Deyu Agriculture Announces Second Quarter 2010 Results
BEIJING, Aug. 16 /PRNewswire-Asia-FirstCall/ -- Deyu Agriculture Corp. (OTC Bulletin Board: ECBI) ("Deyu Agriculture" or the "Company"), an emerging, vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and various grains, today announced its financial results for the second quarter ended June 30, 2010.
Second Quarter 2010 Highlights
-- Net revenue increased 139.0% year-over-year to $18.5 million
-- Gross profit increased 135.3% year-over-year to $4.7 million with a
gross margin of 25.7%
-- Net income was $3.0 million up 85.8% year-over-year with diluted net
income per share of $0.29
-- Became a public company through a share-exchange transaction and
completed a private-placement transaction, raising $10.8 million in
gross proceeds
-- Hired Mr. David Lethem as Chief Financial Officer and strengthened
management team with other key hires
"We are pleased to report record revenue and earnings in the second quarter of 2010," said Mr. Jianming Hao, Chairman and Chief Executive Officer of Deyu Agriculture. "During the second quarter, we rapidly scaled up our supermarket network from previously serving only Beijing and Shanxi province in the first quarter, to serving 12 provinces at the end of July. We moved our headquarters to Beijing, which gives us access to a larger pool of talent and research institutes, with which we can collaborate on marketing and product development. Finally, we became a public company via a share-exchange transaction and raised capital to support our future growth."
"In the second quarter, our traditional corn business maintained strong momentum while we focused on developing the market for our grain products, which expanded significantly to over 3,300 retail outlets as of the end of July 2010. While corn continues to account for the majority of our revenues, we remain focused on our strategy of aggressively expanding into the largely untapped and higher-margin market for grain products," added Mr. Hao.
Highlights for the Three Months Ended June 30, 2010
Net revenue totaled approximately $18.5 million for the three months ended June 30, 2010, an increase of 139.0% from $7.7 million for the comparable period in 2009. Sales of corn products increased 177.7% to $16.0 million (accounting for 86.7% of revenues), and sales of grain products grew 25.0% to $2.5 million (accounting for 13.3% of sales) in the second quarter of 2010. The increase in corn sales is primarily attributable to increased orders from existing customers. The increase in grain sales is primarily attributable to the Company's retail-expansion strategy, with retail outlets increasing to approximately 3,300 stores at the end of July 2010.
Gross profit for the second quarter of 2010 totaled $4.7 million, or 25.7% of net revenue, compared to $2.0 million, or 26.1% of net revenue in the year- ago quarter. Grain gross margins were 52.6% for the second quarter of 2010, up 1.9 points from the year-ago quarter. The corn gross margin improved to 21.6% in the second quarter, up from 17.7% in year-ago quarter, as the Company was able to benefit from owning inventory in a period of shortage of supply.
Operating expenses totaled approximately $1.7 million in the second quarter of 2010, up substantially from $0.4 million in the second quarter of 2009. Total operating expenses in the second quarter of 2010 amounted to 9.1% of net revenue, compared to 5.2% in the second quarter of 2009. Selling expense rose 210.9%, primarily due to increased transportation and packaging costs related to expanding corn sales and the entry into retail outlets for grain products. General and administrative expenses increased to $0.7 million from $0.1 million in the year-ago quarter due to higher office rent, management compensation, staffing, and the added expense of being a public company.
Net income during the three months ended June 30, 2010 was $3.0 million, up 85.8% from $1.6 million in the year-ago quarter. Net income per basic and diluted share were $0.35 and $0.29, respectively, for the second quarter of 2010, compared to net income per basic and diluted share of $0.32 for the same period of 2009. The basic and diluted weighted average number of common shares outstanding increased to approximately 8.6 million and 10.1 million respectively in the second quarter of 2010, from 4.9 million in the year-ago quarter, following the completion of a private-placement transaction.
