China New Borun Announces First Quarter 2013 Unaudited Financial Results

Company Beats First Quarter Guidance

Raises Second Quarter 2013 Production Volume

Expects Second Quarter 2013 Net Revenue Growth of 22% to 33% Quarter-over-Quarter

May 20, 2013, 16:30 ET from China New Borun Corporation

BEIJING, May 20, 2013 /PRNewswire/ -- China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced unaudited financial results for the first quarter of 2013.

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "I am pleased that Borun once again exceeded revenue guidance, remained profitable, and continued to forge ahead with our strategy and operations, despite facing market headwinds and lower demand due to the PRC's challenging macro-economic environment in the first quarter. This April, we were encouraged to witness an improvement in demand for our products, and correspondingly, we have raised our second quarter production volume. With higher production volume, our capacity utilization rate will improve, and given that we have secured adequate corn during the harvest season at favorable price, we believe that Borun will remain profitable during a very challenging environment for the edible alcohol industry."

Mr. Wang added, "During the first quarter, we further optimized our sourcing capacity by using a combination of short-term borrowings and the bond proceeds issued in January to pre-purchase 300,000 tons of corn in the harvest season. We are also diversifying into the promising and complementary foam insulation market. Our construction of the new foam insulation and chlorinated polyethylene plant is, thus far, on schedule and on budget, and we expect to begin trial production by the third quarter of this year. We believe these initiatives will ultimately drive our long-term revenue growth and margin expansion, while at the same time lower our market concentration risks."

First Quarter 2013 Quick View

  • Total revenue decreased 37.5% to RMB450.7 million ($71.9 million[1]) from RMB721.2 million in the first quarter of 2012.
  • Gross profit decreased 57.1% to RMB47.1 million ($7.5 million) from RMB109.9 million in the first quarter of 2012.
  • Net income decreased 80.0% to RMB12.8 million ($2.0 million) from RMB63.7 million in the first quarter of 2012.
  • Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.50 ($0.08) for the quarter ended March 31, 2013. Each ADS represents one of the Company's ordinary shares.

[1] This press release contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars for the period ended March 31, 2013 were made at a rate of RMB6.2689 to USD1.00, the rate published by the People's Bank of China on March 31, 2013. China New Borun Corporation makes no representation that the Renminbi or US dollar amounts referred to in this press release could have been or could be converted into US dollars or Renminbi, at any particular rate or at all.

First Quarter 2013 Financial Performance

For the first quarter of 2013, revenue decreased by 37.5% year-over-year to RMB450.7 million ($71.9 million) from RMB721.2 million in the same period of 2012. The decrease in revenue was mainly attributable to lower average selling price and a decrease in sales volume of edible alcohol due to weaker demand from the baijiu and chemical industries.

Revenue breakdown by product lines is as follows:

  • Revenue from edible alcohol decreased by 39.5% to RMB313.5 million ($50.0 million) in the first quarter of 2013, compared to RMB517.8 million in the first quarter of 2012. The sales volume of edible alcohol in the first quarter of 2013 decreased by 36.1% year-over-year to 59,499 tons, primarily due to lower production as a result of weaker demand, and the average selling price of edible alcohol decreased by 5.3% year-over-year to RMB5,268 per ton.
  • Revenue from DDGS Feed decreased by 27.6% to RMB96.8 million ($15.4 million) in the first quarter of 2013, compared to RMB133.8 million in the first quarter of 2012. The sales volume of DDGS Feed in the first quarter of 2013 decreased by 39.5% year-over-year to 48,534 tons, and the average selling price increased by 19.6% year-over-year to RMB1,995 per ton.
  • Revenue from liquid carbon dioxide decreased by 44.9% to RMB8.1 million ($1.3 million) in the first quarter of 2013 compared to RMB14.8 million in the first quarter of 2012. The sales volume of liquid carbon dioxide in the first quarter of 2013 decreased by 44.4% year-over-year to 18,492 tons, and the average selling price decreased by 0.9% year-over-year to RMB441 per ton.
  • Revenue from crude corn oil decreased by 41.1% to RMB32.3 million ($5.2 million) in the first quarter of 2013 compared to RMB54.8 million in the first quarter of 2012. The sales volume of crude corn oil in the first quarter of 2013 decreased by 41.9% year-over-year to 4,214 tons, and the average selling price increased by 1.3% year-over-year to RMB7,656 per ton.

