China New Borun Announces Fourth Quarter and Full Year 2012 Unaudited Financial Results

Company Beats Fourth Quarter Guidance

Fourth Quarter 2012 Net Operating Cash Flow of RMB63 Million

Announces RMB300 Million Investment in New Foam Insulation and Chlorinated Polyethylene Plant

Mar 06, 2013, 17:00 ET from China New Borun Corporation

SHOUGUANG, China, March 6, 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 fourth quarter and full year 2012.  The Company also announced that it would invest RMB300 million to construct a new foam insulation and chlorinated polyethylene ("CPE") plant.

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, stated, "Despite a persistently challenging environment that continues to weigh heavily on demand of edible alcohol from our customers in the baijiu and chemical industries, I'm pleased that we were able to exceed our revenue guidance and generate positive income and cash flows from operations.  I'm excited about our expansion into promising sectors of foam insulation and CPE that currently experience solid demand and offers great potential for Borun to drive revenue growth, expand margins, and diversify market concentration risks."

Fourth Quarter 2012 Quick View

  • Total revenue decreased 33.9% to RMB503.4 million ($80.1 million[1]) from RMB762.0 million in the fourth quarter of 2011.
  • Gross profit decreased 54.7% to RMB54.4 million ($8.7 million) from RMB120.1 million in the fourth quarter of 2011.
  • Net income decreased 70.1% to RMB21.6 million ($3.4 million) from RMB72.1 million in the fourth quarter of 2011.
  • Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.84 ($0.13) for the quarter ended December 31, 2012. Each ADS represents one of the Company's ordinary shares.
  • Net operating cash flow was RMB63.2 million ($10.1 million) in the fourth quarter of 2012.

[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 year ended December 31, 2012 were made at a rate of RMB6.2855 to USD1.00, the rate published by the People's Bank of China on December 31, 2012. 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.

Mr. Wang continued, "I'm optimistic about the new growth opportunities offered by the foam insulation and CPE plant, as our research indicates a broad use for the products.  We expect to complete construction and begin trial production in the third quarter of 2013, and with an initial total capacity of 80,000 cubic meters of foam insulation products and 25,000 tons of CPE products, we estimate the new project can eventually contribute up to RMB300 million of annual revenue.  Although the production and selling of foam insulation and CPE is different from those of edible alcohol, we believe our core operational advantages are transferable.  We are confident that our efficient production processes, sourcing and distribution capabilities, and local market knowledge and relationships can all be effectively applied to the new sectors.  As such, while I anticipate demand, ASP, and margins for our edible alcohol business will require additional time to recover, I'm encouraged that we are able deploy our operating earnings and expertise to capture a new growth opportunity that should eventually be accretive to our margins and net profits." 

Fourth Quarter 2012 Financial Performance

For the fourth quarter of 2012, revenue decreased by 33.9% year-over-year to RMB503.4 million ($80.1 million) from RMB762.0 million in the same period of 2011.  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 35.5% to RMB345.7 million ($55.0 million) in the fourth quarter of 2012, compared to RMB536.1 million in the fourth quarter of 2011.  The sales volume of edible alcohol decreased by 32.8% year-over-year to 63,884 tons, primarily due to lower production as a result of weaker demand. In the fourth quarter of 2012, average selling price of edible alcohol decreased by 4.0% year-over-year to RMB5,411 per ton.
  • Revenue from DDGS Feed decreased by 28.5% to RMB105.6 million ($16.8 million) in the fourth quarter of 2012, compared to RMB147.8 million in the fourth quarter of 2011. The sales volume of DDGS Feed in the fourth quarter of 2012 decreased by 33.9% year-over-year to 53,939 tons, and average selling price increased by 8.2% year-over-year to RMB1,959 per ton.
  • Revenue from liquid carbon dioxide decreased by 34.8% to RMB10.9 million ($1.7 million) in the fourth quarter of 2012 compared to RMB16.7 million in the fourth quarter of 2011. The sales volume of liquid carbon dioxide in the fourth quarter of 2012 decreased by 31.2% to 23,454 tons, and average selling price decreased by 5.2% year-over-year to RMB464 per ton.
  • Revenue from crude corn oil decreased by 33.0% to RMB41.2 million ($6.6 million) in the fourth quarter of 2012 compared to RMB61.4 million in the fourth quarter of 2011. The sales volume of crude corn oil in the fourth quarter of 2012 decreased by 30.2% year-over-year to 5,339 tons, and average selling price decreased by 4.0% year-over-year to RMB7,712 per ton.

