WEIFANG, Shandong, China, Aug. 15 /PRNewswire-Asia/ -- Yuhe International, Inc. (OTC Bulletin Board: YUII) ("Yuhe" or "the Company"), a leading supplier of day-old chickens raised for meat production, or broilers, in the People's Republic of China ("PRC"), today announced its financial results for the second quarter ended June 30, 2009.
Second Quarter 2009 Highlights
-- Net revenue increased 75.5% to $9.8 million, compared to $5.6 million
in the second quarter of 2008
-- Gross profit grew 52.6% to $2.8 million, compared to $1.8 million in
the same period last year
-- Operating income grew 60.6% to $2.1 million, compared to $1.3 million
in the second quarter of 2008
-- Net income increased 79.5% to $2.1 million, compared to $1.2 million in
the same period last year
-- Fully diluted EPS increased 81.2% to $0.13 per share, compared to $0.07
in the second quarter of 2008
-- Stock trading data became available through Standard & Poor's Market
Access Program
-- Feed production facility operated by Shandong Nongbiao Purina Feed Co.,
Ltd. ("Purina") began operations in July 2009
-- Engaged Ernst & Young in Sarbanes-Oxley compliance project
-- Appointed Jason Wang as Investor Relations Director of the Company
"The second quarter of 2009 was another very successful quarter for Yuhe International Inc. We achieved record revenue and net income in the quarter, due to our capacity expansion and stable customer relationships," commented Mr. Zhentao Gao, Chief Executive Officer of Yuhe. "Selling prices fell in tandem with pork prices, which bottomed out in the first half of 2009 along with the normal seasonal decline associated with the harvest season. Selling prices have since increased, reaching RMB 2.6 per day-old broiler in July 2009. We believe that demand and average pricing for high-quality day-old broilers will continue to expand in the second half of the year."
Second Quarter 2009 Results
Total reported revenue for the second quarter of 2009 increased 75.5% to $9.8 million, from net revenue of $5.6 million for the three-months ended June 30, 2008. The increase was mainly driven by 117.8% growth in sales volume of day-old broilers to 25.7 million from 11.8 million for the three months ended June 30, 2008. Production capacity expansion as well as the increase of parent breeder volume at the end of 2008 fueled the sales volume increase. The growth in sales volume was partially offset by a 24% decrease in selling price from RMB 3.13 per bird for the three months ended June 30, 2008 to RMB 2.38 for the three months ended June 30, 2009 due to lower prices for pork, a substitution meat, which affected chicken prices. In addition, seasonality weakened broiler demand and prices fell sequentially from the first quarter of 2009 (RMB 2.99 per bird), since customers were primarily engaged in harvest activities during the second quarter.
Gross profit increased 52.6% to $2.8 million in the second quarter of 2009, compared to $1.8 million the prior year period. Gross margin was 28.5%, as compared to 32.8% during the same period in 2008. The decrease in gross margin was due largely to early retirement of parent breeders. Excluding this early retirement, gross margin from the Company's core business in the second quarter of 2009 was fairly consistent year- over-year.
Operating expenses for the second quarter of 2009 was $0.7 million, or 7.6% of total revenues, compared to $0.6 million, or 9.9% of total revenues, for the second quarter of 2008. General and administrative expenses increased 38.7% to $0.6 million, primarily due to increased expenses as a public company. Selling expenses were only up 12.8% to $0.1 million, which was significantly lower than the sales growth rate, mainly because customers pay the transportation fees to ship day-old broilers and the increased revenues were mostly from existing customers.
Operating income for the second quarter of 2009 increased 60.6% to $2.1 million, compared to operating income of $1.3 million for the same period in 2008. Operating margin was 20.9%, compared to 22.9% in the same quarter of 2008.
Net profit for the three months ended June 30, 2009 increased 79.5% to $2.1 million, compared to $1.2 million for the same period last year. Fully diluted earnings per share rose 81.2% to $0.13 from $0.07 for the same period last year.
