-- Net Sales decreased 15% to $7.3 million
-- Net income decreased 37% to $1.2 million
BEIJING, China, May 15 /Xinhua-PRNewswire-FirstCall/ -- China Agritech, Inc. (OTC Bulletin Board: CAGC) (“China Agritech” or “the Company”), a leading manufacturer of liquid organic fertilizer and other fertilizer products in China, today announced its financial results for the first quarter ended March 31,2008.
First Quarter Highlights
-- Revenue decreased 15% year-over-year to $7.3 million
-- Gross profit decreased 19% year-over-year to $3.6 million
-- Net income decreased 37% year-over-year to $1.2 million, or $0.05 per
diluted share
“China Agritech’s lower first quarter results were significantly impacted by severe weather conditions caused by heavy rainfall and the longer winter season in northeast China,” commented Mr. Yu Chang, Chief Executive Officer of China Agritech. “The climate change not only affected consumption of our fertilizer products, but also caused delays in delivering orders to our customers. The deferred orders will be delivered by our distributors in the second quarter. The delayed orders should bring our revenue back on the growth track.”
Revenue for the first quarter of 2008 was down 15.0% to $7.3 million from $8.6 million in the first quarter of 2007. Revenue declined as a result of a decrease in sales volume, due to the impact of extended cold weather and heavy rains in northeast China. Unfavorable weather conditions resulted in deferred orders and delayed deliveries. However, the Company observed improved sales in the beginning of the second quarter. In April, customer orders increased by 10% in the Northern region and 15% in the Southern region compared to the same period last year.
Gross profit for the first quarter of 2008 was $3.6 million, down 19.4% from gross profit of $4.5 million in the first quarter of 2007. Gross margin for the quarter was 49.7% compared to 52.4% in the first quarter of 2007. On a sequential basis, gross margin improved from 42.3% in the fourth quarter of 2007. The sequential improvement in gross margin was primarily due to the Company’s success in negotiating both packaging and raw materials cost with its suppliers.
Selling expenses during the quarter was $0.7 million, or 9.7% of revenue, up from $0.6 million, or 7.1% of revenue, in the first quarter of 2007. The increase of selling expenses was primarily due to an increase in sales personnel to total 134 in the first quarter 2008, compared to 96 in the same quarter one year ago. The Company also carried greater selling and marketing activities in the quarter to develop new geographical markets.
General and administrative expenses during the quarter were $0.9 million, or 11.9% of revenue, compared to $0.5 million, or 6.4% of revenue, in the same period of 2007. The increase in G&A was primarily attributable to legal and professional consulting fees such as SOX 404 and SEC maintenance and general legal advice for long term company planning.
Income from operations was $2.1 million, down 38.6% from $3.3 million in the same period of 2007. Operating margin for the quarter was 28.1% compared to 38.9% in the first quarter of 2007.
Net income for the first quarter of 2008 was $1.2 million, down 36.9% from $1.9 million in the first quarter of 2007. Fully diluted earnings per share were $0.05 for the first quarter of 2008 compared to fully diluted earnings per share of $0.10 for the same period a year earlier. Weighted average fully-diluted shares for the first quarter of 2008 increased to 24,699,615 compared to weighted average fully-diluted shares of 19,143,615 in the first quarter of 2007, as the result of an additional 5,556,000 shares of common stock issued in a private placement in July 2007.
Financial Condition
As of March 31, 2008, China Agritech had $11.7 million in cash and restricted cash, no long-term debt and $53.2 million in working capital. Days sales outstanding as of March 31, 2008 was 276 days, compared to 206 days as of March 31, 2007. Inventory turnover days were 79 days as of March 31, 2008, compared to 68 days as of March 31, 2007. Shareholders’ equity stood at $53.4 million up from $50.9 million at year end 2007.
Recent Event
On April 25, 2008, China Agritech announced that it has engaged Grobstein, Horwath & Company, LLP (“Grobstein, Horwath & Co.”), a Horwath International firm, as its new independent auditor, effective April 18, 2008. Grobstein, Horwath & Co. replaces Kabani & Co. LLP (“Kabani & Co.”), which was dismissed on April 18, 2008.
Business Outlook
China Agritech completed its first granular fertilizer factory with 50,000 metric tons capacity in Beijing in March 2008 which expected to start its commercial production by end of May of 2008 or early June of 2008. The Company is also considering options to acquire an existing granular fertilizer factory to expand its production capacity. It plans to acquire a well-run facility with established markets in the Anhui province and has currently initiated the evaluation process. The two granular factories in Harbin and Xinjiang expect to start the construction in June of 2008. Currently, the Company is working on the floor plan for these two factories, respectively.
The Company anticipates fewer orders of its “Green Vitality” liquid organic fertilizer from Sinochem Fertilizer Co., Ltd. than the 1,000 metric tons for the twelve month period following October 2007, as agreed to in the original contract. Recent earthquake in Sichuan province has also affected the sales expected from this region. Therefore, China Agritech is adjusting its previous guidance for full year 2008 downward to revenue of $54 - $56 million, and net income to $8.5 - $9.0 million, or earnings per share of $0.35 to $0.37.
Conference Call Information
About China Agritech Inc.
