Increases 2009 Revenue Guidance to $89-90 Million
BEIJING, Aug. 20 /PRNewswire-Asia/ -- Yongye International, Inc. (OTC Bulletin Board: YGII) ("Yongye" or "the Company"), a leading developer, manufacturer and distributor of Shengmingsu branded plant and animal nutrient products located in the People's Republic of China, today announced record financial results for the quarter ended June 30, 2009.
Second Quarter 2009 Highlights
-- Revenue increased 162.9% to $46.3 million from the second quarter
of 2008
-- Gross profit grew 153.4% to $24.3 million from the second quarter
of 2008
-- Operating income increased 90.8% to $16.0 million from the second
quarter of 2008
-- Net income expanded 58.1% to $11.3 million with diluted EPS of $0.37
-- Expanded branded store network by 40% to 5,000 stores from the end of
the first quarter of 2009
-- Received a renewed production license from the PRC Ministry of
Agriculture, enabling Yongye Nongfeng to manufacture its own products
-- Raised $9.0 million in gross proceeds through private placement
financings in May 2009
-- Appointed KPMG as new independent auditor
"We are very pleased to report triple-digit growth in revenues and gross profits and strong growth in net income during the second quarter of 2009, reflecting the power of our unique sales and marketing channel and the growing brand recognition for Yongye's plant and animal nutrient products. During the first half of 2009, we significantly increased our investments in advertising campaigns to reinforce the village-level promotional activities of our distribution partners and to pull demand through our expanding branded store network," said Mr. Zishen Wu, Chief Executive Officer of Yongye International. "Our distribution partners continue to rapidly penetrate rural markets, which promotes strong brand recognition for Yongye and with each growing season creates greater recognition by farmers as to the benefits of using Shengmingsu. They quickly realize it significantly enhances crop yields and improves their incomes."
Second Quarter 2009 Results
Revenue increased 162.9% to $46.3 million in the three months ended June 30 2009, up from $17.6 million in the same period of 2008. The revenue growth mainly resulted from greater sales penetration in the Company's existing markets. In the second quarter of 2009, the Company's sales network increased from 3,500 branded stores as of March 31, 2009 to 5,000 as of the end of June
2009.
Gross profit expanded 153.4% to $24.3 million in the second quarter of 2009, from $9.6 million in the second quarter of 2008. Gross margin was 52.6%, compared to 54.6% in the same period of 2008. Gross margin decreased primarily due to the standardization of pricing across different regions as the overall sales channels continue to mature.
Operating expenses were $8.4 million in the three months ended June 30, 2009, compared to $1.2 million in the three months ended June 30, 2008. Selling expenses increased to $6.5 million in the second quarter, or 13.9% of sales, as compared to $0.8 million, or 4.4% of sales, in the prior year period. The increase in selling expenses reflects the planned aggressive promotion of Yongye's brand through advertising targeted to rural farmers. In the second quarter of 2009, Yongye recorded $1.1 million in research and development expenses, reflecting the Company's growing emphasis on developing new products through internal research and development efforts as well as partnerships with leading agricultural universities and research institutes in China. In the comparable period in 2008, R&D activities and their related expenses were not yet part of the Company's cost structure.
Income from operations increased 90.8% to $16.0 million in the second quarter of 2009, from $8.4 million during the second quarter of 2009.
Provision for income taxes was $4.6 million in the second quarter of 2009, as compared to only $219,983 in the corresponding period of 2008. Previously, the Company's operating subsidiary, Yongye Nongfeng, had been subject to a local tax rate of only 1.25%, which specifically applied to small scale companies. Due to its growth and development into a larger enterprise, the Company began to accrue for taxes at the national standard enterprise rate of 25%, in case the standard PRC enterprise tax rate is applied to the Company by the relevant local tax authorities. This issue is currently pending resolution.
Net income increased 58.1% to $11.3 million in the second quarter of 2009, or $0.37 per diluted share, compared to net income of $7.2 million, or $0.38 per diluted share, in the second quarter of 2008.
