Asia Bio-Chem Group Corp. Announces First Quarter 2013 Financial Results

TORONTO, May 14, 2013 /CNW/ - Asia Bio-Chem Group Corp. (TSX: ABC) ("Asia Bio-Chem" or the "Company") announces its financial results for the three-month period ending March 31, 2013.

Highlights

  • During the first quarter, higher by-product prices coupled with lower corn costs enabled the Company to achieve breakeven gross profit.  The company achieved gross margin of 0.8% during the first quarter compared with a negative gross margin of 3.9% during the same period in 2012. Despite this improvement, the Company continues to experience negative cash flow and net loss.
  • In reaction to improved gross margins, the Company adjusted Daqing production volume to 92,300 tonnes during the quarter representing 65% of capacity.
  • As a result of higher selling and distribution expenses together with the depreciation and interest expenses from the acquisition of Tieling, net loss for the first quarter was $9.2 million (-$0.11 per share) compared with a net loss of $5.5 million (-$0.06 per share) during the first quarter of 2012.
  • The Company continues to enjoy the strong support of its banking group.  Since the end of the first quarter, the Company has successfully secured a new short term credit facility in the amount of $3.2 million (RMB 20 million).
  • The Company maintains unrestricted cash balance of $3.9 million at March 31, 2013.

Acquisition of Tieling Wanshunda Starch Company Ltd. ("Tieling")
On January 1, 2013, the Company closed the acquisition of 100% of interest in Tieling for an aggregate purchase price of RMB 280 million ($44.8 million), RMB 250 million ($40 million) in the form of overdue accounts receivable of Asia Bio-Chem, and RMB 30 million ($4.8 million) of note payable due 12 months after the completion of all title changes and filing approval with the local government in the PRC.

The Company's main reasons for completing this acquisition was to acquire additional corn processing plant capacity, to ultimately control a larger share of the corn processing market in Northern China, to obtain the corn processing and sweetener processing licenses held by Tieling, to eliminate a competitor from the market, and to take advantage of an opportunity to acquire an additional plant at a cost significantly below construction cost.  In addition, this transaction provided a solution to the Company's overdue trade receivables.

"Improvement in by-product prices together with the lowest corn prices since 2010 have contributed to an improvement in gross margin, however, the market continues to struggle from low demand", stated Mr. Zhiping Wang, President and CEO of Asia Bio-Chem. "Further, with the closing of our acquisition of Tieling, we have cleaned up our overdue accounts receivables and increased our overall production capacity by 66% to 1.5 million tonnes of corn per year."

During the first quarter, the Company increased capacity utilization in response to higher margins and achieved 46% capacity at its Daqing and Changtu plants compared with 31% during the same period in 2012.   This increase in capacity coupled with higher by-product prices resulted in first quarter sales of $33 million representing a 2% improvement over the same period of 2012.

Lower corn costs and higher germ and gluten prices resulted in gross margin of 0.8% during the first quarter compared with negative gross margin of 3.9% during the same period in 2012.

With the acquisition of Tieling, the Company incurred $1.3 million in additional depreciation charges associated with the plant and equipment purchased.  Given that the Tieling plant is not currently in operation, this depreciation charge is categorized in general and administrative expenses. Further, the Tieling acquisition added $68.5 million in short term debt which resulted in $1.2 million in additional finance charges during the quarter.

This higher depreciation and interest charge coupled with higher freight charges resulted in a net loss of $9.2 million during the first quarter compared with a loss of $5.5 million in the first quarter of 2012.

SUMMARY FINANCIAL STATEMENTS

in thousands of Canadian dollars
except per share and percentage data
    Three Months Ended March 31,
    2013   2012   % Change
Sales     33,157   32,486   2.1%
Gross profit     279   (1,257)   122.2%
Gross margin (% of Sales)     0.8%   -3.9%    
Operating expenses     6,696   4,002   67.3%
Income (loss) from operations     (6,417)   (5,259)   -22.0%
Other income (expense)     (2,791)   (1,813)   -53.9%
Income taxes (recovery)     4   (1,537)   100.2%
Net income (loss)     (9,212)   (5,535)   -66.4%
EBITDA     (2,390)   (3,139)   23.9%
EBITDA before stock-based compensation     (2,389)   (2,992)   20.2%
Earnings per share:              
  Basic and diluted       (0.11)    (0.06)    
Weighted average number of shares:              
  Basic       85,306,258    85,306,258    
  Diluted       85,382,359    85,306,258     

During the first quarter the Company's unrestricted cash position declined to $3.9 million from $5.0 million at December 31, 2012.  With the additional bank debt assumed in the Tieling acquisition, total debt increased to $193.6 million at March 31, 2012 from $123.2 million at December 31, 2012.

Conference Call
Asia Bio-Chem will be hosting a conference call to discuss the first quarter results at 9:00 a.m. EST on Wednesday, May 15, 2013. The details are as follows:

Dial in number:         1-888-231-8191  or  647-427-7450
   
Conference ID and
Replay pass code:
        70113276
   
Taped Replay:         1-855-859-2056 or 416-849-0833
(Available until May 22, 2012)

About Asia Bio-Chem Group Corp.
Asia Bio-Chem Group, through its wholly-owned subsidiaries in the People's Republic of China, is in the business of processing corn into cornstarch, germ and gluten for sale into the domestic Chinese market.  From its plants in Liaoning and Heilongjiang Province, the Company has a total processing capacity of 1.5 million tonnes of corn per year.

This news release contains certain statements that may be deemed "forward looking statements". Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects,", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Forward looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward looking statements, except as required by law, in the event that management's beliefs, estimates or opinions, or other factors, should change.

 

SOURCE Asia Bio-Chem Group Corp.



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