Six Month Results
In the six months ended June 30, 2009, Yuhe reported net revenues increased 153.0% to $20.7 million, from pro forma net revenues* of $8.2 million in the six months ended June 30, 2008. Gross profit grew 209.4% to $6.9 million, as compared to pro forma gross margin of $2.2 million in the same period prior year. Reported gross margin expanded 600 basis points to 33.1% for the six months ended June 30, 2009, from pro forma gross margin of 27.1% in the same period last year. Reported operating expense was $1.6 million, or 7.6% of total revenues, compared to pro forma operating expenses of $1.0 million, or 12.4% of total revenues, for the same period of 2008. Reported operating income for the six month period rose 339.0% to $5.3 million, from $1.2 million in pro forma operating income for the same period of 2008. Reported operating margin increased 1,080 basis points to 25.5% for the six months ended June 30, 2009, compared to pro forma operating margin of 14.7% for the same period in 2008. Net income reported for the six months ended June 30, 2009 increased 384.1% to $5.0 million, compared to pro form net income of $1.0 million in the same period of 2008. Fully diluted earnings per share rose 301.5% to $0.32, from $0.08 pro forma earnings per share for the same period last year.
* Yuhe's reported financial statements represent the consolidated results
of Weifang Yuhe Poultry Co. Ltd., "PRC Yuhe", and Weifang Taihong Feed
Co. Ltd., "Taihong", the Company's two operating subsidiaries, from
January 1, 2009 to June 30, 2009 and from February 1, 2008 to June 30,
2008. For comparison purposes, the Company has provided a pro forma
consolidated statement of operations for PRC Yuhe and Taihong from
January 1, 2008 through June 30, 2008 to provide comparable presentation
to its reported results for the six months ended June 30, 2009. These
pro forma results are discussed in this release, together with
reconciliation to the reported financial information (table 4 below).
Pro forma results are presented and discussed because the Company
considers them useful in assessing performance between periods and in
developing expectations of future performance.
Financial Condition
As of June 30, 2009 the Company had $17.3 million in cash and cash equivalents and working capital of $4.8 million and a current ratio of 1:2. The Company had $47.0 million in shareholders' equity compared to $41.6 million at the end of 2008. In the first six months of 2009, Yuhe generated $8.3 million in cash flow from operating activities. Capital expenditures were $4.7 million in the first half of the year and were primarily used for the construction of two new breeder farms under construction that will have 100,000 sets of breeders each.
The company entered into a letter of engagement with Ernst & Young in May 2009 for consulting related to Sarbanes-Oxley compliance. The Company has made positive progress towards reaching full compliance with Section 404 of the Sarbanes-Oxley Act of 2002 by the end of fiscal 2009.
Business Outlook
"The Chinese economy has shown positive signs of recovery in recent months, and we believe Yuhe will continue to generate revenue growth from day-old broilers sales. We recently completed a comprehensive quality assessment of the new Purina feed facility and we are beginning to gradually phase out
in-house feed production, which should contribute to improving margins over time. We are making good progress on our two new breeder farms and an additional hatchery is on track to be completed by the end of 2009. In addition, we expect the third quarter will be our best quarter of 2009 partly due to seasonality. In conclusion, we remain confident that we will be able to achieve our fiscal 2009 guidance of $50 million in total revenue and $13 million in net income," stated Mr. Gao.
Upcoming Event
Yuhe International Inc. will present at the Rodman & Renshaw Annual Global Investment Conference to be held September 9-11, 2009 at the New York Palace Hotel in New York. During the conference, Yuhe's management will be available for one-on-one meetings.
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern time on Monday, August 17, 2009 to discuss its second quarter fiscal 2009 results. To participate in the live conference call, please dial (888) 419-5570 five to ten minutes prior to the scheduled conference call time. International callers should dial (617) 896-9871. When prompted by the operator, enter conference pass code 165 690 09. If you are unable to participate in the call at this time, a replay will be available for fourteen days after the call is held. To access the replay, please dial (888) 286-8010. International callers should dial (617) 801-6888. When prompted by the operator, enter pass code 182 938 99.