The diluted weighted average number of shares outstanding increased from 19,084,248 in the second quarter of 2008 to 30,946,016 in the second quarter of 2009, as a result of additional shares issued in private placements in September 2008 and May 2009.
Six Months 2009 Results
Net revenue increased 118.3% to $58.7 million in the six months ended June 30, 2009, compared to $26.9 million in the six months ended June 30, 2008. Gross profit increased 111.9% to $30.9 million, with a gross margin of 52.6%, compared to $14.6 million, with a gross margin of 54.2%, in the six months ended June 30, 2008. Operating income grew 97.3% to $19.3 million, with an operating margin of 32.8%, compared to $9.8 million, with an operating margin of 36.3%, in the six months ended June 30, 2008. Net income expanded 86.3% to $14.4 million, or $0.50 per diluted share, compared to $7.7 million, or $0.51 per diluted share, in the six months ended June 30, 2008.
The diluted weighted average number of shares outstanding increased from 15,089,375 in the six months ended June 30, 2008 to 28,653,708 in the six months ended June 30, 2009, as a result of additional shares issued in private placements in September 2008 and May 2009.
Financial Condition
As of June 30, 2009, the Company had total assets of $76.3 million, compared to $34.5 million as of December 31, 2008. Working capital increased to $46.4 million at the end of the second quarter from $25.4 million at the end of 2008. Long-term liabilities increased slightly to $0.3 million from $0.2 million at the end of 2008. Stockholders' equity totaled $52.0 million as of June 30, 2009, compared to $29.4 million at the end of 2008.
As of June 30, 2009, cash totaled $4.9 million, compared to $4.5 million on December 31, 2008. The slight increase in the cash balance was primarily the result of the $9.0 million private placement that closed in May 2009 and offset by the increase in accounts receivable and inventories to support our growth during the quarter. At the end of the second quarter of 2009, accounts receivable totaled $36.6 million, up from $2.7 million as of December 31, 2008. Although the rapid sales growth led to a larger amount of accounts receivable, the Company was actually more effective in improving its control over the collections of accounts receivable during the period as evidenced by accounts receivable days sales outstanding significantly decreasing to about 42 days as compared to 72 days in the three month period ending June 30, 2008.
Inventory increased from $20.7 million at the end of 2008 to $26.8 million at the end of the second quarter of 2009, after the Company purchased raw materials and semi-finished goods from its predecessor company after receiving a fertilizer license and beginning to manufacture its own products.
Recent Events
In August 2009, Yongye launched its corporate and investor relations website under the domain name http://www.yongyeintl.com , significantly increasing the Company's ability to efficiently communicate its business strategy, product benefits and growth strategy to customers, investors, and business partners.
In August 2009, Yongye completed the expansion of its research and development center, which now comprises six modern greenhouses, an open testing field, and research laboratories, enabling the Company to directly test and measure the impact of new products and formulations on a wide variety of crops.
In August 2009, Yongye announced that its branded store network increased over 40% to 5,000 stores, demonstrating the success of the Company's channel partner training and development programs and intense efforts with distributors to flood targeted market areas with world-class advertising.
In July 2009, Yongye changed its stock symbol to YGII from YGYB after changing its corporate name in June to Yongye International from Yongye Biotechnology International. The new corporate name and stock symbol better reflect the Company's strong brand name in the Chinese agriculture sector and will foster stronger recognition in the global capital markets.
In June 2009, Yongye, through its sole operating subsidiary, Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd., obtained a renewed fertilizer production license from the PRC Ministry of Agriculture, enabling Yongye Nongfeng to manufacture its own products.
In May 2009, Yongye appointed KPMG Huazhen as its auditor, further elevating the stature and visibility of the Company.
Business Outlook
"During the first half of 2009, sales of Shengmingsu significantly exceeded our expectations as our independently-owned, branded store network reached 5,000 stores. We expect to experience continued strong growth in sales and profits in the second half of 2009. Our strategic goals include completing the restructuring of our business so as to obtain full control of the manufacturing assets, continuing to grow our penetration within our geographic markets, and developing new products that can be sold through our sales channel," said Mr. Wu.
