Origin Agritech Ltd. Reports Unaudited Fiscal Year 2016 Financial Results

DES MOINES, Iowa, Jan. 3, 2017 /PRNewswire/ --

Significant Progress in FY16 as Origin Continues Transition to a Global Agricultural Technology Provider

FY16 Business Realignment Positions Origin for Exciting Opportunities Ahead

Origin Agritech Ltd. (NASDAQ: SEED) ("Origin" or the "Company"), an agricultural biotechnology trait and corn seed provider, today announced its unaudited financial results for the fiscal year ended September 30, 2016.

"We have delivered a 2016 fiscal year of significant change and milestone achievements that reflect our new strategic operating direction," said Dr. Bill Niebur, Origin's Chief Executive Officer. "We have diversified our business model, refreshed our product portfolio and are working to improve our financial position to enable Origin to capitalize on a consolidating global agricultural market environment. Based on China's 13th Five-Year Plan, we continue to believe that the Chinese government is committed to the commercialization of agricultural biotechnology as part of the larger effort to modernize agriculture. We have crafted a strategic plan specifically to position Origin as a leader in the global agricultural transformation."

Key Corporate Developments

• Today, the Company announced a definitive agreement with DuPont Pioneer to gain access to non-GM corn seed products for the U.S., and bring such products into Origin's North America non-GM/Organic business. This collaboration represents an important step as Origin pursues a full slate of agricultural products, technology and services to meet North America non-GM/Organic market needs.
• In December 2016, Origin announced critical milestone achievements for the agricultural biotechnology research program including:
  • Becoming the first Chinese biotech seed company to export genetically modified corn seeds to the United States at a greenhouse designated by the U.S. Department of Agriculture. U.S. field tests of these seeds, with insect resistance and herbicide tolerance technologies developed in China, are scheduled to begin next summer;
  • Completion of lab and field production trials in China for the abovementioned trait;
  • Submission of relevant data to obtain approval of a Safety Certificate.
• In October 2016, the Company announced the opening of the Des Moines office (Iowa) as Origin's North American operations center. Establishing a North American presence is a natural outgrowth of the Company's focus on globalization and enables Origin to contribute to stronger U.S.-China relations in agriculture.
• In September 2016, Origin entered into a definitive agreement to sell its proprietary commercial corn seed production and distribution business and its Beijing headquarters for RMB400 million (approximately USD$60 million). The transaction is subject to customary closing conditions and shareholders' approval.
  • Origin will retain its corn germplasm IP, breeding and biotech research capabilities, which include modern laboratories, extensive field testing networks and off-season winter nursery in Hainan, to expand and pursue germplasm and trait licensing opportunities. The sale of Origin's proprietary commercial seed business will strengthen the Company's balance sheet and enable it to focus on biotechnology trait and seed germplasm research, development and licensing.
• In April 2016, Origin announced a strategic partnership with DuPont Pioneer to create and commercialize corn biotechnology products in China.

Fiscal 2016 Financial Results

As the seed industry in China experienced another challenging year, Origin improved its operating efficiency and cost reduction efforts in fiscal year 2016 after excluding restructuring costs, expenses related to the North American expansion, and one-time stock compensation expenses. The Company's cash flow from operating activities was steady as it managed inventory effectively. Going forward, Origin will maintain its focus on cost and cash flow management to enable strategic investment in R&D and global business development.

Total revenues for the fiscal year ended September 30, 2016 were RMB335.3 million (US$50.2 million), a decrease of 11.0% from RMB376.6 million during the fiscal year ended September 30, 2015. The year-over-year decrease in revenues was mainly due to lower sales volume for corn and rice seeds as a result of market oversupply, increasing competition and a reduction in corn acres in the high single digits as measured by percentage. Market share for corn held flat with last year.

Corn seed accounted for 91% of overall sales. Total revenues from corn seeds were RMB306.4 million (US$45.9 million) in fiscal year 2016, compared with RMB331.3 million in fiscal year 2015. Revenues from the rice product line for the year ended September 30, 2016 decreased to RMB19.7 million (US$3.0 million) from RMB29.2 million in the fiscal year 2015. Sales of canola seeds decreased to RMB8.7 million (US$1.3 million) in fiscal year 2016, compared to RMB15.7 million in fiscal year 2015. Due to continued decline of rice and canola seed sales and increased competition, the Company is phasing out of these product lines in 2017.

