and operates its manufacturing facilities and has established a distribution network serviced by approximately 60 dedicated sales professionals. The Company's products are sold primarily through distributors in 20 provinces throughout China.
Crops grown with the use of the Company's products may qualify for the "AA green food" designation in China. The green food rating system, which consist of an "A" rating and a more stringent "AA" rating, is overseen by the China Green Food Development Center, an agency under the jurisdiction of the Ministry of Agriculture of China.
Safe Harbor and Cautionary Statement
Certain statements in this release concerning our business and future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. There are a number of risks and uncertainties that could cause our actual results to differ materially from those anticipated in any such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding our ability to maintain profitability and manage our planned growth, competition, natural and weather related disasters in China, labor conditions in China, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies under Chinese law, and various other factors beyond the Company's control. These and other risks that could affect our future operating results are more fully described in our filings with the United States Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2007, and Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2008. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. We do not undertake any duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
