Renmin Tianli Group, Inc. Reports Fourth Quarter and Full Year 2017 Financial Results

WUHAN CITY, China, March 28, 2018 /PRNewswire/ -- Renmin Tianli Group, Inc. (NASDAQ: ABAC) ("Renmin Tianli" or the "Company"), a producer of breeder hogs, market hogs and black hogs, as well as specialty processed black hog pork products sold through retail outlets and the internet, with headquarters in Wuhan City, Hubei Province, China, today announced its financial results for the three and twelve months ended December 31, 2017.

Mr. Luchang Zhou, Chief Executive Officer of Renmin Tianli, commented, "We saw a moderate increase of 1.7% in total revenues for the fourth quarter of 2017 as a result of 31.7% growth in the number of hogs sold from our hog farming business, which was partially offset by a decrease in the blended average selling price per hog as well as a decrease in retail sales volume. Gross and operating margins and net income all improved significantly in the fourth quarter of 2017, as we continued to improve our inventory turnover rate and reduce our employee payroll. Looking ahead, we expect the hog farming industry to continue to face significant uncertainty in market demand and high volatilities in both hog pricing and feed costs."

Fourth Quarter 2017 Financial Results

Revenues for the fourth quarter of 2017 increased by $0.12 million, or 1.7%, to $7.31 million from $7.19 million for the same period of last year. The increase in overall revenues was due to an increase in revenues from regular hog sales partially offset by a decrease in revenues from our black hog program.

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, increased by $0.43 million, or 6.9%, to $6.69 million for the fourth quarter of 2017 from $6.25 million for the same period of last year. The Company sold a total of 36,751 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $182 per hog during the fourth quarter of 2017, compared to 27,914 hogs sold and a blended average selling price of $224 per hog for the same period of last year.

Revenues for the fourth quarter of 2017 from regular breeder hog sales increased by 26.9% to $1.17 million with the number of regular breeder hogs sold increasing by 20.6% to 4,658 hogs and the average selling price of regular breeder hogs increasing by 5.2% to $252 per hog. Revenues for the fourth quarter of 2017 from regular market hog sales increased by 11.5% to $3.27 million as the number of regular market hogs sold increased by 46.5% to 21,524 hogs while the average selling price of regular market hogs decreased by 23.9% to $152 per hog. Revenues for the fourth quarter of 2017 from black market hogs decreased by 6.4% to $2.24 million with the number of black hogs sold increasing by 12.9% to 10,569 hogs and the average selling price of black hogs decreasing by 17.1% to $212 per hog.

We sold 127,637 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $0.62 million for the fourth quarter of 2017. This compared to186,357 kilograms sold at approximately $5 per kilogram and revenues of $0.93 million for the same period of last year. These revenues, combined with the sales of black market hogs, led to $2.86 million in revenues from our black hog program for the fourth quarter of 2017, compared to $3.33 million for the same period of last year.

Gross profit

Cost of goods sold increased by $0.05 million, or 0.9%, to $5.97 million for the fourth quarter of 2017 from $5.92 million for the same period of last year. Cost of goods sold for hog farming increased by $0.29 million, or 5.4%, to $5.53 million for the fourth quarter of 2017 from $5.25 million for the same period of last year. Cost of goods sold for retail decreased by $0.23 million, or 34.7%, to $0.44 million for the fourth quarter of 2017 from $0.67 million for the same period of last year.

Overall gross profit increased by $0.07 million, or 5.6%, to $1.34 million for the fourth quarter of 2017 from $1.27 million for the same period of last year. This increase in our gross profit was primarily related to an increase in gross profit of $0.15 million, or 15.0%, for our hog farming segment and partially offset by a decrease in gross profit of $0.08 million, or 29.5%, for retail. Gross profit for hog farming and retail were $1.15 million and $0.19 million, respectively, for the fourth quarter of 2017, compared to $1.00 million and $0.27 million, respectively, for the same period of last year.

Overall gross margin was 18.3%, with gross margins for hog farming and retail of 17.2% and 30.3%, respectively, for the fourth quarter of 2017. This compared to overall gross margin of 17.7%, and gross margins for hog farming and retail of 16.0% and 28.7%, respectively, for the same period of last year.

Operating income

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.21 million, or 22.1%, to $0.73 million for the fourth quarter of 2017 from $0.93 million for the same period of last year. The decrease was primarily the result of cost control over employee payrolls. Operating income for the fourth quarter of 2017 was $0.61 million, compared to an operating loss of $0.34 million for the same period of last year. Operating margin for the fourth quarter of 2017 was 8.4%, compared to 4.7% for the same period of last year.

Net income

Net income increased by $0.26 million, or 71.7%, to $0.63 million for the fourth quarter of 2017, compared to $0.36 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail, was $0.63 million for the fourth quarter of 2017, compared to $0.37 million for the same period of last year. Net income for the fourth quarter of 2016 was adversely impacted by the net loss from our discontinued operation, Hang-ao, which was $6,215 for the fourth quarter of 2016. Hang-ao was sold on December 23, 2016.

After the deduction for non-controlling interests, net income attributable to common shareholders for the fourth quarter of 2017 was $0.63 million, compared to net loss of $0.38 million for the same period of last year.

