Deyu Agriculture Corp. Announces Fiscal Year 2013 Results and Changes of Officers

BEIJING, April 8, 2014 /PRNewswire/ -- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Shanxi Province, China-based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, today announced its financial results for the fiscal year ended December 31, 2013.

Fiscal Year 2013 Results:

  • Net revenue was $246.4 million, a decrease of $7.7 million or 3.0%, compared to $254.0 million in 2012;
  • Gross profit was $14.6 million, a decrease of $30.1 million or 67.3%, compared to $44.7 million in 2012;   
  • Gross margin was 6.0%, as compared to 17.6% in 2012;
  • Net loss available to common stockholders was $26.8 million, as compared to net income of $16.0 million in 2012;
  • Loss per diluted share was $2.52 on 10.6 million shares, as compared to income per diluted share of $1.30 on 12.6 million shares in 2012.

The Company also announced that Mr. Greg Chen resigned from his positions as Chief Executive Officer and Director effective as of March 31, 2014 and April 1, 2014, respectively, and effective as of March 31, 2014, Mr. Jan Poulsen resigned from his position as President of the Company. Effective as of April 1, 2014, the Board appointed Mr. Hong Wang, Chairman of the Board of Directors to serve as Acting Chief Executive Officer. The Company intends to replace the vacancy created by the resignation of Mr. Jan Poulsen, in the near future. Effective as of March 31, 2014, the Company closed its New York office.

"2013 was a very difficult year for the Company. Since the beginning of 2013, the corn market has been experiencing weak demand from downstream industries, while the output of the corn harvest continued to increase. China's on-going economic slowdown also impacted the grain and bulk trading businesses," said Mr. Hong Wang, the Acting Chief Executive Officer. "We saw a substantial decrease in gross margins, especially in corn sales, and an increase in the cost of raw materials for grain products, operating expenses, as well as nonrecurring losses including impairment losses of certain assets and corn inventory damages due to weather-related conditions."

"The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. In December 2013, Management conducted a cost-savings, internal control and efficiency assessment review of all of the Company's subsidiaries and divisions, with a particular focus on reducing administrative costs. After the reviews, improved policies were introduced and implemented forthwith," added Mr. Wang.

Financial Results for the Fiscal Year Ended December 31, 2013

The Company's net revenue for Fiscal Year 2013 was $246.4 million as compared to $254.0 million for 2012, representing a decrease of $7.7 million, or 3.0%. This decrease was the combined result of a decrease of $8.5 million in corn sales and a decrease of $32.2 million in grain sales, off-set by an increase of $33.0 million in bulk trading sales. Net revenue from our Corn Division for 2013 was $142.6 million, a decrease of $8.5 million, or 5.6%, as compared to $151.0 million for 2012, which such decrease was primarily due to the weak demand with an oversupply in the corn market. Net revenue from our Grain Division for 2013 was $41.6 million, a decrease of $32.2 million, or 43.6%, as compared to $73.8 million for 2012, which such decrease was mainly attributable to the decline in commercial sales to institutional clients and the decline in retail sales in supermarket and convenience stores. Net revenue from our Bulk Trading Division for 2013 was $62.2 million, an increase of $33.0 million, or 112.9% as compared to $29.2 million for 2012. This increase was mainly attributable to our strategic shift from grain retail sales to wholesale or bulk trading in 2013.

The gross profit for 2013 was $14.6 million, a decrease of $30.1 million, or 67.3%, as compared to $44.7 million for 2012. This decrease was a combined result of an increase in loss on inventory valuation reserves of $4.5 million, a decrease in gross profits of $11.8 million in the Corn Division and a decrease of $14.2 million in the Grain Division, offset by an increase of $0.4 million in the Bulk Trading Division. Our gross margin decreased from 17.6% for 2012 to 5.9% for 2013, which was mainly the combined result of the increase of loss in inventory valuation reserves, the simultaneous decline of gross margin in each division, and the increased sales percentage of our bulk trading business, which had a relatively lower gross margin. Gross margin for our Corn Division was 8.1% for 2013, down from 15.4% for 2012, which was mainly attributable to the weak demand from corn downstream industries coupled with an oversupply of corn from the two good harvests in 2012 and 2013. Gross margin for the Grain Division was 13.2% for 2013, down from 26.7% for 2012, which was primarily due to the increasing cost of raw materials in addition to the strategic shift from grain retail sales to wholesales, which yielded relatively lower gross margins. Gross margin for the Bulk Trading Division was 3.4% for 2013, down from 6.0% for 2012, which was mainly attributable to market fluctuations in 2013 during the current economy slowdown. Loss on inventory valuation reserves increased by $4.5 million for 2013 compared to 2012, which was mainly attributable to the quality deterioration of some of the corn inventories caused by extreme weather conditions and obsolete grain products.

