China New Borun Announces Third Quarter 2013 Unaudited Financial Results

Company Beats Guidance for the Fourth Consecutive Quarter

Generates Record Quarterly Operating Cash Flows of RMB473 Million

Expects New Revenue from Business Expansion in the Fourth Quarter

13 Nov, 2013, 16:30 ET from China New Borun Corporation

BEIJING, Nov. 13, 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 its unaudited financial results for the third quarter ended September 30, 2013.

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "It is encouraging that China's edible alcohol market has begun to show signs of a modest recovery and the baijiu market also experienced a boom due to the PRC National Holiday. As a result, our sales volume of edible alcohol exceeded expectations, and our third quarter revenue soundly beat the high-end of guidance. As prepayment of corn was completed in the last quarter, we generated outstanding net operating cash flows this quarter, which provide us an excellent cash position to secure adequate corn in the coming harvest season and thereby sustain our competitive advantage. We are optimistic about the market momentum for the edible alcohol industry, and believe we are well positioned to grow revenue and profits in our seasonally peak fourth quarter."

"We are also encouraged by the early positive signs for our newly-completed chlorinated polyethylene and foam insulation plants. The feedback on trial product samples from prospective customers has been very positive, with some prospects rating our products among the best in market. We expect new revenue from this entirely new business line in the fourth quarter. The combination of improving market fundamentals in our core edible alcohol business and early positive momentum in our new business expansion bodes well for China New Borun for the foreseeable future." Mr. Wang concluded.

Third Quarter 2013 Quick View

  • Total revenue decreased 7.4% to RMB518.0 million ($84.3 million[1]) from RMB559.2 million in the third quarter of 2012.
  • Gross profit decreased 27.4% to RMB48.7 million ($7.9 million) from RMB67.0 million in the third quarter of 2012.
  • Net income decreased 68.9% to RMB10.8 million ($1.8 million) from RMB34.8 million in the third quarter of 2012.
  • Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.42 ($0.07) for the quarter ended September 30, 2013. Each ADS represents one of the Company's ordinary shares.
  • Net operating cash flow increased 212.5% to RMB473.0 million ($76.9 million) for the third quarter of 2013 from RMB151.3 million in the third 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 period ended September 30, 2013 were made at a rate of RMB6.148 to USD1.00, the rate published by the People's Bank of China on September 30, 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.

Third Quarter 2013 Financial Performance

For the third quarter of 2013, revenue decreased by 7.4% year-over-year to RMB518.0 million ($84.3 million) from RMB559.2 million in the same period of 2012. The decrease in revenue was mainly attributable to lower average selling prices and lower production volumes for all of our products, except for a slight increase in the average selling price of DDGS feed, primarily due to a longer scheduled annual maintenance period in this quarter, during which our production lines were temporarily shut down.

Revenue breakdown by product line is as follows:

  • Revenue from edible alcohol decreased by 7.4% to RMB353.8 million ($57.5 million) in the third quarter of 2013, compared to RMB381.8 million in the third quarter of 2012. The sales volume of edible alcohol in the third quarter of 2013 decreased by 1.1% year-over-year to 67,991 tons, primarily due to lower production volume as a result of a longer scheduled annual maintenance period during this quarter. The production volume decreased by 11.7% year-over-year to 63,332 tons in the third quarter of 2013. The average selling price decreased by 6.3% year-over-year to RMB5,203 per ton.
  • Revenue from DDGS feed decreased by 1.9% to RMB120.7 million ($19.6 million) in the third quarter of 2013, compared to RMB123.2 million in the third quarter of 2012. The sales volume of DDGS feed in the third quarter of 2013 decreased by 8.3% year-over-year to 55,047 tons, while the average selling price increased by 6.9% year-over-year to RMB2,193 per ton.
  • Revenue from liquid carbon dioxide decreased by 23.0% to RMB9.6 million ($1.6 million) in the third quarter of 2013, compared to RMB12.5 million in the third quarter of 2012. The sales volume of liquid carbon dioxide in the third quarter of 2013 decreased by 10.2% year-over-year to 24,015 tons, and the average selling price decreased by 14.3% year-over-year to RMB402 per ton.
  • Revenue from crude corn oil decreased by 19.1% to RMB33.7 million ($5.5 million) in the third quarter of 2013, compared to RMB41.7 million in the third quarter of 2012. The sales volume of crude corn oil in the third quarter of 2013 decreased by 17.0% year-over-year to 4,453 tons, and the average selling price decreased by 2.5% year-over-year to RMB7,565 per ton.

