BEIJING, May 14, 2013 /PRNewswire/- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Shanxi Province, China-based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, today announced its financial results for the first quarter ended March 31, 2013.
First Quarter 2013 Results:
- Net revenue was $77.2 million, compared to $62.7 million in Q1 of 2012;
- Gross profit was $8.8 million, compared to $12.4 million in Q1 of 2012;
- Gross margin was 11.4%, compared to 19.8% in Q1 of 2012;
- Net income available to common stockholders was $3.1 million, compared to $6.2 million in Q1 of 2012;
- Earnings per diluted share was $0.25 on 12.7 million shares, compared to $0.50 on 12.6 million shares in Q1 of 2012.
"The results of the first quarter of 2013 certainly is disappointing, in comparison with the same period of the previous year," said Greg Chen, Chief Executive Officer of the Company. "The decrease of pork prices and the spread of avian flu H7N9 in the recent months have greatly reduced the demand for animal feeds, which is the major market of our corn products. At the same time, with a good corn harvest last year, market sales prices decreased yet purchase prices did not decline consistently due to the government's protective farming policies in favor of farmers."
"For the grain division, the deteriorating efficiency of current retail distribution channels curtailed much of our retail grain package sales, This highlights the urgent need to focus more on strategic business development for a sustainable growth," added Mr. Chen. "The fast advancing economy and evolving market conditions in China present both opportunities and challenges. The Company is exploring new venues to achieve competitiveness by streamlining its operation structure and by focusing more on strategic planning, resource integration, strategic partnership building and more brand-driven approaches to present our products and services."
"On the bulk trading end, we are considering a new operation structure to integrate business resources into a single trading platform to serve more farmers in the co-ops and clients across several regions. We plan to reorient our retail business toward a better targeted market segment with revamped product lines in a more brand-driven approach with media and service support to assist the retailers, the distributors and institutional buyers in order to efficiently promote packaged grain retail sales to consumers," continued Mr. Chen.
Financial Results for the First Quarter Ended March 31, 2013
The Company's net revenue for Q1 2013 was $77.2 million compared with $62.7 million for Q1 2012, an increase of $14.4 million, or 23.0%, which was mainly due to the increase of our bulk trading business with low margin. Net revenue from our Corn Division for Q1 2013 was approximately $35.4 million, a decrease of $7.8 million, or approximately 18.0%, as compared to $43.2 million for Q1 2012, which was mainly due to the weakening demand from livestock feeds companies. Net revenue from our Grain Division for Q1 2013 was $12.4 million, a decrease of $2.3 million, or 15.6%, as compared to $14.7 million for Q1 2012, which was mainly attributable to the decline of retail sales in supermarket and convenience stores. Net revenue from our Bulk Trading Division for Q1 2013 was $29.4 million, an increase of $24.5 million, or 501.8%, as compared to $4.9 million for Q1 2012, which was mainly attributable to our strategic shift from grain retail sales to wholesale or bulk trading.
The Company's gross profit decreased by $3.6 million, or 29.1%, from $12.4 million for Q1 2012 to $8.8 million for Q1 2013, which was mainly attributable to the decrease of sales revenue from the Corn and Grain Division and the decrease of gross margin. Our gross margin decreased from 19.8% for Q1 2012 to 11.4% for Q1 2013. The decrease in gross margin was mainly the combined result of the simultaneous decline of gross margin in each division and the increased sales percentage of the bulk trading business, which had a relatively lower gross margin.
The Company's gross margin for our Corn Division was 13.5% for Q1 2013, down by 300 basis points from 16.5% Q1 2012, which was mainly attributable to theweakening demand in addition to over supply as a result of a good harvest last year. Gross margin for the Grain Division was 21.0% for Q1 2013, a decrease of 1130 basis points from 32.3% for Q1 2012, which was primarily due to our strategic shift from grain retail sales to wholesales with relatively lower gross margins but with fewer distribution expenses. Gross margin for the Bulk Trading Division was 4.9% for Q1 2013, which was relatively lower compared to our other Divisions as a result of its high turnover rate and relatively lower cost maintenance. Gross margin for the Bulk Trading Division decreased by 680 basis points for the three months ended March 31, 2013 from 11.7% for Q1 2012, which was mainly attributable to the variation in the composition of grain varieties with diversified gross margin.