In addition, the call will be broadcast live over the internet via the following link: http://investor.shareholder.com/media/eventdetail.cfm?eventid=71814&CompanyID=ABEA-3EJRAZ&e=1&mediaKey=ED553D68E210D08B54549C6A2C81D376 (Please copy the full link to the browser for viewing)
Please go to the webcast via the link 10 minutes prior to the start of the call to register. The webcast of the call will be available through the same link for up to a year after the call occurs.
About Yuhe International, Inc.
Founded in 1996, Yuhe is the second largest day-old broiler breeder in China. The Company's main operations involve breeding, as all broilers are sold within a day of hatching. With headquarters in Weifang, Shandong province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd. which largely supplies the Company's internal demand for chicken feed. Currently, 85% of the Company's sales are in Shandong province with a customer base of 27 local agents. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com .
Cautionary Statement
This press release contains forward-looking statements concerning the Company's business, products and financial results. The Company's actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
- FINANCIAL TABLES FOLLOW -
Table 1
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in US Dollars)
June 30, December 31,
2009 2008
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $17,289,486 $13,412,205
Accounts receivable, net of allowances
of $18,847 and $18,845 978 902
Inventories 6,454,753 6,644,961
Advances to suppliers 1,138,701 661,138
Total current assets 24,883,918 20,719,206
Plant and equipment, net 26,831,096 27,112,276
Deposits paid for acquisition of long
term assets 10,084,023 6,092,359
Notes receivable, net and other
receivable, net 126,664 74,720
Unlisted investments held for sale 299,839 299,427
Intangible assets, net 2,880,997 2,909,752
Due from related companies 3,855,886 3,706,589
Deferred expenses 576,354 604,973
Total assets $69,538,777 $61,519,302
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,624,394 $4,606,055
Current portion of long term loans 8,327,489 1,356,832
Other payables 1,193,021 937,535
Accrued expenses and payroll related
liabilities 2,472,085 2,125,587
Advances from customers 1,262,500 673,528
Loan from director 292,193 291,792
Other liabilities 294,609 285,132
Due to related companies 575,837 210,633
Total current liabilities 20,042,128 10,487,094
Non-current liabilities
Long-term loans 2,454,418 9,410,289
Total liabilities 22,496,546 19,897,383
Commitments and contingencies
Stockholders' Equity
Common stock at $.001 par value;
500,000,000 shares authorized,
15,722,180 shares issued and
outstanding 15,722 15,722
Additional paid-in capital 30,305,437 29,944,016
Retained earnings 15,529,486 10,522,673
Accumulated other comprehensive income 1,191,586 1,139,508
Total stockholders' equity 47,042,231 41,621,919
Total liabilities and stockholders'
equity $69,538,777 $61,519,302
Table 2
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME- (UNAUDITED)(Stated in US Dollars)
For The Six Months Ended For The Three Months Ended
June 30 June 30
2009 2008 2009 2008
Net revenue $20,748,763 $6,708,482 $9,834,373 $5,604,931
Cost of revenue (13,883,779) (4,643,247) (7,031,426) (3,768,540)
Gross profit 6,864,984 2,065,235 2,802,947 1,836,391
Operating Expenses
Selling expenses (201,596) (144,831) (108,656) (96,291)
General and
administrative
expenses (1,379,237) (719,211) (635,247) (457,961)
Total operating
expenses (1,580,833) (864,042) (743,903) (554,252)
Income from
operations 5,284,151 1,201,193 2,059,044 1,282,139
Non-operating
income (expenses)
Bad debts recovery -- 86,915 -- 73,770
Interest income 141 4,455 45 4,297
Other income 5,126 5,900 5,126 --
Gain on disposal
of fixed assets 27,778 87,588 27,778 87,588
Investment income 15,509 6,074 -- 6,074
Interest expenses (325,427) (443,120) -- (262,646)
Other expenses (465) (56,342) -- (26,078)
Total other (expenses) (277,338) (308,530) 32,949 (116,995)