During the third quarter of 2013, gross profit decreased by 27.4% to RMB48.7 million ($7.9 million) from RMB67.0 million in the same period of 2012. Gross margin for the third quarter of 2013 decreased to 9.4%, from 12.0% in the same period of 2012, which was primarily attributable to a continued decrease in average selling price and a longer scheduled maintenance period.

Operating income, despite a lower year-over-year level of operating expenses, decreased by 31.7% to RMB37.2 million ($6.0 million) in the third quarter of 2013, from RMB54.4 million in the same period of 2012, primarily due to lower gross profit earned.

Selling expenses increased by RMB0.2 million, or 25.9% to RMB1.2 million ($0.2 million) in the third quarter of 2013, from RMB1.0 million in the same period of 2012.

General and administrative expenses decreased by RMB1.4 million, or 11.9% to RMB10.3 million ($1.7 million) in the third quarter of 2013, from RMB11.7 million in the same period of 2012, benefiting from disciplined cost control.

Interest expense increased by RMB15.8 million or 190% to RMB24.1 million ($3.9 million) in the third quarter of 2013, from RMB8.3 million in the same period of 2012, mainly due to the interest expense arisen from the Bond issued at the beginning of this year and the increased balance of short-term borrowings.

Income tax expenses in the third quarter of 2013 were RMB3.6 million ($0.6 million), representing an effective tax rate of 25%.

Net income decreased by 68.9% to RMB10.8 million ($1.8 million) in the third quarter of 2013, compared to RMB34.8 million in the same quarter of 2012. In the third quarter of 2013, basic and diluted earnings per share and per ADS were RMB0.42 ($0.07), and the Company had 25.7 million weighted average basic and diluted shares outstanding.

As of September 30, 2013, cash and bank deposits of RMB774.2 million ($125.9 million) increased by RMB163.5 million, compared with RMB610.7 million as of December 31, 2012. Cash flows generated in operating activities for the third quarter of 2013 were RMB473.0 million ($76.9 million) mainly due to decrease in prepayment for corn to the local granaries.

Financial Outlook

The Company estimates that its revenue for the fourth quarter of 2013 will be in the range of RMB550 million ($89.5 million) to RMB600 million ($97.6 million), an increase of approximately 9.3% to 19.2% over the same quarter of 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, November 14, 2013 (9:00 p.m. Beijing time on Thursday, November 14, 2013) to discuss the results and highlights from the third 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:

1-845-675-0437

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:

91307692

A replay of the webcast will be accessible through November 27, 2013 on http://ir.chinanewborun.com or by dialing:

United States toll free:

1-855-452-5696

International:

61-2-8199-0299

Passcode

91307692

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

September 30, 2013

RMB

RMB

US$

Assets

Cash

610,692,645

774,238,515

125,933,395

Restricted cash

75,000,000

20,000,000

3,253,090

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

302,779,899

368,960,514

60,013,096

Available-for-sale financial assets

-

17,778,718

2,891,789

Inventories

138,280,880

277,378,263

45,116,829

Advance to suppliers

67,828,505

244,150,156

39,712,127

Other receivables

34,880,868

41,476,014

6,746,262

Prepaid expenses

6,039,816

17,368,150

2,825,008

Total current assets

1,235,502,613

1,761,350,330

286,491,596

Property, plant and equipment, net

1,047,934,015

1,116,859,311

181,662,217

Land use right, net

56,432,887

55,569,983

9,038,709

Intangible assets, net

13,475,014

10,605,332

1,725,005

Other non-current assets

89,648,135

89,648,135

14,581,675

Total assets

2,442,992,664

3,034,033,091

493,499,202

Liabilities and shareholders' equity

Trade accounts payable

12,605,132

19,910,818

3,238,585

Accrued expenses and other payables

63,942,736

87,752,591

14,273,356

Income taxes payable

6,661,771

3,496,905

568,787

Short-term borrowings

842,200,000

784,200,000

127,553,676

Total current liabilities

925,409,639

895,360,314

145,634,404

Long-term borrowings

-

72,000,000

11,711,126

Bonds Payable

-

500,000,000

81,327,261

Total liabilities

925,409,639

1,467,360,314

238,672,791

Shareholders' equity

Ordinary share - (December 31, 2012 and September 30, 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

76,143,817

Retained earnings - appropriated

118,401,996

118,401,996

19,258,620

Retained earnings - unappropriated

931,347,064

980,418,330

159,469,475

Accumulated other comprehensive loss

(473,818)

(455,332)

(71,226)

Total shareholders' equity

1,517,583,025

1,566,672,777

254,826,411

Total liabilities and shareholders' equity

2,442,992,664

3,034,033,091

493,499,202

CHINA NEW BORUN CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

For the three-month period ended,

September 30,

2012

June 30,

2013

September 30, 2013

(RMB)

(RMB)

(RMB)

(US$)

Revenues

559,159,766

628,493,979

518,001,425

84,255,274

Cost of goods sold

492,110,107

557,088,612

469,332,820

76,339,105

Gross profit

67,049,659

71,405,367

48,668,605

7,916,169

Operating expenses:

Selling

964,123

1,509,414

1,213,777

197,426

General and administrative

11,692,129

9,912,973

10,298,164

1,675,044

Total operating expenses

12,656,252

11,422,387

11,511,941

1,872,470

Operating income

54,393,407

59,982,980

37,156,664

6,043,699

Other (income) expenses:

Interest income

(232,978)

(990,007)

(1,296,587)

(210,896)

Interest expense

8,302,047

26,418,467

24,076,289

3,916,117

Others, net

(17,124)

(105,210)

(23,410)

(3,808)

Total other expense, net

8,051,945

25,323,250

22,756,292

3,701,413

Income before income taxes

46,341,462

34,659,730

14,400,372

2,342,286

Income tax expense

11,585,365

9,142,375

3,600,094

585,572

Net income

34,756,097

25,517,355

10,800,278

1,756,714

Earnings per share:

Basic and diluted

1.35

0.99

0.42

0.07

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 nine-month period ended,

September 30, 2012

September 30, 2013

(RMB)

(RMB)

(US$)

Revenues

2,084,066,723

1,597,187,463

259,789,763

Cost of goods sold

1,791,665,572

1,430,022,882

232,599,688

Gross profit

292,401,151

167,164,581

27,190,075

Operating expenses:

Selling

3,280,385

3,772,527

613,619

General and administrative

39,606,386

30,019,934

4,882,878

Total operating expenses

42,886,771

33,792,461

5,496,497

Operating income

249,514,380

133,372,120

21,693,578

Other (income) expenses:

Interest income

(925,843)

(2,912,684)

(473,761)

Interest expense

28,396,766

70,374,422

11,446,718

Others, net

(36,219)

(154,564)

(25,141)

Total other expense, net

27,434,704

67,307,174

10,947,816

Income before income taxes

222,079,676

66,064,946

10,745,762

Income tax expense

55,519,919

16,993,680

2,764,099

Net income

166,559,757

49,071,266

7,981,663

Earnings per share:

Basic and diluted

6.47

1.91

0.31

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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