Selling expenses for 2013 were $17.4 million, an increase of $1.3 million, or 8.0% from $16.2 million for 2012, which was mainly the combined result of the increase in freight and handling expenses off-set by a decrease in advertisement and payroll expenses incurred as a result of the reduction of retail sales. General and administrative expenses for 2013 were $13.2 million, an increase of $3.6 million or 37.2% compared to $9.6 million for 2012, which was primarily due to an increase in allowance for bad debts of account receivables and other receivables, the increased expenses for management team enhancement, as well as business development and the increase in taxes related to inter-subsidiary fixed asset transfers. Loss on impairment of asset valuation was $7.3 million for 2013, which represented the impairment loss of the land use rights of farmland, the construction of an uncompleted building and the idle ERP system for retail sales. Extraordinary loss (after taxes) for 2013 represented $1.2 million in inventory loss due to the collapse of our warehouses under a heavy snow storm in April 2013.

As a result of the above, we had net loss available to common stockholders of $26.8 million for 2013 compared to a net income of $16.0 million for 2012. Loss per diluted share was $2.52 on 10.6 million shares for 2013, compared to income per diluted share of $1.30 on 12.6 million shares for 2012.

Business Outlook

"Given that the decrease in demand of corn from downstream industries, another good corn harvest in 2013 and anticipated increases in corn imports with low prices, we anticipate the oversupply in the corn market will continue to impact our business in the coming months," said Mr. Wang. "The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. At the same time, the Company is continuing its business development initiatives. We expect these measures, together with new business development, will help us get through this difficult period and restore the growth in the future."

About Deyu Agriculture Corp.

Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province in the People's Republic of China. We have a nationwide sales network covering manufacturers, grain traders, wholesalers, distributors, institutional clients and retail stores in China. Deyu Agriculture Corp.'s facilities include sophisticated production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company's website is located at www.deyuagri.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 Corp.'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. Additional Information regarding risks can be found in the Company's quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov.

Company Contact:

Ms. Amy He, Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-8273-2870 x8522
Email: amy@china-deyu.com

Financial Tables

 

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 




December 31,
2013




December 31,
2012

Assets
















Current Assets








  Cash and cash equivalents


$

979,282



$

4,937,279

  Restricted cash



16,519




815,348

  Accounts receivable, net



32,326,897




33,991,288

  Due from related parties



44,441




397,214

  Inventory



15,318,224




30,322,191

  Advance to supplier



4,363,298




6,145,840

  Prepaid expenses



1,161,302




1,453,184

Other current assets



115,507




340,456

 Total Current Assets



54,325,470




78,402,800









Property, plant, and equipment, net



19,251,051




19,442,599

Construction-in-progress



-




2,614,491

Long-term Investment



60,129




58,426

Intangible assets, net



7,827,809




13,389,075









Total Assets


$

81,464,459



$

113,907,391









Liabilities and Equity
















Current Liabilities








  Short-term loan


$

7,464,856



$

8,323,623

  Accounts payable



8,538,544




5,179,729

  Advance from customers



1,990,479




2,249,282

  Accrued expenses



1,002,885




1,506,776

  Tax payable



73,790




305,712

  Preferred stock dividends payable



247,614




229,171

  Due to related parties



14,306




8,668,552

Other current liabilities



282,179




986,153

Total Current Liabilities



19,614,653




27,448,998









Equity








Series A convertible preferred stock, $.001 par value, 10,000,000 shares 
    authorized, 2,182,628 and 2,039,970 shares outstanding, respectively                  



2,183




2,040

Common stock, $.001 par value; 75,000,000 shares authorized, 10,618,266 and     10,658,266 shares outstanding, respectively



10,618




10,658

    Additional paid-in capital



21,225,146




20,781,439

    Other comprehensive income



7,897,730




5,737,793

Retained earnings



32,681,588




59,500,134

Total Stockholders' Equity



61,817,265




86,032,064

Noncontrolling Interests



32,541




426,329

Total Equity



61,849,806




86,458,393









Total Liabilities and Equity


$

81,464,459



$

113,907,391

 

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 



For The Years Ended



December 31,



2013



2012







Net revenue


$

246,350,104



$

254,046,098

Cost of goods sold



(227,250,013)




(209,325,445)

Loss on inventory valuation reserve



(4,478,174)




-

Gross Profit



14,621,917




44,720,653









Selling expenses



(17,447,531)




(16,153,096)

General and administrative expenses



(13,195,537)




(9,619,036)

Loss on impairment of asset valuation



(7,346,776)




-

  Total Operating Expenses



(37,989,844)




(25,772,132)

Operating income (loss)



(23,367,927)




18,948,521









Interest income



35,193




37,846

Interest expense



(790,438)




(1,477,304)

Non-operating income (loss)



(403,885)




665,270

  Total Other Expenses



(1,159,130)




(774,188)









Income (loss) before income taxes



(24,527,057)




18,174,333

Income taxes



(604,450)




(1,765,514)

Income before extraordinary items



(25,131,507)




16,408,819

Extraordinary loss (after taxes)



(1,212,430)




-

Net income



(26,343,937)




16,408,819

Net loss attributable to noncontrolling interests



4,160




46,599

Net income (loss) attributable to Deyu Agriculture Corp.



