DAQING, China, Feb. 18 /PRNewswire-Asia-FirstCall/ -- China Nutrifruit (OTC Bulletin Board: CNGL) (“China Nutrifruit” or “the Company”), a leading producer of premium specialty fruit based products in China (“PRC”), today reported financial results for the third quarter of its 2009 fiscal year ended December 31, 2008.
Third Quarter 2009 Highlights
-- Net sales grew 3.7% year-over-year to $13.9 million
-- Gross profit was $6.0 million with gross margin of 43.5%
-- Net income was $3.3 million, or $0.09 per fully diluted share
-- New facility in Mu Dan Jiang City ramped up to 54% utilization level
-- Completed a private placement of 3.1 million shares of common stock
generating $6.84 million in net proceeds
China Nutrifruit’s reported financial statements represent the consolidated results of Daqing Longheda Food Company Limited (“Longheda”), the Company’s indirect, wholly-owned subsidiary, from October 1, 2008 to December 31, 2008. For comparison purposes, the Company has provided a pro forma consolidated statement of operations including Longheda’s operations for the three and nine month periods ended December 31, 2007. These pro forma results are presented in Table 4 below. The Company uses these items in its internal performance measures to analyze performance between periods, develop internal projections and measure management performance. The Company believes the pro forma results provide investors with a measurement of operating results which are comparable with subsequent periods.
“During the quarter, total sales volume increased only slightly as our distributors became more cautious in building up inventory of our nectar and glazed fruit products in light of the global economic contraction. As a result of the relatively slow sales growth in one of our seasonally strongest periods of the year and our larger operating infrastructure, we experienced lower profitability in the third quarter of fiscal 2009. However, we are encouraged by the recent increase in orders in January and February as our distributors increase inventory levels to meet growing consumer demand for premium specialty fruit based products,” commented Mr. Jinglin Shi, CEO of China Nutrifruit. “Our new fruit processing facility in Mu Dan Jiang, which came online in August 2008, ramped up to 54% utilization level contributing to our revenues during the quarter.”
Net sales for the three months ended December 31, 2008 increased $0.5 million to $13.9 million, up 3.7% from pro forma net sales of $13.4 million in the three months ended December 31, 2007. The sole reason for the increase in sales was due to exchange rate gains. The impact of the weak global economy affected the distributors’ demand forecasts and desired inventory levels. In addition, the Company selectively reduced selling prices for products that had lower raw materials costs during the quarter in an effort to mitigate the impact of the slowing economy.
For the third quarter of fiscal 2009, net sales from concentrated juice products, which accounted for 71.9% of the total net sales, were $10.0 million, up 10.9% from $9.0 million in the third quarter of fiscal 2008. Net sales from glazed fruit and nectar, which accounted for 6.1% and 10.0% of net sales, were $0.8 million and $1.4 million, down 18.9% and 32.5% from $1.0 million and $2.1 million in the third quarter of fiscal 2008 respectively. Net sales of fresh golden berry fruits accounted for 3.1% of net sales and totaled $0.4 million, up 34.1% from $0.3 million in the same period of fiscal 2008. Beverages, which represented 8.9% of net sales, experienced the strongest growth and increased 28.3% to $1.2 million from $1.0 million in the same period a year ago. Among the Company’s beverage products, sales of the branded beverage “Fu” surged 62.7% to $0.7 million during the third quarter of 2009. There was no significant impact in sales of the Company’s internet bar beverage despite the replacement of the previously licensed brand “The World of Legend” with the Company’s brand “The Legend of Network,” which was launched in May 2008, demonstrating that the target consumers in internet bars have established a strong loyalty to the Company’s beverage.
Gross profit for the third quarter of fiscal 2009 was $6.0 million, down slightly from pro forma gross profit of $6.1 million in the third quarter of fiscal 2008. Gross margin was 43.5% in the third quarter of fiscal 2009 compared with pro forma gross profit of 45.5% in third quarter of fiscal 2008. The slight decline in gross margin was due to the decreased sale of our higher margin nectar and glazed fruit products and lower selling prices of apple and crab apple fruit concentrate offered by the Company in an effort to stimulate sales to distributors.