Net income before
income taxes 5,006,813 892,663 2,091,993 1,165,144
Income taxes -- -- -- --
Net income $5,006,813 $892,663 $2,091,993 $1,165,144
Other comprehensive
income
Foreign currency
translation 52,078 1,068,750 3,806 650,829
Comprehensive
income $5,058,891 $1,961,413 $2,095,799 $1,815,973
Earnings per share
Basic $0.32 $0.07 $0.13 $0.07
Diluted $0.32 $0.07 $0.13 $0.07
Weighted average
shares outstanding
Basic 15,722,180 12,844,935 15,722,180 15,543,330
Diluted 15,722,180 13,039,395 15,722,180 15,868,739
Table 3
YUHE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)(Stated in US Dollars)
For The Six Months Ended
June 30
2009 2008
Cash flows from operating activities
Net income $5,006,813 $892,663
Adjustments to reconcile net income to
net cash used in operating activities:
Stock based compensation 361,421 33,946
Depreciation 1,027,465 621,912
Amortization 32,759 26,497
Bad debts recovery -- (86,915)
Gain on disposal of fixed assets (27,778) (87,588)
Income from unlisted investment -- (6,074)
Changes in operating assets and liabilities:
Accounts receivable (75) (2,359)
Advances to suppliers (526,528) (301,750)
Inventories 199,889 (4,350,914)
Deferred expenses 29,459 (37,339)
Accounts payable 1,011,712 (699,260)
Other payable 254,103 (370,416)
Payroll and payroll related liabilities (32,432) 10,926
Accrued expenses 376,532 (574,584)
Advances from customers 588,416 (29,814)
Other taxes payable 9,090 9,386
Net cash provided by (used in)
operating activities 8,310,846 (4,951,683)
Cash flows from investing activities
Deposit paid and acquisition of
property, plant and equipment (4,673,695) (11,394,809)
Advance to notes receivable (23,602) (3,432,604)
Proceeds from disposal of fixed assets 27,778 118,216
Acquisition of subsidiaries -- (10,567,946)
Advance to related companies (144,350) (34,185)
Net cash (used in) investing activities (4,813,869) (25,311,328)
Cash flows from financing activities
Proceeds from loan payable -- 1,300,726
Proceeds from related party payable 360,094 1,106,240
Capital contribution by shareholder -- 12,149,750
Proceeds from common stock sale - net
of offering costs -- 15,359,523
Net cash flows provided by financing
activities: 360,094 29,916,239
Effect of foreign currency translation
on cash and cash equivalents 20,210 142,169
Net increase (decrease) in cash 3,877,281 (204,603)
Cash - beginning of period 13,412,205 1,050,168
Cash - end of period $17,289,486 $845,565
Cash paid during the period for:
Interest paid $448,487 $885,005
Income taxes paid $-- $--
Non-cash investing activities:
Transfer of construction in progress
to fixed assets $1,831,131 $--
Table 4
YUHE INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six For the six For the six
6 months 6 months 6 months
ended ended ended
30-Jun 30-Jun 30-Jun
2009 2008 2008
(As reported)(Pro forma) (As reported)
Sales revenue 20,748,763 8,199,811 6,708,482
Costs of goods sold 13,883,779 5,980,685 4,643,247
Gross profit (loss) 6,864,984 2,219,126 2,065,235
Selling expenses 201,596 173,828 144,831
General and administrative expenses 1,379,237 841,625 719,211
Operating (loss) income 5,284,151 1,203,673 1,201,193
Interest income 141 4,460 4,455
Other income 48,413 105,166 99,562
Interest expenses 325,427 529,287 443,120
Other expenses 465 56,623 56,342
Income taxes -- -- --
Net income (loss) 5,006,813 1,034,197 892,663
The pro forma financial information above was prepared based on the unaudited financial results for the Company's Weifang and Taihong subsidiaries for the six month period ended June 30, 2008.
The pro forma financial information has been prepared based upon available information and assumptions that the Company believes are reasonable. However, the pro forma financial information is presented for illustrative and informational purposes only and does not purport to represent the Company's actual results during the corresponding reporting periods nor is it necessarily indicative of the Company's future performance.
