Yuhe International, Inc. Announces Record Second Quarter 2010 Results
-Revenues Increased 26.9% to $12.5 Million-
-Net Income and Diluted EPS Increased 46.1% and 46.2%, Respectively-
WEIFANG, China, Aug. 16 /PRNewswire-Asia-FirstCall/ -- Yuhe International, Inc. (Nasdaq: YUII) ("Yuhe" or "the Company"), a leading supplier of day-old chickens raised for meat production, or broilers, in the People's Republic of China ("PRC"), today announced financial results for the quarter ended June 30, 2010.
Second Quarter 2010 Highlights
-- Net revenue increased 26.9% to $12.5 million year-over-year
-- Sales volume increased 34.4% to 34.6 million birds
-- Gross profit increased 47.1% to $4.1 million
-- Gross margin increased 450 basis points to 33.0%
-- Operating income increased 51.1% to $3.1 million
-- Operating margin increased 400 basis points to 24.9%
-- Net income increased 46.1% to $3.1 million
-- Diluted EPS increased 46.2% to $0.19
"The second quarter of 2010 was another successful quarter for Yuhe," commented Mr. Zhentao Gao, Chairman and Chief Executive Officer of Yuhe. "We benefited from the fact that we were able to use our industry expertise to accurately forecast the trends in our market earlier in the year and were able to respond accordingly during the quarter to maximize our sales, margins and earnings performance. We executed according to our plan and our business achieved record revenue and net income."
Second Quarter 2010 Results
Net revenue for the second quarter of 2010 increased 26.9% to $12.5 million, compared to $9.8 million for the same period last year. The increase was mainly driven by the 34.4% gain in sales volume of day-old broilers to 34.6 million from 25.7 million in the comparable period last year. The average selling price per broiler was RMB 2.38 in the second quarter of 2010, remaining the same as that in the same period last year. Sales of broilers accounted for $12.1 million or 96.8% of the Company's net revenue.
Gross profit increased 47.1% year over year to $4.1 million, compared to $2.8 million in the same period last year. Gross profit margin was 33.0%, compared to 28.5% in the same quarter last year. The increase in gross profit margin was mainly attributable to the fact that the Company was able to successfully adjust its business so as to decrease the unit costs of its day- old broilers by increasing the proportion of externally-purchased eggs, which had lower costs than internally-produced eggs in the second quarter.
Operating income increased 51.1% to $3.1 million, compared to $2.1 million in the same period of 2009. Operating margin was 24.9%, compared to 20.9% in the same quarter of 2009.
Net income increased 46.1% to $3.1 million, or $0.19 per diluted share, compared to $2.1 million, or $0.13 per diluted share, in the same period last year.
Six Month Results
In the six months ended June 30, 2010, Yuhe reported net revenues increased 16.8% to $24.2 million, from $20.7 million in the six months ended June 30, 2009. Gross profit grew 16.9% year over year to $8.0 million, with a gross margin of 33.1%, flat with the same period of 2009. Operating income rose 15.1% to $6.1 million, with an operating margin of 25.1%. Net income increased 19.5% to $6.0 million, or $0.37 per diluted share, compared to $5.0 million, or $0.32 per diluted share, in the same period of 2009.
Financial Condition
As of June 30, 2010, the Company held $19.6 million in cash and cash equivalents, as compared to $14.0 million at year-end 2009. Working capital was $14.7 million with a 2:1 current ratio. The Company had $61.9 million in shareholders' equity compared to $55.3 million at year-end 2009. Yuhe generated $6.2 million in operating cash flow in the six months ended June 30, 2010.
Recent Developments
On July 19, 2010, Yuhe announced that its wholly owned subsidiary, Weifang Yuhe Poultry Co., Ltd., entered into an asset purchase agreement with Liaoning Haicheng Songsen Stock Farming and Feed Company Limited to purchase five breeder farms in Haicheng City, Liaoning Province. The payment included RMB 21.3 million (approximately $3.1 million) in cash and approximately 300,000 restricted shares of Yuhe common stock calculated at a price of $10 per share. The restricted shares are subject to a six-month lock-up period. The five breeder farms have a total production capacity of 430,000 sets of parent breeders.
As of August 13, 2010, six of the thirteen breeder farms which were purchased in 2009 and 2010 have begun operations and the other seven farms are expected to commence operations by the end of 2010.
Outlook
The Company's management expects sales volume and net income to rise in the second half of the year, given the seasonality of the business and the fact that the new parent breeders that were purchased in 2009 and 2010 will begin to generate revenue in the fourth quarter of 2010. Therefore, management re-affirms its previously issued guidance for 2010 with production of 150 million broilers in total and net income of approximately $17 million.