China Agritech is engaged in the development, manufacture and distribution of organic liquid and granular compound fertilizers and related products in the People’s Republic of China. The company has developed proprietary formulas that provide a continuous supply of high-quality agricultural products while maintaining soil fertility. The company sells it products to farmers located in twenty provinces of China including: Hainan, Anhui, Hubei, Jiangsu, Jiangxi, Guangxi, Liaoning, Shanxi Heilongjiang, Hebei, Jilin, Shandong, Inner Mongolia, Henan, Sichuan, Guangdong, Xinjiang, Yunnan, Chongqing and Guizhou. For more information visit http://www.chinaagritechinc.com .
--financial tables below--
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)
2008 2007
Net sales $ 7,317,083 $ 8,611,741
Cost of sales (3,681,006) (4,100,825)
Gross profit 3,636,077 4,510,916
Operating expenses
Selling expenses (706,590) (614,002)
General and administrative expenses (873,554) (548,067)
Total operating expenses (1,580,144) (1,162,069)
Income from operations 2,055,933 3,348,847
Other expenses
Other (expenses)/income 61,673 27,896
Finance expenses 5,227 (209)
Total other expenses/(income) 66,900 27,687
Income before income taxes and
minority interest 2,122,833 3,376,534
Provision for income taxes (717,280) (1,260,055)
Income before minority interests 1,405,554 2,116,479
Minority interests (215,184) (231,351)
Net income 1,190,370 1,885,128
Other comprehensive income
Foreign currency translation
adjustment 1,318,663 504,648
2,389,776
Comprehensive income $ 2,509,033 $
Basic and diluted weighted average
shares outstanding 24,699,615 19,143,615
Basic net earnings per share $ 0.05 $ 0.10
Diluted weighted average shares
outstanding 24,699,615 19,143,615
Diluted net earnings per share $ 0.05 $ 0.10
CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
March 31, 2008 2007
(UNAUDITED) (AUDITED)
ASSETS
Current Assets
Cash and cash equivalents $ 9,744,105 $ 11,852,636
Restricted cash 2,000,000 2,000,000
Accounts receivable, net 28,693,391 22,695,039
Inventories 4,017,007 3,508,741
Advances to suppliers 10,877,770 12,343,255
Prepayments and other receivables 768,401 1,242,694
Total Current Assets 56,100,674 53,642,365
Construction In Process 157,651 --
Property, Plant, And Equipment, Net 3,857,576 3,798,958
Total Assets $ 60,115,901 $ 57,441,323
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 245,522 $ 41,146
Accrued liabilities and other payables 1,385,420 1,047,721
Amount due to related parties -- 352,505
Taxes payable 1,251,977 1,650,243
Total Current Liabilities 2,882,919 3,091,615
Minority Interests 3,839,963 3,465,724
Commitments -- --
Stockholders’ Equity
Common stocks; $0.001 par value,
100,000,000 shares authorized,
24,699,615 shares issued and
outstanding as of September 30, 7
200and 19,143,615 shares issued
and outstanding as of December 31,
2006 24,700 24,700
Additional paid in capital
26,135,914 26,135,914
Statutory reserve
4,590,152 4,299,653
Accumulated other comprehensive income
3,896,770 2,578,107
Retained earnings
18,745,483 17,845,610
Total Stockholders’ Equity
53,393,019 50,883,984
Total Liabilities and Stockholders’
Equity $ 60,115,901 $ 57,441,323
CHINA AGRITECH, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)
March 31, March 31,
2008 2007
Cash flows from operating activities:
Net income $1,190,370 $1,885,128
Adjustments to reconcile net income
to net cash used in operating
activities:
Stock based compensation -- 1,199
Minority Interest 215,184 231,351
Depreciation 169,073 81,140
(Increase) / Decrease in current
assets:
Accounts receivable (5,998,352) (5,944,426)
Prepayments and other receivables 474,295 6,016
Inventories (508,266) (1,340,544)
Advances to suppliers 1,465,485 2,810,417
(Decrease) / Increase in current
liabilities:
Accounts payable 204,374 (272,030)
Other payable (260,826) 245,294
Tax payable (398,266) 515,789
Accrued expenses 246,022 (38,641)
Net cash provide used in operating
activities (3,200,907) (1,819,307)
Cash flows from investing activities:
Acquisition of property & equipment (385,342) (34,811)
Restricted Cash 0 43,883
Net cash by (used in) investing
activities (385,342) 9,072
Cash flows from financing activities:
Advance from shareholders -- 1,246
Net cash provided by financing
activities -- 1,246
Net increase in cash and cash
equivalents (3,586,249) (1,808,989)
Effect of exchange rate change on
cash and cash equivalents 1,477,718 289,574
Cash and cash equivalents, beginning
of year 11,852,636 6,430,009
Cash and cash equivalents, end of
year $9,744,105 $4,910,594
Supplements Disclosure of cash flow
information:
Income Taxes paid $1,093,804 $3,760,570
Non-cash investment and financial
activity
Offset of amounts due to/from
stockholders $330,985 --
For more information, please contact:
CCG Elite Investor Relations
Crocker Coulson, President
Tel: +1-646-213-1915 Email: crocker.coulson@ccgir.com
Web: http://www.ccgelite.com
China Agritech, Inc.
Kelviz Lim
Tel: +86-10-5962-1220