Revised Guidance
As a result of Yongye's record financial performance in the first half of 2009, the Company increased its previously announced fiscal 2009 revenue guidance to $89-$90 million from $82-$84 million. In addition, Yongye
re-affirmed its previously provided net income guidance of $23-$24 million for fiscal 2009.
Conference Call
The Company will host a conference call at 10:00 a.m. Eastern time on August 21, 2009 to discuss its second quarter 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: +1-800-688-0796. International callers should dial +1-617-614-4070. The conference pass code is 238 352 15. For those who are unable to participate in the conference call at the time of the call, a replay will be available for fourteen days after the call is held. To access the replay, please dial +1-888-286-8010. International callers should dial +1-617-801-6888. The replay pass code is 887 753 03.
About Yongye International, Inc.
Yongye International, Inc., headquartered in Beijing, is engaged in the development, manufacturing, distribution and sales of fulvic acid based nutrients for plants and animals. The Company's patented and patent pending processes and proprietary formulas allow it to create products which increase crop yields and improve the health of livestock. Its sole operating subsidiary, Yongye Nongfeng Biotechnology Company, Ltd., is located in Inner Mongolia. The Company sells its products through distributors and directly to farmers throughout China.
Safe Harbor Statement
This press release contains certain statements that may include
"forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website ( http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
2009 2008(Restated) 2009 2008(Restated)
SALES
External customers $46,271,544 $17,598,671 $56,487,236 $26,896,639
Related party -- -- 2,220,083 --
TOTAL SALES 46,271,544 17,598,671 58,707,319 26,896,639
COST OF SALES 21,936,877 7,996,521 27,839,484 12,419,020
GROSS PROFIT 24,334,667 9,602,150 30,867,835 14,567,619
SELLING EXPENSES 6,450,694 777,012 9,070,992 3,997,477
RESEARCH & DEVELOPMENT
EXPENSES 1,124,445 -- 1,413,017 --
GENERAL AND
ADMINISTRATIVE
EXPENSES 785,565 454,697 1,130,722 812,125
INCOME FROM OPERATIONS 15,973,963 8,370,441 19,253,104 9,758,017
OTHER
EXPENSES/(INCOME)
Interest
Expense/(Income),
net 10,500 (789) 16,458 (778)
Other Expenses
/(Income), net (13,178) 387,198 (12,737) 386,840
TOTAL OTHER
EXPENSES/(INCOME),
NET (2,678) 386,409 3,721 386,062
INCOME BEFORE
PROVISION FOR INCOME
TAXES 15,976,641 7,984,032 19,249,383 9,371,955
PROVISION FOR INCOME
TAXES 4,591,776 219,983 4,747,223 594,765
NET INCOME 11,384,865 7,764,049 14,502,160 8,777,190
LESS: NET INCOME
ATTRIBUTABLE TO THE
NONCONTROLLING
INTEREST 63,734 603,194 82,256 1,035,005
NET INCOME
ATTRIBUTABLE TO
YONGYE INTERNATIONAL,
INC. 11,321,131 7,160,855 14,419,904 7,742,185
OTHER COMPREHENSIVE
INCOME/(LOSS)
Foreign Currency
Translation
Adjustment (36,750) 277,101 11,195 414,771
COMPREHENSIVE INCOME 11,348,115 8,041,150 14,513,355 9,191,961
LESS: COMPREHENSIVE
INCOME ATTRIBUTABLE
TO THE NONCONTROLLING
INTEREST 63,528 603,194 82,319 1,035,005
COMPREHENSIVE INCOME
ATTRIBUTABLE TO
YONGYE INTERNATIONAL,
INC. $11,284,587 $7,437,956 $14,431,036 $8,156,956
Net income per share:
Basic $0.37 $0.39 $0.51 $0.52
Diluted $0.37 $0.38 $0.50 $0.51
Weighted average
shares used in
computation:
Basic 30,222,243 18,496,093 28,500,814 14,970,434
Diluted 30,946,016 19,084,248 28,653,708 15,089,375
