-- Full year revenues increased 33.0% to a record $39.3 million
-- Full year net income increased 59.4% to $8.5 million
BEIJING, March 28 /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 fourth quarter and full year ended December 31, 2007.
Fourth Quarter Highlights
-- Revenues increased 53.2% year-over-year to $9.2 million
-- Gross profit increased 23.5% year-over-year to $3.9 million
-- Net income increased 27.5% year-over-year to $1.5 million, or $0.06
per diluted share
Full Year 2007 Highlights
-- Revenues grew 33.0% to a record $39.3 million in line with guidance
-- Gross profit increased 32.3% to a record $20.3 million
-- Net income grew 59.4% to a record $8.5 million, or $0.39 per diluted
share, in line with guidance
-- Completed private placement financing, raising $15 million in gross
proceeds to build new granular production facilities
"We made significant progress in our expansion strategy throughout 2007 as we penetrated new markets in central and southern China and signed a $7.8 million contract with Sinochem Fertilizer, the largest fertilizer distributor in China," commented Mr. Yu Chang, Chief Executive Officer of China Agritech. "We will begin test production of our new granular fertilizer factory in Beijing in April; we expect the factory will begin production in May."
"During the fourth quarter, we experienced higher packaging costs associated with rising crude oil prices, which negatively impacted gross margin. We are in the process of evaluating alternative options for packaging materials in an effort to lower these costs in the future."
Net revenue for the fourth quarter of 2007 climbed 53.2% to $9.2 million from $6 million in the fourth quarter of 2006. Revenue growth was the result of strong demand for LvlingBao III and Tailong I fertilizers, which represented 36% and 26%, respectively, of net revenue in the fourth quarter of 2007. Green Vitality doubled as a percent of net revenue from the third quarter of 2007 to 16% as the Company increased its penetration in the southern and central regions of China. Lvling BaoIV represented the balance of 22% of net revenue.
Gross profit for the fourth quarter of 2007 was $3.9 million, up 23.5% from gross profit of $3.1 million in the fourth quarter of 2006. Gross margin for the quarter was 42.3% compared to 52.5%. The decline in gross margin was primarily due to higher packaging costs, as well as higher raw materials costs for nitrogen, phosphorus, and potassium.
Selling expenses during the quarter were $0.8 million, or 8.2% of revenue, down from $1.1 million, or 19.0% of revenue, in the fourth quarter of 2006. The decline in selling expense is due to the higher than usual selling expenses in the fourth quarter of 2006 as the Company established its new distribution network throughout China.
Operating and administrative expenses during the quarter were $0.7 million, or 7.3% of revenue, compared to a credit of $0.3 million, in the same period of 2006. China Agritech recorded $227,981 in allowance for doubtful accounts during the quarter compared to $170,236 in the fourth quarter of 2006. The credits in the fourth quarter of 2006 represented the reversal of certain
bad-debt expenses recorded in the previous three quarters of 2006 and were accounted for in the fourth quarter of 2006, which were more than the allowance for doubtful accounts incurred in the same quarter.
Income from operations was $2.5 million, up 8.1% from $2.3 million in the same period of 2006. Operating margin for the quarter was 26.8% compared to 37.9% in the fourth quarter of 2006.
Net income for the fourth quarter of 2007 was $1.5 million, up 27.5% from $1.1 million in the fourth quarter of 2006. Fully diluted earnings per share were $0.06 for the fourth quarter of 2007 compared to fully diluted earnings per share of $0.06 for the same period a year earlier. Weighted average fully-diluted shares for the fourth quarter of 2007 increased to 24,811,761 compared to weighted average fully-diluted shares of 19,143,615 in the fourth quarter of 2006, as the result of an additional 5,556,000 shares of common stock issued in a private placement in July 2007.
Full Year Financial Results
Revenues for the full year 2007 increased 33.0% to $39.3 million, from $29.5 million in 2006. Gross profit increased to $20.3 million, up 32.3% from $15.3 million. Gross profit margin was 51.8% in 2007 compared to 52.0% in 2006. Income from operations increased 44.0% to $15.0 million from $10.4 million in the same period a year ago. Net income in 2007 was $8.5 million, or $0.39 per fully diluted share up 59.4% from $5.3 million, or $0.29 per fully diluted share.