Considering the contribution of the five newly acquired breeder farms, management expects the output of broilers in 2011 to reach 250 million. Management also believes their existing sales network is capable of absorbing the increased output in the short run. The Company plans to build sales networks gradually around those production facilities outside Shandong province to provide pre-sales services, marketing, and after-sales support.
The construction of Yuhe's new hatchery was, to some extent, affected by the recent hot weather because the Chinese government enforces shorter working hours for construction workers on high temperature days. Management expects the new hatchery to commence operations in September 2010.
Mr. Gao added, "We believe Yuhe is very well positioned to capitalize on the opportunities in our market. With our recently closed and announced acquisitions and the construction of our new hatchery, we are confident that we are making the right investments today to position our Company for profitable growth. We have a very experienced team that understands our market very well and is adept at optimizing our input costs and maximizing our sales potential to drive both sales and earnings. We are very pleased with our first half performance. As we enter the second half of the year, we are encouraged by the market environment. We previously stated that we believe there will be a supply shortage in our market going forward and we are beginning to see tangible signs of this. Our day-old broilers are currently commanding average selling prices that are up significantly from the prices we were seeing in the second quarter. We believe that demand and prices for high-quality day-old broilers will stay strong through at least the second half of the year. This together with our expanding capacity gives us confidence that we will be able to deliver strong results for our shareholders through the balance of the year and beyond."
Conference Call
The Company will host a conference call at 9:00 a.m. EDT on Monday, August 16, 2010, to discuss financial results for the second quarter of 2010. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 509-7549. International callers should dial (706) 902-4287. When promoted, enter the conference passcode: 92156284.
A replay will be available for two weeks beginning on Monday, August 16, 2010 at 10:00 a.m. EDT. To access the replay, dial (800) 642-1687. International callers should dial (706) 645-9291. When prompted, enter the conference passcode: 92156284.
About Yuhe International, Inc.
Founded in 1996, Yuhe is the largest day-old broiler breeders in China. The Company's main operations involve breeding, as all broilers are sold within a day of hatching. Headquartered in Weifang, Shandong Province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., which largely supplies the Company's internal demand for chicken feed. Currently, 90% of the Company's sales of day-old broilers are in Shandong province through 28 local agents. There are 10 other sales agents in adjacent provinces. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com .
Cautionary Statement
This press release contains forward-looking statements concerning the Company's business, products and financial results. The Company's actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
For more information, please contact:
Yuhe International, Inc.
Mr. Vincent Hu, CFO
Phone: +86-536-7300-667
Email: [email protected]
Mr. Jason Wang, Director of IR
Phone: +1-765-409-1844
Email: [email protected]
Web: http://www.yuhepoultry.com
CCG Investor Relations Inc.
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: [email protected]
Web: http://www.ccgir.com
- FINANCIAL TABLES FOLLOW-
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
June 30, December 31,
2010 2009
(unaudited)
US$
ASSETS
Current assets:
Cash and cash equivalents $ 19,633,056 $ 14,047,147
Accounts receivable, net of allowances of
$18,947 and $18,868 842 838
Inventories 9,344,534 6,560,783
Advances to suppliers 264,991 359,179
Deferred tax assets 11,888 17,766
Total current assets 29,255,311 20,985,713
Plant and equipment, net 32,625,090 29,556,712
Deposits paid for acquisition of long-term
assets 11,342,811 16,082,613
Notes receivable, net and other receivable,
net 52,866 33,635
Unlisted investments held for sale 301,433 300,172
Intangible assets, net 2,830,463 2,851,411
Net investment in direct financing lease 400,436 382,742
Long-term prepaid rent 8,118,188 6,570,038
Total assets $ 84,926,598 $ 76,763,036
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,008,463 $ 5,740,912
Current portion of long term loans 2,026,848 9,433,686
Other payable 1,061,094 1,343,901
Accrued expenses and payroll related
liabilities 3,001,702 2,366,134
Advances from customers 1,860,833 678,366