During the quarter, selling expenses were $0.9 million, an increase of $0.2 million, from pro forma selling expenses of $0.7 million a year ago. The increase was primarily due to higher transportation costs incurred during the quarter. General and administrative (“G&A”) expenses were $0.7 million, an increase of $0.2 million, from pro forma G&A expenses of $0.4 million in the third quarter of fiscal 2008. The rise in G&A expenses was attributable to the increased cost of insurance benefits for employees as mandated by the PRC government and the additional salary and professional expenses incurred as a result of the reverse merger in August 2008.
Income from operations in the third quarter of fiscal 2009 was $4.4 million, down 10.2% from pro forma income from operations of $4.9 million in the third quarter of fiscal 2008. Operating margin for the quarter was 31.9%, compared to 36.8% for the third quarter of fiscal 2008.
Net income for the third quarter of fiscal 2009 was $3.3 million, or $0.09 per fully diluted share, compared to pro forma net income of $4.1 million, or $0.13 per fully diluted share, for the third quarter of fiscal 2008. Fully diluted weighted average shares outstanding increased by 15,559,641 from the same quarter last year, due to the share exchange and private placement which occurred in August and October 2008, respectively.
Nine Month Financial Results
For the first nine months of fiscal 2009, net sales were $36.2 million, up 33.3% from pro forma net sales of $27.2 million in the first nine months of fiscal 2008. Net sales from concentrated juice products, which accounted for 56.2% of the total net sales, were $20.4 million, up 43.2% from $14.2 million in the same period of fiscal 2008. Net sales from glazed fruit and nectar, which accounted for 13.4% and 14.6% of net sales, were $4.8 million and $5.3 million, up 50.7% and 22.5% from $3.2 million and $4.3 million in the first three quarters of fiscal 2008, respectively. Net sales of fresh golden berry fruits accounted for 6.7% of net sales and totaled $2.4 million, up 20.0% from $2.0 million in the same period of fiscal 2008. Beverages, which represented 9.0% of net sales, fell 3.0% to $3.3 million from $3.4 million in the same period a year ago. Gross profit increased 34.9% in the first nine months of fiscal 2009 to $17.2 million from pro forma gross profit of $12.7 million in the comparable period a year ago. Gross margin was 47.5% in the first nine months of fiscal year 2009 compared to pro forma gross profit of 46.9% in the first nine months of 2008. Income from operations increased 31.7% to $13.7 million compared to pro forma income from operations of $10.4 million in the same period a year ago. Net income for the nine months ended December 31, 2008 was $9.9 million, or $0.51 per fully diluted share, up 14.4% from pro forma net income of $8.7 million, or $0.28 per fully diluted share, in the first nine months of fiscal year 2008.
Financial Condition
As of December 31, 2008, China Nutrifruit had $8.4 million in cash and cash equivalents, $7.3 million in short-term debt, $19.1 million in total liabilities with no long term debt and working capital of $4.2 million. Accounts receivable turnover decreased to 12 days during the third quarter of fiscal year 2009. Shareholders’ equity stood at $21.3 million as of December 31, 2008, up 324.7% from $5.0 million as of March 31, 2008. In the first nine months of fiscal 2009, the Company generated $4.9 million in cash flow from operating activities.
On October 10, 2008, the Company completed a private placement of 3,085,840 shares of its common stock resulting in approximately $6.84 million in net proceeds. The Company used the proceeds for building the new concentrate juice production line in Mu Dan Jiang.
Business Outlook
The Company is focusing on increasing its market penetration and the Company intends to expand its distribution network by adding five to ten new distributors annually over the next few years. In an effort to maintain the most productive distributor network possible, China Nutrifruit reviews its network and from time to time will terminate relationships with unproductive distributors. The Company also has plans to expand its product portfolio and recently developed glazed blueberries and two new concentrates: sea buckthorn and black currant. Subject to financing, the Company also plans to add two new fruit processing production lines by July 2009 which will increase its total installed fruit processing capacity to 36,960 tons.