Financial Condition
As of December 31, 2007, China Agritech had $13.9 million in cash and restricted cash, no long-term debt and $50.6 million in working capital. Days' sales outstanding for the year was 161 compared to 127 in 2006. Shareholders' equity stood at $50.8 million up from $26.9 million in 2006.
Business Outlook
China Agritech completed its first granular fertilizer factory with 50,000 metric tons capacity in Beijing in March 2008. The factory will begin test production in April; it is expected to begin production in May 2008. The Company plans to add two new granular factories with 50,000 metric tons capacity each in Harbin and Xinjiang once the Beijing factory is operating smoothly. China Agritech estimates that it will sell approximately 40,000 to 50,000 metric tons of granular fertilizer in 2008. The Company continues to develop new markets in the central and southern regions of China for its organic liquid compound fertilizer.
China Agritech reaffirms its 2008 guidance for revenue to be in the range of $60 - $62 million, and net income to $9.5 - $10 million. Fully diluted earnings per share are expected to be $0.38 to $0.40 based on 24.8 million fully diluted shares. Capital expenditures for 2008 are estimated at $6 million.
"We are actively ramping up production ahead of the peak agriculture season and have signed contracts with about 280 distributors. Our contracts are for a full year although the majority of our fertilizer is delivered during the second and third quarters," concluded Mr. Chang. "We have ramped up our marketing efforts throughout local villages and are providing more demonstrations of the benefits of using our fertilizer. We are also in the initial stages of working with the Ministry of Agriculture to launch a national campaign for sustainable agriculture."
Conference Call Information
Management will conduct a conference call to discuss China Agritech's fourth quarter and full year financial results and provide a corporate overview. The conference call will take place at 9:00 am ET on Friday, March 28, 2008. Hosting the call will be Mr. Kelviz Lim Kok Siak, Vice President of Finance of China Agritech. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 419-5570. International callers should dial 617-896-9871. The pass code for the call is 129 657 34. If you are unable to participate in the call at this time, a replay will be available on Friday, March 28, 2008 at 11:00 a.m. ET, through Friday, April 11, 2008. To access the replay from the United States dial 888-286-8010, or 617-801-6888 if calling internationally. Enter the conference ID number 37675636. This conference call will be broadcast live over the Internet and can be accessed by all interested parties on the China Agritech website at http://www.chinaagritechinc.com . To listen to the live webcast, please go to the China Agritech website at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on China Agritech's website for 90 days.
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 .
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by China Agritech on its conference call in relation to this release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs, but these projections also involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as 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. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
-- financial tables below --
CHINA AGRITECH, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006
2007 2006
Net revenue $39,270,292 $29,525,577
Cost of revenue 18,939,725 14,161,358
Gross profit 20,330,567 15,364,219
Operating expenses
Selling expenses 2,985,581 2,983,756
Operating and administrative expenses 2,418,895 2,015,252
Total operating expenses 5,404,476 4,999,008
Income from operations 14,926,091 10,365,211
Other income (expense)
Other income 111,852 98,617
Finance costs (271) (3,590)
Total other income (expense) 111,581 95,027
Income before income taxes and
minority interests 15,037,672 10,460,238
Provision for income taxes 5,391,464 4,248,144
Income before minority interests 9,646,208 6,212,094
Minority interests (1,117,583 ) (862,756)
Net income $8,528,625 $5,349,338
Other comprehensive income
Foreign currency translation
