China New Borun Announces Third Quarter 2011 Financial Results

BEIJING, November 11, 2011 /PRNewswire-Asia/ -- China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced unaudited financial results for the third quarter of 2011.

Third Quarter 2011 Financial Highlights

• Total revenue increased 50.1% to RMB627.0 million ($98.7 million(1)) from RMB417.7 million in the third quarter of 2010.
• Gross profit increased 10.8% to RMB111.8 million ($17.6 million) from RMB100.9 million in the third quarter of 2010.
• Net income increased 5.0% to RMB67.5 million ($10.6 million) from RMB64.2 million in the third quarter of 2010.
• Diluted earnings per American Depositary Share ("ADS") were RMB2.62 ($0.41) for the quarter ended September 30, 2011. Each ADS represents one of the Company's ordinary shares.

Commenting on the results for the quarter, Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, stated, "During the third quarter we executed on our plans for continued strong growth. The company successfully brought online increased production capacity for crude corn oil and liquid carbon dioxide in our Shandong facility, and grade-A edible alcohol in our Daqing facility. These projects increase our yield from processing corn and help diversify both our revenue and customer base. They help position us as one of the most modern and efficient producers of edible alcohol in China."

Mr. Wang added, "Demand for edible alcohol remains strong as we saw good increases in sales volumes of edible alcohol. However, the cost of corn, our principal input cost, rose sharply during the quarter, outpacing edible alcohol prices and put pressure on our gross margins. Looking forward to the fourth quarter, our ability to continue to execute on our operating strengths, our sourcing expertise and diversifying our product and customer base should allow us to continue profitable growth."

Third Quarter 2011 Financial Performance

Third quarter 2011 revenue increased by 50.1% year-over-year to RMB627.0 million ($98.7 million) from RMB417.7 million in the same period of 2010. Key factors affecting our results of operations are as follows:

• Revenue from edible alcohol increased by 56.9% to RMB447.2 million ($70.4 million) in the third quarter of 2011 compared to RMB284.9 million in the third quarter of 2010 as a result of increases in the sales volume and price of edible alcohol during this period. Both strong demand in the edible alcohol market and increased production capacity from facilities opened during the year contributed to the revenue increase. Sales volume increased by 32.3% to 80,463 tons in the third quarter of 2011 and sales price increased by 18.6% to RMB5,558 per ton.
• Revenue from DDGS Feed increased by 54.3% to RMB112.4 million ($17.7 million) in the third quarter of 2011, compared to RMB72.8 million in the prior year period, mainly due to an increase in sales volume. Sales volume increased by 54.9% to 64,656 tons over the prior year period due to (i) increased overall production due to the opening of the Daqing Phase III facilities and (ii) implementation of crude corn oil production at our Daqing and Shandong facilities. The production of crude corn oil byproduct results in increased DDGS Feed produced per ton of corn processed. Sales price decreased in the third quarter of 2011 by 0.4% over the prior year period to RMB1,738 per ton.
• Revenue from corn germ decreased by 66.1% to RMB16.1 million ($2.5 million) in the third quarter of 2011 compared to RMB47.3 million in the third quarter of 2010, mainly due to the decreases in sales volume during this period. Sales volume decreased by 67.7% to 4,624 tons, due primarily to the installation of our crude corn oil processing equipment in our Daqing facilities in the first quarter of 2011. As a result, we began to deep-process corn germ into crude corn oil in our Daqing facilities beginning in March 2011. This eliminated corn germ production at our Daqing facilities. Additionally, in September 2011 we began producing crude corn oil in our Shandong facilities, eliminating corn germ production at our Shandong facilities.
• Revenue from liquid carbon dioxide increased by 10.7% to RMB 14.0 million ($2.2 million) in the third quarter of 2011 compared to RMB 12.6 million in the third quarter of 2010 as a result of increases in sales volume and the price of liquid carbon dioxide during the period. Through the realization of process improvements, sales volume increased by 7.0% to 23,949 tons in the third quarter of 2011 and sales price increased by 3.5% to RMB 584 per ton.
• We began recognizing revenue from the by-product crude corn oil, produced at our Daqing facilities, in March 2011. In September 2011 we also began recognizing revenue for crude corn oil produced at our Shandong facilities. Revenue from crude corn oil was RMB37.4 million ($5.9 million) in the third quarter of 2011, and the sales volume was 4,578 tons at a price per ton of RMB8,173.

During the third quarter of 2011, gross profit increased by 10.8% to RMB111.8 million ($17.6 million) from RMB100.9 million in the prior year period. Gross margin for the third quarter of 2011 decreased to 17.8% from 24.2% in the prior year period, driven by higher corn cost and lower capacity utilization due to an extended maintenance period in July 2011.

Operating income increased by 11.6% to RMB98.8 million ($15.5 million) in the third quarter of 2011, from RMB88.6 million in the same period of 2010, reflecting the Company's strong revenue growth.

Selling expenses increased by 84.8% to RMB1.1 million ($0.2 million) in the third quarter of 2011 compared to RMB0.6 million in the same period of 2010. The higher expenses in the third quarter of 2011 were primarily due to additional sales activities to support the increased sales volume.

General and administrative expenses were RMB11.9 million ($1.9 million) in the third quarter of 2011, which were stable compared to RMB11.8 million in the same period of 2010.

Income tax expenses in the third quarter of 2011 were RMB22.5 million ($3.5 million), representing an effective tax rate of 25.0%.

Net income increased by 5.0% to RMB67.5 million ($10.6 million) in the third quarter of 2011, compared to RMB64.2 million in the same quarter of 2010. Diluted earnings per share and per ADS were RMB2.62 ($0.41) in the third quarter of 2011. The Company had 25.725 million weighted average diluted shares outstanding during the quarter ended September 30, 2011.

As of September 30, 2011, the Company had cash and bank deposits of RMB227.3 million ($35.8 million), a decrease from RMB341.0 million as of December 31, 2010, which was principally driven by the cost of expanding production facilities. Cash flows provided by operating activities for the quarter ended September 30, 2011 were approximately RMB105.7 million ($16.6 million), reflecting the Company's strong operating results.

Financial Outlook

The Company estimates that its revenue for the fourth quarter will be in the range of RMB720.0 million ($113.3 million) to RMB750.0 million ($118.0 million), an increase of approximately 51.6% to 57.9% over the same quarter in 2010. Correspondingly, the Company estimates that its revenue for the full year of 2011 will be in the range of RMB2,643.2 million ($415.9 million) to RMB2,673.2 million ($420.6 million), an increase of approximately 54.2% to 56.0% over the previous year.

This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call

Borun's management will hold a corresponding earnings conference call and live webcast at 8:00 a.m. E.T on Friday, November 11, 2011 (9:00 p.m. Beijing time on Friday, November 11, 2011) to discuss the results and highlights from the third quarter of 2011 and answer questions from investors. A webcast of the call will be available at http://ir.chinanewborun.com. Listeners may access the call by dialing:

A replay of the webcast will be accessible through November 18, 2011 on http://ir.chinanewborun.com or by dialing:

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol in China. Borun's edible alcohol products are primarily sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage that is sold throughout China in retail stores, restaurants and bars. The Company also produces DDGS Feed, Corn Germ, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production. China New Borun is based in Shouguang, Shandong Province. Additional information about the company can be found at http://www.chinanewborun.com and in documents filed with the U.S. Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

Contact Information:

Three Part Advisors, LLC
John Palizza
Phone: +1-888-870-0798
Email: jpalizza@threepa.com