(26,339,777)




16,455,418

Preferred stock dividends



(478,769)




(446,748)

Net income (loss) available to common stockholders



(26,818,546)




16,008,670

Foreign currency translation gain



2,150,517




910,907

Comprehensive income (loss)



(24,668,029)




16,919,577

Other comprehensive income (loss) attributable to noncontrolling interests



9,420




(4,467)

Comprehensive income (loss) attributable to Deyu Agriculture Corp.          


$

(24,658,609)



$

16,915,110









Net income (loss) attributable to common stockholders per share - basic


$

(2.52)



$

1.51

Net income (loss) attributable to common stockholders per share - diluted


$

(2.52)



$

1.30

Weighted average number of common shares outstanding - basic



10,625,170




10,598,603

Weighted average number of common shares outstanding - diluted



10,625,170




12,614,108

 

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 



For The Year Ended



December 31,




2013




2012

CASH FLOWS FROM OPERATING ACTIVITIES          








Net income (loss) available to common stockholders


$

(26,818,546)



$

16,008,670

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:








   Depreciation & amortization



2,366,220




2,297,082

   Loss on impairment of asset valuation



7,346,776




-

   Loss on disposal of fixed assets



-




577

   Extraordinary loss



1,212,430




-

   Provision for Inventory valuation



4,478,174




-

   Allowance for doubtful accounts



1,925,357




-

   Share-based compensation



44,504




120,853

   Preferred stock dividends accrued



478,769




446,748

   Common stocks issued for services



(57,200)




114,400

   Gain on bargain purchase



-




(499,079)

   Deferred income tax expense



-




878,746

   Noncontrolling interests



(4,160)




(46,599)

   Decrease (increase) in current assets:








Accounts receivable



1,649,532




2,649,036

Related-parties trade receivable



358,771




226,755

Inventories



11,182,382




(8,383,187)

Advance to suppliers



1,931,601




1,987,857

Prepaid expense and other current assets



(244,860)




(40,331)

   Increase (decrease) in liabilities:








Accounts payable



1,946,353




2,967,217

Advance from customers



(319,381)




(6,471,286)

Accrued expense and other liabilities



(1,631,079)




297,336

Net cash provided by operating activities



5,845,643




12,554,795









CASH FLOWS FROM INVESTING ACTIVITIES








Purchase of machinery and equipment



(518,165)




(128,383)

Construction and remodeling of factory and warehouses



-




(900,487)

Consideration paid for acquisition



-




(5,501,046)

Advances to related parties



-




(33,294)

Cash held by the Taizihu Group at acquisition date



-




20,272

   Net cash used in investing activities



(518,165)




(6,542,938)









CASH FLOWS FROM FINANCING ACTIVITIES








Net proceeds (repayment) of short-term loans from
related parties                                                                    



(9,053,440)




3,312,931

Net repayment from short-term loans from bank and others



(1,024,757)




(12,658,509)

Cash released from restriction for credit line of bank loans



809,997




1,281,894

Net repayments of short-term bank acceptance notes



-




(1,585,087)

Payment of preferred dividends



-




(267,721)

Proceeds from capital contributions



-




31,702

   Net cash used in financing activities



(9,268,200)




(9,884,790)









EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH 

EQUIVALENTS                                                                             



87,275




68,509









NET DECREASE IN CASH & CASH EQUIVALENTS



(3,957,997)




(3,804,424)

CASH &CASH EQUIVALENTS, BEGINNING BALANCE



4,937,279




8,741,703

CASH & CASH EQUIVALENTS, ENDING BALANCE


$

979,282



$

4,937,279









SUPPLEMENTAL DISCLOSURES:








    Income tax paid


$

841,593



$

678,420

    Interest paid


$

743,653



$

1,815,269

NONCASH INVESTING AND FINANCING ACTIVITIES:








    Construction completed and transferred to property, plant, and 
    equipment


$

767,494



$

-

    Construction transferred to land use rights


$

1,045,640



$

-









Note: Please refer to the Company's annual report on Form 10-K for fiscal year 2013 for additional notes, which are an integral part of these consolidated financial statements.

SOURCE Deyu Agriculture Corp.



RELATED LINKS
http://www.deyuagri.com

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