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, 2009 December 31, 2008
CURRENT ASSETS
Cash $4,860,814 $4,477,477
Accounts receivable, net - third
parties 36,562,325 2,748,042
Accounts receivable, net - related
party 29,219 --
Inventories 26,760,401 20,708,193
Advance payments 188,808 44,051
Due from a related party 193,046 192,741
Prepaid expenses 129,590 189,478
Other receivables 418,335 680,752
Total Current Assets 69,142,538 29,040,734
PROPERTY AND EQUIPMENT, NET 7,091,521 5,368,074
INTANGIBLE ASSETS, NET 90,274 95,453
TOTAL ASSETS $76,324,333 $34,504,261
CURRENT LIABILITIES
Long-term loans - current portion $183,723 $167,652
Accounts payable - related party 11,414,741 46,739
Accounts payable - third parties 41,158 --
Income tax payable 4,771,415 219,366
Advance from customers 171,847 1,869,400
Accrued expenses 5,324,376 583,880
Other payables 869,387 774,526
Total Current Liabilities 22,776,647 3,661,563
LONG-TERM LOANS 273,615 230,121
EQUITY
Common stock: par value
$.001;75,000,000 shares authorized;
32,594,341 shares issued and
outstanding at June 30, 2009 and
26,760,258 shares issued and
outstanding December 31, 2008 32,594 26,760
Additional paid-in capital - Common
stock 21,799,562 13,976,900
Additional paid-in capital - Warrants 4,203,075 3,883,432
Retained earnings 25,611,901 11,191,997
Accumulated other comprehensive
income 342,232 331,100
Total Equity of the Company's
Shareholders 51,989,364 29,410,189
Noncontrolling interest 1,284,707 1,202,388
Total Equity 53,274,071 30,612,577
TOTAL LIABILITIES AND EQUITY $76,324,333 $34,504,261
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months For the Six Months
Ended Ended
June 30, 2009 June 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $14,502,160 $8,777,190
Adjustments to reconcile net income
to net cash used in operating
activities
Depreciation and amortization 244,805 93,263
Reversal of bad debt provision (305,338) --
Changes in assets and liabilities:
Accounts receivable - third parties (33,525,463) (20,613,347)
Accounts receivable - related party (29,212) --
Inventories (6,026,638) (5,196,266)
Advance payments -- (65,453)
Due from a related party 33 2,397,465
Prepaid expenses 60,096 --
Other receivables 263,126 (216,795)
Accounts payable- related party 11,376,007 4,889,694
Accounts payable- third parties 41,187 --
Income tax payable 4,562,992 243,007
Advance from customers (1,699,588) --
Accrued expenses 4,742,049 1,882,643
Other payables 85,887 203,947
Net Cash Used in Operating Activities (5,707,897) (7,604,652)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (2,100,266) (639,519)
Addition to intangible assets -- (122,899)
Net Cash Used in Investing Activities (2,100,266) (762,418)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans 129,593 --
Repayment of bank loans (70,591) --
Proceeds from common stock and
warrants issued 8,984,595 10,100,651
Payment for common stock issuance
costs (836,456) (806,159)
Net Cash Provided by Financing
Activities 8,207,141 9,294,492
EFFECT OF FOREIGN CURRENCY
TRANSLATION ON CASH (15,641) 414,771
NET INCREASE IN CASH 383,337 1,342,193
CASH- BEGINNING 4,477,477 8,137
CASH - ENDING $4,860,814 $1,350,330
Supplemental cash flow information:
Cash paid for income taxes 192,357 417,744
Cash paid for interest expense 21,384 --
Noncash investing and financing activities:
During the six months ended June 30, 2008, the non-controlling shareholder of Yongye Nongfeng contributed a patent valued at $100,000 to Yongye Nongfeng.