During the first quarter of 2013, gross profit decreased by 57.1% to RMB47.1 million ($7.5 million) from RMB109.9 million in the same period of 2012. Gross margin for the first quarter of 2013 decreased to 10.4%, from 15.2% in the same period of 2012, which was primarily attributable to a combination of increased corn purchase price and decreased average selling price.

Operating income, despite a lower year-over-year level of operating expenses, decreased by 61.5% to RMB36.2 million ($5.8 million) in the first quarter of 2013, from RMB94.1 million in the same period of 2012, primarily due to lower gross profit earned.

Selling expenses decreased by 9.8% to RMB1.1 million ($0.2 million) in the first quarter of 2013, from RMB1.2 million in the same period of 2012, in line with the decrease in revenue.

General and administrative expenses decreased by 32.7% to RMB9.8 million ($1.5 million) in the first quarter of 2013, from RMB14.6 million in the same period of 2012, benefiting from disciplined cost control.

Income tax expenses in the first quarter of 2013 were RMB4.3 million ($0.7 million), representing an effective tax rate of 25.0%.

Net income decreased by 80.0% to RMB12.8 million ($2.0 million) in the first quarter of 2013, compared to RMB63.7 million in the same quarter of 2012. In the first quarter of 2013, basic and diluted earnings per share and per ADS were RMB0.50 ($0.08), and the Company had 25.7 million weighted average basic and diluted shares outstanding.

As of March 31, 2013, reflecting the large corn pre-purchase, cash and bank deposits of RMB394.3 million ($62.9 million) decreased by RMB216.4 million, compared with RMB610.7 million as of December 31, 2012. Correspondingly, cash flows used in operating activities for the first quarter of 2013 were RMB554.7 million ($88.5 million) mainly due to cash pre-payments for corn. As of March 31, 2013, advance to supplier balance was RMB546.9 million ($87.2 million), representing an increase of RMB479.1 million, compared with RMB67.8 million as of December 31, 2012.

Financial Outlook

The Company estimates that its revenue for the second quarter of 2013 will be in the range of RMB550.0 million ($87.7 million) to RMB600.0 million ($95.7 million), an increase of 22.0% to 33.1% over the prior quarter and a decrease of approximately 25.3% to 31.6% over the same quarter in 2012.

This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

Conference Call

Borun's management will hold a corresponding earnings conference call and live webcast at 8:00 a.m. E.T. on Tuesday, May 21, 2013 (8:00 p.m. Beijing time on Tuesday, May 21, 2013) to discuss the results and highlights from the first quarter and answer questions from investors. A webcast of the call will be available at http://ir.chinanewborun.com. Listeners may access the call by dialing:

United States Toll Free: 1-866-519-4004 US Toll/International: 1-718-354-1231 Hong Kong Toll Free: 800-930-346 Hong Kong Toll: 852-2475-0994 China Toll Free: 800-819-0121 China Toll Free (Mobile): 400-620-8038 Conference ID: 64851810

A replay of the webcast will be accessible through May 29, 2013 on http://ir.chinanewborun.com or by dialing:

United States toll free: 1-855-452-5696 International: 61-2-8199-0299 Passcode: 64851810

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol in China. Borun's edible alcohol products are primarily sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage that is sold throughout China in retail stores, restaurants, and bars. The Company also produces DDGS Feed, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production. China New Borun is based in Shouguang, Shandong Province. Additional information about the company can be found at http://www.chinanewborun.com and in documents filed with the U.S. Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

Contact Information

Asia Bridge Capital Limited Wendy Sun Phone: +86-10-8556-9033 (China) +1-888-870-0798 (U.S.) Email: wendy.sun@asiabridgegroup.com