During the fourth quarter of 2012, gross profit decreased by 54.7% to RMB54.4 million ($8.7 million) from RMB120.1 million in the same period of 2011. Gross margin for the fourth quarter of 2012 decreased to 10.8%, from 15.8% in the same period of 2011, 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 59.1% to RMB42.9 million ($6.8 million) in the fourth quarter of 2012, from RMB104.9 million in the same period of 2011, primarily due to lower gross profit earned.

Selling expenses decreased by 26.3% to RMB 1.3 million ($0.2 million) in the fourth quarter of 2012, from RMB 1.7 million in the same period of 2011, in line with the decrease in revenue.   

General and administrative expenses decreased by 24.0% to RMB10.2 million ($1.6 million) in the fourth quarter of 2012, from RMB13.5 million in the same period of 2011, benefiting from disciplined cost control.

Income tax expenses in the fourth quarter of 2012 were RMB7.2 million ($1.1 million), representing an effective tax rate of 25.0%.

Net income decreased by 70.1% to RMB21.6 million ($3.4 million) in the fourth quarter of 2012, compared to RMB72.1 million in the same quarter of 2011.  In the fourth quarter of 2012, basic and diluted earnings per share and per ADS were RMB0.84 ($0.13), and the Company had 25.7 million weighted average basic and diluted shares outstanding.  

As of December 31, 2012, the Company had cash and bank deposits of RMB685.7 million ($109.1 million), representing an increase of RMB461.8 million, compared with RMB223.9 million as of December 31, 2011. Cash flows generated from operating activities were RMB63.2 million ($10.1 million) for the fourth quarter of 2012.

Full Year 2012 Financial Performance

For the year ended December 31, 2012, total revenue decreased 3.6% year-over-year to RMB2,587.4 million ($411.7 million), from RMB2,685.2 million for the year ended December 31, 2011. Gross profit decreased 32.0% year-over-year to RMB346.8 million ($55.2 million), from RMB510.2 million for the year ended December 31, 2011. Operating income decreased 35.2% year-over-year to RMB292.4 million ($46.5 million), from RMB451.1 million for the year ended December 31, 2011. Net income decreased 39.9% year-over-year to RMB188.2 million ($29.9 million), from RMB313.0 million for the year ended December 31, 2011. Basic and diluted earnings per share or ADS decreased to RMB7.31 ($1.16), from RMB12.17 in the prior year. Weighted average number of basic and diluted shares outstanding was approximately 25.7 million in 2012.

Financial Outlook

The Company estimates that its revenue for the first quarter of 2013 will be in the range of RMB385.0 million ($61.3 million) to RMB420.0 million ($66.8 million), a decrease of approximately 46.6% to 41.8% 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 Thursday, March 7, 2013 (9:00 p.m. Beijing time on Thursday, March 7, 2013) to discuss the results and highlights from the fourth quarter and full year of 2012 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:                                                          

96622365

A replay of the webcast will be accessible through March 14, 2013 on http://ir.chinanewborun.com or by dialing:

United States toll free:                                            

1-855-452-5696

International:                                                            

61-2-8199-0299

Passcode                                                                  

96622365

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 SHEET  

December 31, 2011

 

