2014

China New Borun Announces Second Quarter 2011 Financial Results 2Q11 Revenue Increased 67.5% Year-Over-Year

2Q11 Net Income Increased 42.7 % Year-Over-Year

Phase III Daqing facilities run at full capacity throughout the quarter

BEIJING, Aug. 9, 2011 /PRNewswire-Asia/ -- 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 second quarter of 2011.

Second Quarter 2011 Financial Highlights

  • Total revenue increased 67.5% to RMB724.4 million ($111.9 million(1) ) from RMB432.5 million in the second quarter of 2010.
  • Gross profit increased 47.9% to RMB151.1 million ($23.3 million) from RMB102.1 million in the second quarter of 2010.
  • Net income increased 42.7% to RMB95.8 million ($14.8 million) from RMB67.1 million in the second quarter of 2010.
  • Diluted earnings per American Depositary Share ("ADS") were RMB3.72 ($0.58) for the quarter ended June 30, 2011. Each ADS represents one of the Company's ordinary shares.

Commenting on the results for the quarter, Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, stated, "We are pleased with our performance in the second quarter, as we solidly executed on all aspects of our business plans. We continue to experience strong demand for edible alcohol with sales volumes showing strong increases in spite of rising prices. Although corn cost rose at a higher year-over-year rate than that of edible alcohol prices and caused a decrease in our gross margin, our operating and net income rose solidly in line with our sales volume increases."

Mr. Wang added, "Our ability to complete pre-purchases of corn at locked-in prices provided us with assured supplies and enabled us to operate at full capacity throughout the quarter. Our new Phase III Daqing facility reached full capacity utilization during the quarter, allowing us to meet increasing market demand for our edible alcohol. I am confident that our operating efficiencies and sourcing expertise have placed us in a much better position in the edible alcohol market than most of the rest of the industry, and we are well positioned to take advantage of strategic expansion opportunities. The outlook for continued growth is bright, and we continue to make good progress towards becoming the preeminent producer of edible alcohol in China."

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 quarter ended June 30, 2011, were made at a rate of RMB6.4716 to USD1.00 as published by the People’s Bank of China on June 30, 2011. 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.



Second Quarter 2011 Financial Performance

Second quarter 2011 revenue increased by 67.5% year-over-year to RMB724.4 million ($111.9 million) from RMB432.5 million in the same period of 2010. Key factors affecting our results of operations are as follows:

  • Revenue from edible alcohol increased by 74.1% to RMB523.9 million ($81.0 million) in the second quarter of 2011 compared to RMB301.0 million in the second quarter of 2010 as a result of increases in the sales volume and price of edible alcohol during this period. Both strong demand in the edible alcohol market and increased production capacity due to deployment of our Daqing Phase III facilities throughout the quarter contributed to the revenue increase. Sales volume increased by 44.3% to 94,375 tons in the second quarter of 2011 and sales price increased by 20.7% to RMB5,552 per ton.
  • Revenue from DDGS Feed increased by 48.8% to RMB119.2 million ($18.4 million) in the second quarter of 2011, compared to RMB80.1 million in the prior year period, due to increase in sales volume being offset in part by a decrease in sales price per ton. Sales volume increased by 65.7% to 75,129 tons over the prior year period due to the utilization of the Daqing Phase III facilities and improved production yield. Following the deep-processing corn germ into crude corn oil, we can collect the residuals from Corn Germ to produce more DDGS. Sales price decreased in the second quarter of 2011 by 10.2% over the prior year period to RMB1,587 per ton.
  • Revenue from Corn Germ decreased by 38.8% to RMB31.5 million ($4.9 million) in the second quarter of 2011 compared to RMB51.4 million in the second quarter of 2010, mainly due to the decreases in sales volume during this period. Sales volume decreased by 43.1% to 8,916 tons. Due to the installation of our crude corn oil equipment in our Daqing facilities in the first quarter of 2011, we began to deep-process Corn Germ into crude corn oil in our Daqing facilities beginning in March 2011. This eliminated Corn Germ production at our Daqing facilities.
  • We began recognizing revenue from the by-product liquid carbon dioxide in July 2010. Revenue from liquid carbon dioxide was RMB15.8 million ($2.4 million) in the second quarter of 2011, and the sales volume was 29,945 tons at a price per ton of RMB528.
  • We began recognizing revenue from the by-product crude corn oil, produced at our Daqing facilities, in March 2011. Revenue from crude corn oil was RMB34.0 million ($5.2 million) in the second quarter of 2011, and the sales volume was 4,400 tons at a price per ton of RMB7,717.
  • During the second quarter of 2011, gross profit increased by 47.9% to RMB151.1 million ($23.3 million) from RMB102.1 million in the prior year period.  Gross margin for the second quarter of 2011 decreased to 20.9% from 23.6% in the prior year period due to higher corn cost.