“We believe the long-term outlook for premium fruit products continues to remain robust and we expect to benefit significantly due to our leading position as China’s premium specialty fruit processor,” concluded Mr. Shi. “We expect to achieve strong top-line and bottom line growth throughout the rest of fiscal 2009 and into fiscal 2010 as we expand market penetration, increase utilization at our new facility and expand our product portfolio to meet the changing tastes of consumers.”
Conference Call Information
Management will conduct a conference call at 9:00 a.m. Eastern Standard Time on Thursday, February 19, 2009 to discuss its third quarter of fiscal 2009 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-688-0796. International callers should dial 617-614-4070. The pass code for the call is 39180585. If you are unable to participate in the call at this time, a replay will be available on Thursday, February 19, 2009 at 11:00 a.m. Eastern Standard Time, through Thursday, March 5, 2009. To access the replay, dial 888-286-8010. International callers should dial 617-801-6888. The conference pass code is 90130587.
About China Nutrifruit Group Limited
Through its subsidiary Daqing Longheda Food Company Limited, China Nutrifruit, is engaged in developing, processing, marketing and distributing a variety of food products processed primarily from premium specialty fruits grown in Northeast China, including golden berry, crab apple, blueberry and raspberry. The Company’s processing facility possesses ISO9001 and HACCP series qualifications. Currently, the Company has established an extensive nationwide sales and distribution network covering 19 provinces and 41 cities, through 68 distributors in China.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act"). Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the “Risk Factors” section of our Current Report on Form 8-K filed on August 14, 2008, and other risks and uncertainties mentioned in our other reports filed with the Securities and Exchange Commission. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.
- Financial Tables Follow -
Table 1
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Stated in US Dollars)
December 31, March 31,
2008 2008
ASSETS
Current assets:
Cash and cash equivalents $8,396,925 $7,104,849
Trade receivables, net 1,794,802 1,921,457
Inventory, net 12,562,421 1,955,725
Prepayments 499,546 --
Other current assets 4,376 114,865
Total current assets 23,258,070 11,096,896
Property, plant and equipment, net 16,966,697 7,173,523
Land use rights, net 190,095 318,120
TOTAL ASSETS $40,414,862 $18,588,539
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings $7,294,797 $2,848,110
Other payables and accrued expense 389,178 494,278
Consideration payable -- 5,353,755
Trade payables 1,220,239 161,136
Income taxes payable 1,050,475 607,680
Advances from customers 1,737,133 --
Amount due to a director 516 --
Amount due to a shareholder 7,374,420 --
Amount due to an affiliate -- 58,253
TOTAL LIABILITIES 19,066,758 9,523,212
Minority interests -- 4,039,286
Commitments and Contingencies
Stockholders’ equity
Preferred stock
Authorized: 5,000,000 shares, par value $0.001
None issued and outstanding -- --
Common stock
Authorized: 120,000,000 shares, par value $0.001
Issued and outstanding: 36,125,754 shares
as at December 31, 2008;
(2,873,036 shares as at March 31, 2008) 36,126 2,873
Additional paid-in-capital 6,781,315 (4,965)
Statutory reserves - restricted 2,872,011 1,713,065
Accumulated other comprehensive income 410,125 812,312
Retained earnings 11,248,527 2,502,756
TOTAL STOCKHOLDERS’ EQUITY 21,348,104 5,026,041
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $40,414,862 $18,588,539
Table 2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Stated in US Dollars)
Three months ended Nine months ended
December 31, December 31,
2008 2007 2008 2007