December 31, 2012

RMB

RMB

US$

Assets

Cash

223,875,750

685,692,645

109,091,185

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

300,023,348

302,779,899

48,171,172

Inventories

86,205,820

138,280,880

21,999,981

Advance to suppliers

143,742,755

157,476,640

25,053,956

Other receivables

12,682,305

34,880,868

5,549,418

Prepaid expenses

3,957,293

6,039,816

960,913

Total current assets

770,487,271

1,325,150,748

210,826,625

Property, plant and equipment, net

1,127,381,307

1,047,934,015

166,722,459

Land use right, net

57,583,427

56,432,887

8,978,265

Intangible assets, net

17,301,257

13,475,014

2,143,825

Total assets

1,972,753,262

2,442,992,664

388,671,174

Liabilities and shareholders' equity

Trade accounts payable

13,200,118

12,605,132

2,005,430

Accrued expenses and other payables                                      

86,945,695

63,942,736

10,173,055

Income taxes payable

34,475,778

6,661,771

1,059,863

Short-term borrowings

508,700,000

842,200,000

133,990,932

Total current liabilities and total liabilities  

643,321,591

925,409,639

147,229,280

Shareholders' equity  

Ordinary share - (December 31, 2011 and 2012: 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

74,478,114

Retained earnings – appropriated

99,586,852

118,401,996

18,837,323

Retained earnings – unappropriated

762,010,754

931,347,064

148,173,902

Accumulated other comprehensive loss

(473,718)

(473,818)

(73,170)

Total shareholders' equity

1,329,431,671

1,517,583,025

241,441,894

Total liabilities and shareholders' equity

1,972,753,262

2,442,992,664

388,671,174

 

CHINA NEW BORUN CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

For the three-month period ended,

December 31,

 2011

September 30,  2012

December 31, 2012

 

(RMB)

(RMB)

(RMB)

(US$)

Revenues

762,037,367

559,159,766

503,375,028

80,085,121

Cost of goods sold

641,947,866

492,110,107

448,934,524

71,423,836

Gross profit

120,089,501

67,049,659

54,440,504

8,661,285

Operating expenses:

Selling

1,746,508

964,123

1,286,558

204,687

General and administrative

13,474,509

11,692,129

10,238,935

1,628,977

Total operating expenses

15,221,017

12,656,252

11,525,493

1,833,664

Operating income

104,868,484

54,393,407

42,915,011

6,827,621

Other (income) expenses:

Interest income

(373,057)

(232,978)

(438,967)

(69,838)

Interest expense

9,046,705

8,302,047

14,371,023

2,286,377

Others, net

(30,810)

(17,124)

194,026

30,869

Total other expense, net

8,642,838

8,051,945

14,126,082

2,247,408

Income before income taxes                      

96,225,646

46,341,462

28,788,929

4,580,213

Income tax expense

24,076,500

11,585,365

7,197,232

1,145,053

Net income

72,149,146

34,756,097

21,591,697

3,435,160

Earnings per share:

Basic and diluted

2.80

1.35

0.84

0.13

Weighted average ordinary shares   outstanding:

Basic and diluted

25,725,000

25,725,000

25,725,000

25,725,000

 

CHINA NEW BORUN CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

For the year ended,

December 31, 2011

December 31, 2012

(RMB)

(RMB)

(US$)

Revenues

2,685,223,409

2,587,441,751

411,652,494

Cost of goods sold

2,175,060,342

2,240,600,096

356,471,259

Gross profit

510,163,067

346,841,655

55,181,235

Operating expenses:

Selling

5,281,112

4,566,943

726,584

General and administrative

53,779,944

49,845,321

7,930,208

Total operating expenses

59,061,056

54,412,264

8,656,792

Operating income

451,102,011

292,429,391

46,524,443

Other (income) expenses:

Interest income

(1,169,183)

(1,364,810)

(217,136)

Interest expense

34,114,359

42,767,789

6,804,198

Others, net

(32,319)

157,807

25,107

Total other expense, net

32,912,857

41,560,786

6,612,169

Income before income taxes

418,189,154

250,868,605

39,912,274

Income tax expense

105,194,680

62,717,151

9,978,069

Net income

312,994,474

188,151,454

29,934,205

Earnings per share:

Basic and diluted

12.17

7.31

1.16

Weighted average ordinary shares outstanding:

Basic and diluted

25,725,000

25,725,000

25,725,000

SOURCE China New Borun Corporation



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