adjustment 1,976,819 372,722
Other comprehensive income $10,505,444 $5,722,060
Basic weighted average shares
outstanding 21,868,338 18,735,944
Basic net earning per share $0.39 $0.29
Diluted weighted average shares
outstanding 21,929,031 18,735,944
Diluted net earnings per share $0.39 $0.29
CHINA AGRITECH, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2007, AND 2006
2007 2006
Net revenue $9,195,862 $6,002,968
Cost of revenue 5,307,860 2,853,719
Gross profit 3,888,002 3,149,249
Operating expenses
Selling expenses 756,100 1,143,016
Operating and administrative expenses 670,314 (271,120)
Total operating expenses 1,426,415 871,896
Income from operations 2,461,587 2,277,353
Other income (expense)
Other income 158,269 137,760
Finance costs 2,866 (1,777)
Total other income (expense) 161,136 135,983
Income before income taxes and minority
interests 2,622,722 2,413,336
Provision for income taxes 938,932 1,059,286
Income before minority interests 1,683,790 1,354,050
Minority interests 232,114 215,068
Net income $1,451,676 $1,138,982
Basic weighted average shares
outstanding 24,699,615 19,143,615
Basic net earning per share $0.06 $0.06
Diluted weighted average shares
outstanding 24,811,761 19,143,615
Diluted net earnings per share $0.06 $0.06
CHINA AGRITECH, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2007 AND 2006
2007 2006
ASSETS
Current Assets
Cash and cash equivalents $11,841,221 $6,430,009
Restricted cash 2,011,415 100,028
Accounts receivable, net 22,695,039 12,239,073
Inventories 3,508,741 1,322,244
Advances to suppliers 12,343,255 8,038,974
Prepayments and other
receivables 1,242,694 382,463
Total Current Assets 53,642,365 28,512,791
Property, Plant and
Equipment, net 3,798,958 2,514,123
Total Assets $57,441,323 $31,026,914
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $41,146 $108,886
Accrued expenses and other
payables 1,047,721 871,495
Amount due to related
parties 352,505 954
Tax payables 1,650,243 1,028,885
Total Current Liabilities 3,091,615 2,010,220
Minority Interests 3,465,724 2,160,575
Commitments -- --
Stockholders' Equity
Common stocks; $0.001 par
value, 100,000,000
shares authorized, shares
issued and outstanding
24,699,615 and
19,143,615 24,700 19,144
Additional paid-in capital 26,135,914 12,619,049
Statutory reserves 4,299,653 2,790,916
Accumulated other
comprehensive
income 2,578,107 601,288
Retained earnings 17,845,610 10,825,722
Total Stockholders' Equity 50,883,984 26,856,119
Total Liabilities and
Stockholders' Equity $57,441,323 $31,026,914
CHINA AGRITECH, INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006
Cash flows from operating activities:
Net income $8,528,625 $5,349,338
Adjustments to reconcile net income to
net cash
Provided by (used in) operating
activities:
Stock based compensation 37,942 (3,597)
Minority Interest 1,117,583 862,756
Depreciation 390,736 155,292
Decrease / (Increase) in current
assets:
Accounts receivable (9,275,894) (3,357,026)
Other receivables (111,276) 55,024
Inventory (2,186,497) (1,502,205)
Advances to suppliers (3,626,775) (5,769,071)
Prepayments (344,423) (62,887)
Other assets 22,532 2,024
(Decrease) / Increase in current
liabilities:
Accounts payable (357,627) 262,020
Tax payables 532,043 365,731
Accrued expenses and other payables 625,851 305,739
Net cash provide by (used in)
operating activities (4,647,180) (3,336,852)
Cash flows from investing activities:
Restricted Cash (1,911,179) 174,972
Acquisition of property & equipment (1,429,517) (1,541,812)
Net cash used in investing activities (3,340,697) (1,366,840)
Cash flows from financing activities:
Payments to shareholders / related
parties -- (51,312)
Capital contributed 13,484,478 11,079,705
Net cash provided by (used in)
financing activities 13,484,478 11,028,393
Net increase in cash and cash
equivalents 5,496,602 6,324,691
Effect of exchange rate change on cash
and cash equivalents (85,390) (150,513)
Cash and cash equivalents, beginning
of year 6,430,009 255,831
Cash and cash equivalents, end of year $11,841,221 $6,430,009
For more information, please contact:
CCG Elite Investor Relations
Crocker Coulson, President
Leslie Richardson, Financial Writer
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
China Agritech, Inc.
Kelviz Lim
Tel: +86-10-5962-1220