Operating income increased by 49.6% to RMB135.8 million ($21.0 million) in the second quarter of 2011, from RMB90.7 million in the same period of 2010, reflecting of the Company's strong revenue growth.

Selling expenses increased by 93.5% to RMB1.2 million ($0.2 million) in the second quarter of 2011 compared to RMB0.6 million in the same period of 2010. The higher expenses in the second quarter of 2011 were primarily due to additional sales activities to support the increased sales volume.

General and administrative expenses increased by 30.9% to RMB14.1 million ($2.2 million) in the second quarter of 2011 compared to RMB10.8 million in the same period of 2010, reflecting an increase in administrative staff costs, professional fees and other expenses in connection with maintaining the Company's status as a publicly-traded company and expanded operations.

Income tax expenses in the second quarter of 2011 were RMB32.3 million ($5.0 million), representing an effective tax rate of 25.2%, increasing from RMB21.7 million in the same period of 2010. The effective tax rate represented an increase of 78 basis points over the effective tax rate in the second quarter of 2010.

Net income increased by 42.7% to RMB95.8 million ($14.8 million) in the second quarter of 2011, compared to RMB67.1 million in the same quarter of 2010. Diluted earnings per share and per ADS were RMB3.72 ($0.58) in the second quarter of 2011. The Company had 25.725 million weighted average diluted shares outstanding during the quarter ended June 30, 2011.

As of June 30, 2011, the Company had cash and bank deposits of RMB112.9 million ($17.4 million), a decrease from RMB341.0 million as of December 31, 2010, which was principally driven by the pre-purchase of corn and the costs of expanding production facilities. Cash flows provided by operating activities for the quarter ended June 30, 2011 were approximately RMB36.0 million ($5.6 million) due to the strong operating results partially offset by the cash payment for corn storage for 2011 non-harvest season.

Financial Outlook

Reflecting a planned annual maintenance and upgrade of its production facilities, the Company estimates that its revenue for the third quarter of 2011 will be in the range of RMB570 million ($88.1 million) to RMB620 million ($95.8 million), an increase of approximately 36.5% to 48.4% over the same quarter of 2010.

This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call

Borun's management will hold an earnings conference call at 8:00 am ET on August 10, 2011 to discuss the results and highlights from the second quarter of 2011 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:

1-866-700-0133

US Toll/International:

1-617-213-8831

Hong Kong Toll Free:  

800-96-3844

Hong Kong Toll:

852-3002-1672

South China Toll Free (China Telecom):  

10-800-130-0399

North China Toll Free (China Telecom):    

10-800-152-1490

South China Toll Free (China Netcom):    

10-800-852-1490

China Toll:

86-400-881-1629

Passcode:

45349761



A replay of the webcast will be accessible through August 17, 2011 on http://ir.chinanewborun.com or by dialing:

United States toll free:

1-888-286-8010

International:    

1-617-801-6888

Passcode

95014389



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, Corn Germ, 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