CHINA NEW BORUN CORPORATION

UNAUDITED CONSOLIDATED BALANCE SHEETS

December 31, 2012

March 31, 2013

RMB

RMB

US$

Assets                                                                             

Cash

610,692,645

394,335,855

62,903,517

Restricted cash

75,000,000

272,500,000

43,468,551

Trade accounts receivable, net of allowance for doubtful     accounts of nil and nil, respectively

302,779,899

283,661,545

45,249,014

Available-for-sale financial assets

17,778,718

2,836,019

Inventories

138,280,880

245,287,637

39,127,700

Advance to suppliers

67,828,505

546,905,650

87,241,087

Other receivables

34,880,868

44,633,556

7,119,839

Prepaid expenses

6,039,816

16,623,239

2,651,700

Total current assets

1,235,502,613

1,821,726,200

290,597,427

Property, plant and equipment, net

1,047,934,015

1,123,937,601

179,287,850

Land use right, net

56,432,887

56,145,253

8,956,157

Intangible assets, net

13,475,014

12,518,453

1,996,914

Other non-current assets

89,648,135

89,648,135

14,300,457

Total assets

2,442,992,664

3,103,975,642

495,138,805

Liabilities and shareholders' equity

Trade accounts payable

12,605,132

11,031,031

1,759,644

Accrued expenses and other payables

63,942,736

117,714,304

18,777,505

Income taxes payable

6,661,771

7,484,511

1,193,911

Short-term borrowings

842,200,000

991,800,000

158,209,574

Total current liabilities

925,409,639

1,128,029,846

179,940,634

Long-term borrowings

90,000,000

14,356,586

Bonds payable

355,605,833

56,725,396

Total liabilities

925,409,639

1,573,635,679

251,022,616

Shareholders' equity

Ordinary share – (December 31, 2012 and March 31, 2013: par value of RMB0.0068259, 25,725,000 shares issued and outstanding)

175,596

175,596

25,725

Additional paid-in capital

468,132,187

468,132,187

74,675,332

Retained earnings – appropriated

118,401,996

118,401,996

18,887,204

Retained earnings – unappropriated

931,347,064

944,100,697

150,600,695

Accumulated other comprehensive loss

(473,818)

(470,513)

(72,767)

Total shareholders' equity

1,517,583,025

1,530,339,963

244,116,189

Total liabilities and shareholders' equity

2,442,992,664

3,103,975,642

495,138,805

 

CHINA NEW BORUN CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

For the three-month period ended,

March 31,

 2012

December 31,

2012

March 31, 2013

(RMB)

(RMB)

(RMB)

(US$)

Revenues

721,175,850

503,375,028

450,692,059

71,893,324

Cost of goods sold

611,298,467

448,934,524

403,601,450

64,381,542

Gross profit

109,877,383

54,440,504

47,090,609

7,511,782

Operating expenses:

Selling

1,162,789

1,286,558

1,049,336

167,388

General and administrative

14,580,533

10,238,935

9,808,797

1,564,676

Total operating expenses

15,743,322

11,525,493

10,858,133

1,732,064

Operating income

94,134,061

42,915,011

36,232,476

5,779,718

Other (income) expenses:

Interest income

(319,400)

(438,967)

(626,090)

(99,872)

Interest expense

9,555,927

14,371,023

19,879,666

3,171,157

Others, net

(15,898)

194,026

(25,944)

(4,139)

Total other expense, net

9,220,629

14,126,082

19,227,632

3,067,146

Income before income taxes

84,913,432

28,788,929

17,004,844

2,712,572

Income tax expense

21,228,358

7,197,232

4,251,211

678,143

Net income

63,685,074

21,591,697

12,753,633

2,034,429

Earnings per share:

Basic and diluted

2.48

0.84

0.50

0.08

Weighted average ordinary shares     outstanding:

Basic and diluted

25,725,000

25,725,000

25,725,000

25,725,000

SOURCE China New Borun Corporation



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