Revenues of Biotech & Product Development, related to conversion and testing fees from international partners, for the year ended September 30, 2016 increased to RMB0.5 million (US$0.1 million) from RMB0.3 million in fiscal year 2015.

Operating expenses for the fiscal year ended September 30, 2016 were RMB137.3 million (US$20.6 million), representing an increase of 23.5% from RMB111.2 million in the fiscal year 2015, mainly due to restructuring costs, start-up expenses related to expansion of operations in North America and a one-time stock compensation expense. Excluding these items, total operating expenses increased marginally by 2% to RMB113.2 million (US$17.0 million). Selling and marketing expenses for the fiscal year ended September 30, 2016 decreased 4.8% year-over-year to RMB38.1 million (US$5.7 million), mainly due to a decrease in headcount as Company's sales through e-commerce increased in 2016.

Operating loss for the fiscal year ended September 30, 2016 was RMB61.3 million (US$9.2 million), compared with operating income of RMB1.3 million in fiscal year 2015.

Net loss attributable to Origin for the fiscal year ended September 30, 2016 was RMB65.6 million (US$9.8 million), compared to a net loss of RMB13.8 million for the fiscal year ended September 30, 2015.

Net loss per share was RMB2.87 (US$0.43) for the fiscal year 2016, compared with net loss per share of RMB0.61 in fiscal year 2015.

As of September 30, 2016 and 2015, the Company had approximately RMB54.5 million (US$8.2 million) and RMB66.0 million, respectively, in cash and cash equivalents. Total borrowings as of September 30, 2016 and 2015 were RMB237.1 million (US$35.5 million) and RMB285.0 million, respectively. During fiscal year 2016, net cash provided by operating activities was RMB47.9 million (US$7.2 million), compared with RMB52.2 million for the fiscal year ended September 30, 2015. Net cash used in investing activities was RMB6.5 million (US$1.0 million) for the fiscal year ended September 30, 2016, compared with RMB20.4 million for the fiscal year ended September 30, 2015. Net cash used in financing activities was RMB48.8 million (US$7.3 million) for the fiscal year ended September 30, 2016, compared with RMB9.5 million for the fiscal year ended September 30, 2015.

Conference Call Information

The Company will host a teleconference on January 3, 2017, at 8:30 a.m. ET / 9:30 p.m. Beijing time to discuss the results. To participate in the call, please dial the following numbers approximately 5 minutes prior to the scheduled start time.

US Toll Free: 1-888-346-8982
International Toll: 1-412-902-4272
Mainland China Toll Free: 4001-201203
Hong Kong Toll Free: 800-905945

A replay of the call will be available shortly after the conference call through January 10, 2016. The dial-in numbers for the replay are:

US Toll Free: 1-877-344-7529
International Toll: 1-412-317-0088
Replay Access Code: 10098247

A live and archived webcast of the conference call will be available through the Company's investor relations website at http://originseed.investorroom.com/.

About Origin

Founded in 1997 and headquartered in Zhong-Guan-Cun (ZGC) Life Science Park in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is China's leading agricultural biotechnology company, specializing in crop seed breeding and genetic improvement, seed production, processing, distribution, and related technical services. Leading the development of crop seed biotechnologies, Origin Agritech's phytase corn was the first transgenic corn to receive the Bio-Safety Certificate from China's Ministry of Agriculture. Over the years, Origin has established a robust biotechnology seed pipeline including products with glyphosate tolerance and pest resistance (Bt) traits. Origin operates production centers, processing centers and breeding stations nationwide with sales centers located in key crop-planting regions. Product lines are vertically integrated for corn, rice and canola seeds. For further information, please log on to the Company's website at: www.originseed.com.cn.

Forward Looking Statement

This release contains forward-looking statements. All forward-looking statements included in this release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "continue," or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those risk factors discussed in Origin's filings with the SEC including its annual report on Form 20-F to be filed. We undertake no obligation to revise or update publicly any forward-looking statements for any reasons.

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