Three Part Advisors, LLC

John Palizza

Phone: +1-888-870-0798

Email: jpalizza@threepa.com



CHINA NEW BORUN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET


December 31, 2010


June 30, 2011


RMB


RMB


US$

Assets






Cash

340,984,614


112,926,491


17,449,547

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

128,480,503


204,555,946


31,608,249

Inventories

96,942,787


140,878,281


21,768,694

Advance to suppliers

46,113,552


201,009,718


31,060,282

Other receivables

33,904,486


26,567,390


4,105,227

Prepaid expenses

1,313,568


3,000,469


463,636

Total current assets

647,739,510


688,938,295


106,455,635

Property, plant and equipment, net

1,035,304,235


1,071,592,214


165,583,815

Land use right, net

58,733,967


58,158,697


8,986,757

Intangible assets, net

21,127,500


19,214,378


2,969,031

Total assets

1,762,905,212


1,837,903,584


283,995,238







Liabilities and shareholders' equity






Trade accounts payable

29,222,634


19,265,652


2,976,953

Accrued expenses and other payables

199,446,777


82,697,270


12,778,489

Income taxes payable

19,707,874


35,575,891


5,497,233

Short-term borrowings

498,000,000


510,500,000


78,883,120

Total current liabilities

746,377,285


648,038,813


100,135,795

Total liabilities

746,377,285


648,038,813


100,135,795

Commitment and contingencies

-


-


-

Shareholders' equity






Ordinary share – (December 31, 2010 and March 31, 2011: par value of RMB0.0068259, 100,000,000 shares authorized, 25,725,000 shares issued and outstanding)

175,596


175,596


25,725

Additional paid-in capital

468,132,187


468,132,187


72,336,391

Retained earnings – appropriated

67,794,324


67,794,324


10,475,667

Retained earnings – unappropriated

480,808,808


654,187,817


101,085,947

Accumulated other comprehensive income (loss)

(382,988)


(425,153)


(64,287)

Total shareholders' equity

1,016,527,927


1,189,864,771


183,859,443

Total liabilities and shareholders' equity

1,762,905,212


1,837,903,584


283,995,238




CHINA NEW BORUN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


For the three months period ended,


June 30,
2010


March 31,
2011


June 30, 2011



(RMB)


(RMB)


(RMB)


(US$)









Revenues

432,469,590


571,811,302


724,369,706


111,930,544

Cost of goods sold

330,324,880


444,664,817


573,290,692


88,585,619

Gross profit

102,144,710


127,146,485


151,079,014


23,344,925

Operating expenses:








Selling

635,830


1,159,400


1,230,520


190,142

General and administrative

10,759,284


14,309,065


14,088,395


2,176,957

Total operating expenses

11,395,114


15,468,465


15,318,915


2,367,099

Operating income

90,749,596


111,678,020


135,760,099


20,977,826

Other (income) expenses:








Interest income

(156,239)


(309,197)


(199,696)


(30,857)

Interest expense

1,849,998


8,047,668


7,852,602


1,213,394

Others, net

218,007


6,332


1,849


286

Total other expense, net

1,911,766


7,744,803


7,654,755


1,182,823

Income before income taxes

88,837,830


103,933,217


128,105,344


19,795,003

Income tax expense

21,741,170


26,319,074


32,340,478


4,997,292

Net income

67,096,660


77,614,143


95,764,866


14,797,711

Participation in undistributed earnings by
preference shareholders

(12,687,683)


-


-


-

Net income attributable to ordinary shareholders

54,408,977


77,614,143


95,764,866


14,797,711









Earnings per share:








Basic and diluted

3.16


3.02


3.72


0.58

Weighted average ordinary shares outstanding:








Basic and diluted

17,238,402


25,725,000


25,725,000


25,725,000












CHINA NEW BORUN CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


For the six months period ended,


June 30, 2010


June 30, 2011


(RMB)


(RMB)


(US$)







Revenues

821,238,007


1,296,181,008


200,287,565

Cost of goods sold

631,999,323


1,017,955,509


157,295,802

Gross profit

189,238,684


278,225,499


42,991,763

Operating expenses:






Selling

1,249,026


2,389,920


369,294

General and administrative

16,783,577


28,397,460


4,388,012

Total operating expenses

18,032,603


30,787,380


4,757,306

Operating income

171,206,081


247,438,119


38,234,457

Other (income) expenses:






Interest income

(193,063)


(508,893)


(78,635)

Interest expense

3,906,265


15,900,270


2,456,930

Others, net

(135,261)


8,181


1,264

Total other expense, net

3,577,941


15,399,558


2,379,559

Income before income taxes

167,628,140


232,038,561


35,854,898

Income tax expense

42,080,631


58,659,552


9,064,150

Net income

125,547,509


173,379,009


26,790,748

Participation in undistributed earnings by

preference shareholders

(27,744,622)


-


-

Net income attributable to ordinary shareholders

97,802,887


173,379,009


26,790,748







Earnings per share:






Basic and diluted

6.09


6.74


1.04

Weighted average ordinary shares outstanding:






Basic and diluted

16,049,711


25,725,000


25,725,000
















SOURCE China New Borun Corporation



RELATED LINKS
http://www.chinanewborun.com
http://ir.chinanewborun.com

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