Other taxes payable 149,941 150,764
Loan from director 293,746 292,517
Other liabilities 144,553 143,949
Due to related companies 1,208 1,208
Total current liabilities 14,548,388 20,151,437
Non-current liabilities
Long-term loans 8,518,638 1,360,206
Total liabilities 23,067,026 21,511,643
Stockholders' Equity
Preferred stock, $.001 par value, 1,000,000
shares authorized, no shares issued and
outstanding -- --
Common stock, $.001 par value; authorized
500,000,000 shares, 15,809,563 and
15,722,180 shares issued and outstanding at
June 30, 2010 and December 31, 2009,
respectively 15,809 15,722
Additional paid-in capital 31,034,149 30,672,849
Retained earnings 29,299,177 23,316,794
Accumulated other comprehensive income 1,510,437 1,246,028
Total stockholders' equity 61,859,572 55,251,393
Total liabilities and stockholders' equity $84,926,598 $76,763,036
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(Stated in US Dollars)
For The Three Months For The Six Months
Ended June 30 Ended June 30
2010 2009 2010 2009
US$
Net revenue $12,478,631 $9,834,373 $24,235,548 $20,748,763
Cost of revenue (8,355,543) (7,031,426) (16,212,105) (13,883,779)
Gross profit $4,123,088 2,802,947 $8,023,443 $6,864,984
Operating Expenses
Selling expenses (201,568) (108,656) (312,515) (201,596)
General and
administrative
expenses (810,623) (635,247) (1,631,139) (1,379,237)
Total operating
expenses $(1,012,191) (743,903) $(1,943,654) $(1,580,833)
Income from operations 3,110,897 2,059,044 6,079,789 5,284,151
Non-operating income
(expenses)
Interest income 81 45 139 141
Other income (expenses) (3,081) 5,126 8,084 4,661
(Loss) gain on disposal
of fixed assets -- 27,778 (176) 27,778
Investment income 3 -- 15,615 15,509
Interest expenses (49,188) -- (115,138) (325,427)
Total other income
(expenses) $(52,185) 32,949 $(91,476) $(277,338)
Net income before
income taxes 3,058,712 2,091,993 5,988,313 5,006,813
Income tax expenses (3,329) -- (5,930) --
Net income $3,055,383 $2,091,993 $5,982,383 $5,006,813
Other comprehensive
income
Foreign currency
translation 255,534 3,806 264,409 52,078
Comprehensive income $3,310,917 $2,095,799 $6,246,792 $5,058,891
Earnings per share
Basic $0.19 $0.13 $0.38 $0.32
Diluted $0.19 $0.13 $0.37 $0.32
Weighted average shares
outstanding
Basic 15,809,563 15,722,180 15,772,872 15,722,180
Diluted 16,029,036 15,722,180 16,041,393 15,722,180
YUHE INTERNATIONAL, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
For The Six Months Ended
June 30
2010 2009
US$
Cash flows from operating activities
Net income $ 5,982,383 $ 5,006,813
Adjustments to reconcile net income to
net cash used in operating
activities:
Stock based compensation 361,387 361,421
Depreciation 1,123,534 1,027,465
Amortization 32,800 32,759
Capitalized interest in construction in
progress (370,223) (302,058)
Loss (gain) on disposal of fixed assets 176 (27,778)
Changes in operating assets and
liabilities:
Accounts receivable -- (75)
Advances to suppliers 10,128 (526,528)
Inventories (2,745,647) 199,889
Deferred tax assets 5,930 29,459
Long-term prepaid rent 104,930 --
Accounts payable 242,505 1,011,712
Other payable (287,265) 254,103
Accrued expenses and payroll related
liabilities 624,891 344,100
Advances from customers 1,175,104 588,416
Other taxes payable (1,451) 9,090
Net investment in direct financing
lease (16,025) --
Net cash provided by operating
activities 6,243,157 8,008,788
Cash flows from investing activities
Deposit paid and acquisition of
property, plant and equipment (438,884) (4,371,637)
Advance to notes receivable (11,370) (23,602)
Advance to related parties (3,022,463) (144,350)
Proceeds from related parties 3,022,463
Proceeds from disposal of fixed assets -- 27,778
Proceeds received from related parties
receivables -- --
Net cash used in investing activities (450,254) (4,511,811)
Cash flows from financing activities
Repayment of loan payable (292,622) --
Proceeds from related party payable -- 360,094
Net cash flows (used in) provided by
financing activities: (292,622) 360,094
Effect of foreign currency translation on cash
and cash equivalents 85,628 20,210
Net increase in cash 5,585,909 3,877,281
Cash- beginning of period 14,047,147 13,412,205
Cash- end of period $19,633,056 $17,289,486
Cash paid during the period for:
Interest paid $ 447,091 $ 448,487
Income taxes paid $ -- $ --
Supplemental disclosure
Transfer from construction in progress to
fixed assets $2,656,342 $ 1,831,131
Transfer from advances to suppliers and
deposit paid for acquisition of
long-term assets to fixed assets $3,316,607 $ --
Transfer from deposit paid for
acquisition of long-term assets
to long-term prepaid rent $1,619,664 $ --
Cashless exercise of 142,816 warrants $ 87 $ --
SOURCE Yuhe International, Inc.
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