Net sales $13,873,857 $6,210,070 $36,212,228 $6,210,070
Cost of sales (7,836,719) (3,536,169) (19,020,828) (3,536,169)
Gross profit
6,037,138 2,673,901 17,191,400 2,673,901
Selling, general and
administrative expenses (1,610,004) (550,299) (3,541,459) (550,299)
Operating earnings 4,427,134 2,123,602 13,649,941 2,123,602
Other income (expenses)
Interest expenses (128,455) (114,103) (318,050) (114,103)
Other income 6,555 60 26,092 60
Total other
income (expenses) (121,900) (114,043) (291,958) (114,043)
Earnings before minority
interests and
income taxes 4,305,234 2,009,559 13,357,983 2,009,559
Provision for income
taxes (1,050,626) (293,824) (3,243,958) (293,824)
Earnings before minority
interests 3,254,608 1,715,735 10,114,025 1,715,735
Minority interests -- (416,254) (209,308) (416,254)
Net earnings $3,254,608 $1,299,481 $9,904,717 $1,299,481
Earnings per share
Basic $0.0903 $0.0633 $0.5089 $0.1404
Diluted $0.0902 $0.0633 $0.5088 $0.1404
Weighted average number
of common stock
outstanding
Basic 36,061,476 20,531,621 19,463,339 9,258,462
Diluted 36,091,262 20,531,621 19,465,518 9,258,462
Table 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in US Dollars)
Nine months ended
December 31,
2008 2007
Operating activities:
Net earnings $9,904,717 $1,299,481
Adjustments to reconcile net loss to net
cash provided by operating activities
Minority interests 209,308 416,254
Depreciation and amortization 654,849 62,837
Loss on disposal of property,
plant and equipment 289 --
Changes in operating assets and
liabilities:
Trade receivables, net 172,808 3,383,301
Inventory (10,501,428) 1,589,015
Prepayments (499,412) (197,472)
Other current assets (64,981) 725,737
Trade payables 1,049,463 (574,506)
Income taxes payable 425,577 476,152
Advances from customers 1,727,701 --
Consideration payables (5,352,352) --
Amount due to a shareholder 7,360,552 --
Amount due to a director (59,076) 34,053
Other payables and accrued expenses (116,020) 454,033
Net cash provided by operating activities 4,911,995 7,668,885
Investing activities:
Cash (outflow)/inflow from acquisition
of subsidiaries (1,451,038) 829,765
Purchases of property and equipment (13,102,841) --
Proceeds from disposal of property
and equipment 3,918 --
Net cash (used in)/provided by
investing activities (14,549,961) 829,765
Financing activities:
Proceeds from borrowings 4,353,113 --
Proceeds from issue of common stock 8,578,706 1,010
Costs related to issuance of common stock (1,741,421) --
Net cash (used in)/provided by
financing activities 11,190,398 1,010
Increase in cash and cash equivalents 1,552,432 8,499,660
Effect of exchange rate on cash and
cash equivalents (260,356) 95,204
Cash and cash equivalents at beginning
of the period 7,104,849 --
Cash and cash equivalents at end
of the period $8,396,925 $8,594,864
Supplemental disclosure of cash
flows information:
Cash paid for:
Interest $318,050 $114,103
Income tax $2,818,381 $214,314
Table 4
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(THREE MONTHS AND NINE MONTHS)
(Stated in US Dollars)
For the three For the nine
months ended months ended
December 31, December 31,
2007 2007
(Pro forma) (Pro forma)
Net sales $13,384,677 $27,155,984
Cost of sales (7,299,044) (14,415,039)
Gross profit 6,085,633 12,740,945
Selling, general and
administrative expenses (1,154,900) (2,375,725)
Operating earnings 4,930,733 10,365,220
Other income (expenses)
Interest expenses (107,166) (281,097)
Other income 5,514 17,007
Total other income (expenses) (101,652) (264,090)
Earnings before income taxes 4,829,081 10,101,130
Provision for income taxes (691,052) (1,445,204)
Net earnings $4,138,029 $8,655,926
Earnings per share
Basic and diluted $0.1284 $0.2784
Weighted average number of
common stock outstanding
Basic and diluted 32,220,041 31,092,725
For more information, please contact:
CCG Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