The Company's operating expenses decreased $0.9 million, or 15.6%, to $5.1 million for Q1 2013 as compared to $6.0 million for Q1 2012. This decrease was primarily due to the reduction of advertisement expenses and distribution expenses spent on retail sales. Interest expense for Q1 2013 was $0.2 million compared to $0.5 million for Q1 2012, a decrease of $0.3 million, or 63.7%, which was mainly due to the decrease in the balances on loans. Non-operating income for Q1 2013 decreased $0.6 million, which mainly due to the reduction of $0.5 million gain on bargain purchase in connection with the business acquisition for Q1 2012.
The Company had net income available to common stockholders of $3.1 million for Q1 2013, as compared to a net income of $6.2 million for Q1 2012, a decrease of $3.1 million, or 50.0%. Earnings per diluted share was $0.25 on 12.7 million shares for Q1 2013, compared to $0.50 on 12.6 million shares for Q1 2012.
Subsequent Event after March 31, 2013
Due to a rather unexpected heavy snow storm which hit Taiyuan, Shanxi Province in late April 2013, the warehouses leased by the Company suffered severe structural damage and caused extensive damage to our grain goods stored in those warehouses. The full details of the event including the scale of the damage are still being investigated jointly by the warehouse owner and the Company. We have estimated potential loss due to such damages can reach $1 million or higher.
Business Outlook
"2013 is a very important transition period. We are working on new initiatives to continue to cultivate the whole value chain concept, by offering agricultural services to secure strategic production resources, to offer efficient commercial orders and other value-added services, to continue to engage the retail market by introducing new product lines utilizing a brand-driven approach to go beyond the traditional distribution channels," said Mr. Chen.
"To achieve the goals set by our new initiatives, we believe our new IT infrastructure, which is currently under development, will become a crucial operation platform to provide high level resource integration, information access, risk management, et cetera. We expect that the platform will offer extended services to farmers in the co-ops and clients alike, will build strategic partnerships and serve Deyu's brand building strive. We believe the Company can compete more effectively with our new operation approach to turn some key barriers imposed by the conventional approaches into strategic advantages," added Mr. Chen.
Conference Call
The Company will host a conference call on May 16, 2013 at 8:30 AM EDT to discuss the Company's results for the first quarter ended March 31, 2013.
To join the conference call, use the dial-in information below. When prompted, ask for the "Deyu Agriculture Call" and/or be prepared to provide the conference ID.
Date: | 5/16/2013 |
Time: | 8:30 AM EDT |
Conference Line Dial-In (US): | 877-407-9205 |
International Dial-In: | 201-689-8054 |
Conference ID#: | 00414504 |
Webcast Link: | http://www.investorcalendar.com/IC/CEPage.asp?ID=170988 |
Dial in at least 10 minutes before the call to ensure timely participation. A Teleconference Replay will be available until 11:59 PM May 23, 2013. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally. Utilize the conference ID # for replay: 00414504.
About Deyu Agriculture Corp.
Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province in the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. We have a nationwide sales network covering manufacturers, grain traders, wholesalers, distributors, institutional clients and retail stores in China. Deyu Agriculture Corp.'s facilities include sophisticated production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company's website is located at www.deyuagri.com.
Safe Harbor Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the current plans, estimates and projections of Deyu Agriculture Corp.'s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of 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, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company's ability to maintain its competitive position. Additional Information regarding risks can be found in the Company's quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov.
Company Contact:
Mr. Greg Chen, Chief Executive Officer
Deyu Agriculture Corp.