Twelve Months Ended December 31, 2017 Financial Results

Revenues for 2017 decreased by $6.69 million, or 19.9%, to $27.00 million from $33.70 million for 2016. The reduction in revenues reflected the impact from the ongoing weak demand for regular breeder hogs, which also reduced prices for regular hogs and black hogs, and the reduction in the number of black hogs available for sale after the 2016 flood damage.

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $7.02 million, or 22.3%, to $24.43 million for 2017 from $31.45 million for 2016. The Company sold a total of 134,161 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $182 per hog during 2017, compared to 127,360 hogs sold and a blended average selling price of $247 per hog for 2016.

Revenues for 2017 from regular breeder hog sales decreased by 6.9% to $3.69 million with the number of regular breeder hogs sold decreasing by 7.2% to 14,801 hogs and the average selling price of regular breeder hogs increasing by 0.4% to $249 per hog. Revenues for 2017 from regular market hog sales decreased by 12.5% to $11.72 million as the number of regular market hogs sold increased by 25.3% to 76,218 hogs while the average selling price of regular market hogs decreased by 30.2% to $154 per hog. Revenues for 2017 from black market hogs decreased by 36.0% to $9.02 million with the number of black hogs sold decreasing by 14.7% to 43,142 hogs and the average selling price of black hogs decreasing by 24.9% to $209 per hog.

We sold 523,472 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $2.58 million for 2017. This compares to 462,499 kilograms sold at approximately $5 per kilogram and revenues of $2.25 million for 2016. These revenues, combined with the sales of black market hogs, led to $11.60 million in revenues from our black hog program for 2017, compared to $16.34 million for 2016.

Gross profit

Cost of goods sold decreased by $4.54 million, or 16.6%, to $22.76 million for 2017 from $27.29 million for 2016. Cost of goods sold for hog farming decreased by $4.61 million, or 18.0%, to $21.02 million for 2017 from $25.63 million for 2016. The decrease in cost of goods sold for hog farming was primarily due to the lower sales volume of black market hogs in 2017. Meanwhile, to control our production costs during the downtrend cycle, we sold our regular market hogs at younger ages which improved our inventory turnover rate and reduced relevant inventory maintenance cost. Cost of goods sold for retail increased by $0.08 million, or 4.8%, to $1.74 million for 2017 from $1.66 million for 2016. The increase in cost of goods sold for retail was primarily due to increased sales volume.

Overall gross profit decreased by $2.16 million, or 33.7%, to $4.25 million for 2017 from $6.41 million for 2016. This decrease in our gross profit reflected a decrease in gross profit for our hog farming segment partially offset by improvement in gross profit for retail. Gross profits for hog farming and retail were $3.41 million and $0.84 million, respectively, for 2017, compared to $5.82 million and $0.59 million, respectively, for 2016.

Overall gross margin was 15.7%, with gross margins for hog farming and retail of 14.0% and 32.5%, respectively, for 2017. This compared to overall gross margin of 19.0%, and gross margins for hog farming and retail of 18.5% and 26.2%, respectively, for 2016. The reduction in our gross margin from our hog farming segment was due to the reduced selling prices for regular market hogs and black market hogs during 2017. During 2017, we sold more large regular market hogs to pork dealers than in 2016. However, the reduced sales prices of regular market hogs and increased feed costs for maintaining large market hogs caused our gross margin to decrease. The improvement in gross profit and gross margin from the retail segment was primarily the result of higher sale prices charged to our new customer and an increase in sales volume.

Operating income

Total operating expenses, including general and administrative expenses, and selling and marketing expenses, decreased by $0.77 million, or 19.5%, to $3.19 million for 2017 from $3.96 million for 2016. The decrease was primarily the result of cost control over employee payrolls. Operating income for 2017 was $1.06 million, compared to $2.45 million for 2016. Operating margin for 2017 was 3.9%, compared to 7.3% for 2016.

Net income (loss)

Net income was $1.11 million for 2017, compared to net loss of $2.14 million for 2016. Our net income from continuing operations, including both hog farming and retail, was $1.1 million for 2017, compared to $0.94 million for 2016. Net income for 2016 was adversely impacted by the net loss from our discontinued operation, Hang-ao, which was $3.08 million for 2016. Hang-ao was sold on December 23, 2016.

After the deduction for non-controlling interests, net income attributable to common shareholders for 2017 was $1.11 million, compared to net loss of $1.76 million for 2016.

Financial Condition

As of December 31, 2017, the Company had cash and cash equivalents of $62.64 million, compared to $54.46 million at the end of 2016. Working capital as of December 31, 2017 was $65.12 million as compared to $57.50 million at December 31, 2016. Net cash provided by operating activities was $5.21 million for 2017, compared to $10.05 million for 2016. Net cash used in investing activities was $0.10 million for 2017, compared to $1.24 million for 2016. Net cash used in financing activities was $0.59 million for 2017, compared to $0.30 million for 2016.

About Renmin Tianli Group, Inc.

Renmin Tianli Group, Inc. (the "Company"), previously known as Aoxin Tianli Group, Inc., is in the business of breeding, raising and selling breeder and market hogs in China. The Company also sells specialty processed black hog pork products through supermarkets and other retail outlets, as well as the internet.

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information, please contact:

Tony Tian, CFA
Weitian Group LLC
Phone: +1-732-910-9692
Email: tony.tian@weitian-ir.com

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