Results for the Six Months Ended June 30, 2010
Net revenue for the first six months of 2010 was $32.9 million, up 125.4% versus the first six months of 2009. Gross profit during the first six months of 2010 was $8.3 million, a significant increase of 119.9% from $3.8 million in the comparable year-ago period. The gross margin was 25.1% during the first six months of 2010, slightly below 25.7% in the year-ago period. The Company recorded operating income of $5.7 million, compared with $2.9 million in the first six months of 2009. Net income for the first six months of 2010 was $5.5 million, compared with $2.9 million in the first six months of 2009. Basic and diluted net income per share were $0.82 and $0.74, respectively, for the first six months of 2010, versus $0.59 for the first six months of 2009.
Financial Condition
As of June 30, 2010, Deyu Agriculture had approximately $9.6 million in cash and cash equivalents, compared to $2.6 million at the end of 2009. Working capital increased significantly to approximately $26.5 million compared to $14.0 million at the end of 2009, due higher inventory and the cash raised in a private-placement transaction. As of June 30, 2010, the Company had $3.8 million in short-term bank loans and no long-term liabilities versus $1.8 million of short-term loans at the end of 2009. Shareholders' equity was $36.6 million as of June 30, 2010, compared to $21.7 million at the end of 2009.
Cash used in operating activities was $1.3 million for the six months ended June 30, 2010, a decrease of $2.7 million from $4.0 million used in the first half of 2009, as higher inventories, receivables, and payables were more than offset by strong profitability.
Business Outlook
"We're optimistic about the vast opportunities presented by an increasingly health and nutrition-conscious population, and about growing demand for natural, green and organic foods," commented Mr. Hao. "As one of the first companies to market branded grain products nationwide, we are focused on providing deeply processed grain foods, which are set to become a major driver in our future growth. We plan to use the funds we raised in our private placement to roll out grain-based instant noodles and ready-to-drink beverages starting in the third quarter of 2010 and expand our retail outlets to 10,000 supermarkets by the end of 2010, as we believe sales of grain products will start to pick up in the fourth quarter and gain momentum in 2011."
"The corn business will continue to provide an essential platform for the Company to grow, as it provides a solid base and is a strong cash contributor. We plan to expand our corn acreage and capacity to further realize economies of scale," added Mr. Hao.
About Deyu Agriculture Corp.
Deyu Agriculture Corp. ("Deyu Agriculture" or "the Company") is an emerging, vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and various grains. The Company maintains facilities and farmland in Shanxi province, which has a relatively dry climate and wide daily temperature difference between day and night that is ideal for grain cultivation. With a 135-plus day growing season, one of the longest in China, farmland in Shanxi provides a consistent supply of high-quality and high-nutrition crops. The Company is headquartered in Beijing, where it also maintains a marketing center and a product research center. For more information, contact CCG Investor Relations directly or go to Deyu Agriculture's website at http://www.china-deyu.com/ .
Safe Harbor Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Deyu Agriculture's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company's ability to maintain its competitive position as well as other relevant risks, including but not limited to risks outlined in the Company's periodic filings with the U.S. Securities and Exchange Commission. Deyu Agriculture does not assume any obligation to update the information contained in this press release.
Deyu Agriculture Corp. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
Assets 2010 2009
(Unaudited) (Audited)
Current Assets
Cash and cash equivalents $9,572,696 $2,562,501
Restricted cash 417,688 --
Accounts receivable 6,651,250 4,200,749
Inventory 12,453,734 8,233,760
Other receivable 469,233 28,998
Advance to supplier 403,298 --
Prepaid expenses 2,510,656 1,104,072
Total Current Assets 32,478,555 16,130,080
Property, plant, and equipment, net 4,187,382 2,939,475