Tel: +1-646-499-5475
Email: gregchen@china-deyu.com
Ms. Amy He, Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-8273-2870 x8522
Email: amy@china-deyu.com
Financial Tables
DEYU AGRICULTURE CORP AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
March 31, | December 31, | |||||||
(Unaudited) | (Audited) | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 8,996,461 | $ | 4,937,279 | ||||
Restricted cash | 499,131 | 815,348 | ||||||
Accounts receivable, net | 26,570,650 | 33,991,288 | ||||||
Due from related parties | 162,604 | 397,214 | ||||||
Inventory | 24,871,764 | 30,322,191 | ||||||
Advance to supplier | 16,400,579 | 6,145,840 | ||||||
Prepaid expenses | 413,962 | 1,453,184 | ||||||
Other current assets | 308,477 | 340,456 | ||||||
Total Current Assets | 78,223,628 | 78,402,800 | ||||||
Property, plant, and equipment, net | 19,777,755 | 19,442,599 | ||||||
Construction-in-progress | 1,905,392 | 2,614,491 | ||||||
Long-term Investment | 58,608 | 58,426 | ||||||
Intangible assets, net | 13,327,286 | 13,389,075 | ||||||
Total Assets | $ | 113,292,669 | $ | 113,907,391 | ||||
Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Short-term loan | $ | 8,768,114 | $ | 8,323,623 | ||||
Accounts payable | 3,564,063 | 5,179,729 | ||||||
Advance from customers | 5,501,706 | 2,249,282 | ||||||
Accrued expenses | 1,426,295 | 1,506,776 | ||||||
Tax payable | 432,171 | 305,712 | ||||||
Preferred stock dividends payable | 116,279 | 229,171 | ||||||
Due to related parties | 3,271,720 | 8,668,552 | ||||||
Other current liabilities | 536,739 | 986,153 | ||||||
TotalCurrentLiabilities | 23,617,087 | 27,448,998 | ||||||
Equity | ||||||||
Series A convertible preferred stock, $.001 par | 2,110 | 2,040 | ||||||
Common stock, $.001 par value; 75,000,000 shares | 10,618 | 10,658 | ||||||
Additional paid-in capital | 20,990,814 | 20,781,439 | ||||||
Other comprehensive income | 6,036,644 | 5,737,793 | ||||||
Retained earnings | 62,603,185 | 59,500,134 | ||||||
Total Stockholders' Equity | 89,643,371 | 86,032,064 | ||||||
Noncontrolling Interests | 32,211 | 426,329 | ||||||
Total Equity | 89,675,582 | 86,458,393 | ||||||
Total Liabilities and Equity | $ | 113,292,669 | $ | 113,907,391 | ||||
DEYU AGRICULTURE CORP AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||
(UNAUDITED) | ||||||||
For The Three Months Ended | ||||||||
March 31, | ||||||||
2013 | 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
Net revenue | $ | 77,167,714 | $ | 62,739,469 | ||||
Cost of goods sold | (68,363,540) | (50,319,668) | ||||||
Gross Profit | 8,804,174 | 12,419,801 | ||||||
Selling expenses | (3,198,595) | (4,158,372) | ||||||
General and administrative expenses | (1,882,867) | (1,858,774) | ||||||
Total Operating Expenses | (5,081,462) | (6,017,146) | ||||||
Operating income | 3,722,712 | 6,402,655 | ||||||
Interest income | 8,100 | 11,538 | ||||||
Interest expense | (175,704) | (484,544) | ||||||
Non-operating income | 813 | 568,346 | ||||||
Total Other Expenses | (166,791) | 95,340 | ||||||
Income before income taxes | 3,555,921 | 6,497,995 | ||||||
Income taxes | (340,433) | (201,294) | ||||||
Net income | 3,215,488 | 6,296,701 | ||||||
Net loss attributable to noncontrolling interests: | 3,619 | 21,434 | ||||||
Net income attributable to Deyu Agriculture Corp. | 3,219,107 | 6,318,135 | ||||||
Preferred stock dividends | (116,055) | (110,075) | ||||||
Net income available to common stockholders | 3,103,052 | 6,208,060 | ||||||
Foreign currency translation (loss) gain | 288,602 | 37,273 | ||||||