Construction-in-progress 4,336,483 3,254,696
Other assets 1,515,181 1,506,902
Intangible assets, net -- --
Total Assets $42,517,601 $23,831,153
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $1,531,459 $--
Short-term loan 3,829,950 1,801,960
Accrued expenses 224,086 116,968
Due to related parties 106,888 145,650
Construction payable 20,979 --
Other current liabilities 253,385 68,339
Total Current Liabilities 5,966,747 2,132,917
Stockholders' Equity
Series A Preferred Stock-$0.001 par
value, 10,000,000 authorized,
2,455,863 and 0 outstanding,
respectively 8,228,677 --
Common stock, $.001 par value;
75,000,000 shares authorized,
9,999,999 and 4,930,000 shares
issued and outstanding,
respectively 9,999 4,930
Additional paid-in capital 10,702,075 9,685,698
Other comprehensive income 358,444 202,140
Retained earnings 17,251,659 11,805,468
Total Stockholders' Equity 36,550,854 21,698,236
Total Liabilities, and
Stockholders' Equity $42,517,601 $23,831,153
Deyu Agriculture Corp. and Subsidiaries
Condensed Consolidated Income Statement
(Unaudited)
For The Three Months For The Six Months
Ended June 30, Ended June 30,
2010 2009 2010 2009
Net revenue $18,468,570 $7,728,761 $32,915,852 $14,601,679
Cost of goods sold (13,722,057) (5,711,577) (24,658,176) (10,846,173)
Gross Profit 4,746,513 2,017,184 8,257,676 3,755,505
Selling expenses (975,947) (313,904) (1,597,661) (652,703)
General and
administrative
expenses (709,288) (85,301) (971,199) (170,427)
Total Operating
Expense (1,685,235) (399,205) (2,568,860) (823,130)
Operating income 3,061,278 1,617,979 5,688,816 2,932,375
Interest income 2,553 1,976 3,465 2,269
Interest expense (91,054) (19,560) (152,591) (38,532)
Total Other Expense (88,501) (17,584) (149,126) (36,263)
Income before income
taxes 2,972,777 1,600,395 5,539,690 2,896,113
Provision for income
taxes -- -- -- --
Net income 2,972,777 1,600,395 5,539,690 2,893,113
Preferred Stock
Dividend Expense (96,051) -- (96,051) --
Net income attributable
to common shareholders 2,876,726 1,600,395 5,443,639 2,896,113
Net income per common
share - basic $0.35 $0.32 $0.82 $0.59
Net income per common
share - diluted $0.29 $0.32 $0.74 $0.59
Weighted average number
of common shares
outstanding - basic 8,551,428 4,930,000 6,750,718 4,930,000
Weighted average number
of common shares
outstanding - diluted 10,106,763 4,930,000 7,532,682 4,930,000
Deyu Agriculture Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For The Six Months Ended June 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $5,443,639 $2,896,113
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 191,086 146,180
Reserve for sales discount 389,773 438,847
Preferred stock dividends declared 96,051 --
Decrease (increase) in current
assets:
Accounts receivable (2,800,806) (2,871,209)
Inventories (4,146,551) (4,171,110)
Prepaid expense and other current
assets (2,228,742) (482,092)
Increase (decrease) in liabilities:
Accounts payable 1,521,121 --
Accrued expense and other liabilities 190,287 33,461
Net cash used in operating activities (1,344,142) (4,009,810)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of machinery and equipment (1,414,526) (484,418)
Construction of warehouse (1,035,884) --
Net cash used in investing activities (2,450,411) (484,418)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term loans
from bank 2,004,465 394,962
Net (repayments of) proceeds from
short-term loans from related
parties (39,296) 7,204,678
Net proceeds from short-term loans
from others 3,490 --
Proceeds from capital contributions -- 263,308
Release of restricted cash related to
private placement 5,312 --
Proceeds from private placement, net
of restricted cash held in escrow 8,766,651 --
Net cash provided by financing
activities 10,740,623 7,862,948
EFFECT OF EXCHANGE RATE CHANGE ON
CASH AND CASH EQUIVALENTS 64,128 1,072
NET (DECREASE) INCREASE IN CASH &
CASH EQUIVALENTS 7,010,195 3,369,792
CASH & CASH EQUIVALENTS, BEGINNING
BALANCE 2,562,501 332,409
CASH & CASH EQUIVALENTS, ENDING
BALANCE $9,572,696 $3,702,201
For more information, please contact:
Company Contact:
David Lethem, Chief Financial Officer
Deyu Agriculture Corp.
Tel: +1-239-940-8889
Email: [email protected]
Web: http://www.china-deyu.com
Investor Relations Contact:
John Harmon, Senior Account Manager
CCG Investor Relations
Tel: +1-646-833-3424
Email: [email protected]
Web: http://www.ccgir.com
SOURCE Deyu Agriculture Corp.
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