Comprehensive income | 3,391,654 | 6,245,333 | ||||||
Other comprehensive income attributable to noncontrolling interests | 10,249 | 292 | ||||||
Comprehensive income attributable to Deyu Agriculture Corp. | $ | 3,401,903 | $ | 6,245,625 | ||||
Net income attributable to common stockholders per share - basic: | $ | 0.29 | $ | 0.59 | ||||
Net income attributable to common stockholders per share - diluted: | 0.25 | 0.50 | ||||||
Weighted average number of common shares outstanding - basic | 10,646,266 | 10,564,774 | ||||||
Weighted average number of common shares outstanding - diluted | 12,738,439 | 12,580,609 | ||||||
DEYU AGRICULTURE CORP AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(UNAUDITED) | ||||||||
For The Three Months Ended | ||||||||
March 31, | ||||||||
2013 | 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income available to common stockholders | $ | 3,103,052 | $ | 6,208,060 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation & amortization | 599,415 | 595,270 | ||||||
Allowance for doubtful accounts | - | 31,967 | ||||||
Share-based compensation | 42,208 | 128,359 | ||||||
Preferred stock dividends accrued | 116,055 | 110,075 | ||||||
Common stocks issued for services | (57,200) | - | ||||||
Gain on bargain purchase | - | (499,079) | ||||||
Deferred income tax expense (benefit) | - | 30,327 | ||||||
Noncontrolling interests | (3,619) | (21,434) | ||||||
Decrease (increase) in current assets: | ||||||||
Accounts receivable | 7,511,752 | 8,368,802 | ||||||
Related-parties trade receivable | 235,390 | 539,894 | ||||||
Inventories | 5,576,393 | (9,326,178) | ||||||
Advance to suppliers | (10,215,902) | 3,522,357 | ||||||
Prepaid expense and other current assets | 1,074,083 | (557,328) | ||||||
Increase (decrease) in liabilities: | ||||||||
Accounts payable | (1,639,659) | 602,144 | ||||||
Advance from customers | 3,239,176 | (6,298,935) | ||||||
Accrued expense and other liabilities | (476,135) | 511,846 | ||||||
Net cash provided by operating activities | 9,105,009 | 3,946,147 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Construction and remodeling of factory and warehouses | (50,172) | - | ||||||
Purchase of machinery and equipment | (4,414) | (24,524) | ||||||
Consideration paid for acquisition | - | (5,183,125) | ||||||
Advances to related parties | - | (78,863) | ||||||
Cash held by the Taizihu Group at acquisition date | - | 20,272 | ||||||
Net cash used in investing activities | (54,586) | (5,266,240) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net repayment of short-term loans from related parties | (5,735,157) | (251,834) | ||||||
Net proceeds from short-term loans from bank and others | 417,818 | 261,494 | ||||||
Cash released from restriction (restricted) for credit line of bank loans | 318,137 | 1,584,728 | ||||||
Net repayments of short-term bank acceptance notes | - | (1,584,811) | ||||||
Payment of preferred dividends | - | (219,290) | ||||||
Net cash used in financing activities | (4,999,202) | (209,713) | ||||||
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS | 7,961 | 23,348 | ||||||
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS | 4,059,182 | (1,506,458) | ||||||
CASH & CASH EQUIVALENTS, BEGINNING BALANCE | 4,937,279 | 8,741,703 | ||||||
CASH & CASH EQUIVALENTS, ENDING BALANCE | $ | 8,996,461 | $ | 7,235,245 | ||||
Note: Please refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2013 for additional notes, which are an integral part of these consolidated financial statements.
SOURCE Deyu Agriculture Corp.
