Yuhe International Inc. Reports Strong First Quarter 2009 Results

WEIFANG, Shandong, China, May 15 /PRNewswire-Asia-FirstCall/ -- Yuhe International, Inc. (OTC Bulletin Board: 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 strong financial results for the first quarter of its 2009 fiscal year.

Yuhe's reported financial statements represent the consolidated results of Weifang Yuhe Poultry Co. Ltd. ("PRC Yuhe") and Weifang Taihong Feed Co. Ltd. ("Taihong"), the Company's two operating subsidiaries, from January 1, 2009 to March 31, 2009. For comparison purposes, the Company has provided a pro forma consolidated statement of operations for PRC Yuhe and Taihong for the three months ended March 31, 2008. These pro forma results are presented (in Table 4 below) and discussed because the Company considers them useful for investors as more indicative of the underlying performance of the business as currently constituted for the periods presented.

    First Quarter 2009 Highlights
    -- Revenue for the quarter was $10.9 million, up 320.6% compared to pro
       forma revenue in the first quarter of 2008
    -- Gross profit for the quarter was $4.1 million, up 961.3% from pro forma
       gross profit in the same period last year
    -- Operating income was $3.2 million, up from a pro forma operating loss
       of $78,466 a year earlier
    -- Net income was $2.9 million, or $0.19 per basic and diluted share, up
       from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic
       and diluted share for the same period in 2008

"We are pleased to start out our 2009 fiscal year with such strong top and bottom line growth," stated Mr. Zhengtao Gao, chief executive officer of Yuhe International Inc. "In the first quarter of 2009, the broiler market remained strong despite the macro economic slowdown in China. With our mature breeder stock and recently expanded operations, we were able to take full advantage of favorable market conditions and generate excellent financial results in the quarter."

First Quarter 2009 Results

Total reported revenue for the first quarter of 2009 equaled $10.9 million, up 320.6% from $2.6 million in pro forma revenue for the three month period ended March 31, 2008. The increase in revenues was driven by the increase in sales volume to 23.1 million day-old broilers in the first quarter of 2009 from 4.8 million birds in the same period a year earlier. The increase in sales volume was partially offset by a decrease in selling price to RMB 2.99 per bird in the first quarter of 2009 from RMB 3.27 per bird one year ago. The increase in sales volume was the result of an expansion in production capacity as well as an increase in parent breeder volume at the end of 2008.

Gross profit increased 961.3% to $4.1 million in the first quarter of 2009, compared to $0.4 million in pro forma gross profit in the prior year period. Gross margin was 37.2% compared to pro forma gross margin of 14.7% during the same period in 2008. The increase in gross margin was mainly attributable to the Company reaching a normal level of productivity in 2009 versus a low level of productivity in the first quarter of 2008.

Selling, general and administrative expenses for the first quarter of 2009 were $0.8 million, up 81.5% compared to pro forma operating expenses of $0.5 million for the first quarter of 2008. Selling expenses were $93,000 compared to $78,000 in the same period of 2008. The increase in selling expenses was primarily due to an increase in sales volume. Administrative expenses were $0.7 million in the three months ended March 31, 2009, up from $0.4 million in the same period of 2008. The increase in administrative expenses was mainly attributable to expenses associated with being a public company.

Operating income for the first quarter of 2009 totaled $3.2 million, up from a pro forma operating loss of $78,466 for the same period in 2008. Operating margin was 29.5% for the first quarter of 2009.

Net income for the three months ended March 31, 2009 was $2.9 million, or $0.19 per diluted share, up from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic and diluted share, for the same period last year. For the first quarter of 2009 there were 15.7 million fully diluted weighted shares outstanding versus 10.1 million fully diluted weighted shares outstanding in the prior year period.

Financial Condition

As of March 31, 2009, the Company had $18.1 million in cash and cash equivalents, up from $13.4 million at December 31, 2008. Working capital was $18.7 million and the Company had a current ratio of 2.7 to 1. Shareholders equity stood at $44.8 million compared to $41.6 million at the end of 2008. Cash flows from operating activities in the first quarter of 2009 were $4.4 million.

The company plans to utilize its increase in cash for upcoming capital construction projects.

Business Outlook

For the remainder of 2009, Yuhe will remain focused on its capital construction plan, adding a third hatchery and two additional breeder farms with 100,000 sets of parent breeders each. In addition, the Company expects a new feed plant, currently under construction by Nongbiao Purina, will be finished during the second quarter of 2009. Once operational, Yuhe will perform quality analysis tests on Nongbiao Purina's feed. If Nongbiao Purina's feed meets Yuhe's quality requirements, the production facility will become Yuhe's sole feed supplier while its current in house feed production facility will cease operations.

For the fiscal year 2009 Yuhe International Inc. is forecasting $50 million in revenues and $13 million in net income with an anticipated sales volume of 110 million day old breeders. This exceeds the Company to meet its make good provision of $41.0 million in revenues and $12.3 million in net income.

"With a positive start to the new year, we look forward to continued growth throughout the remainder of 2009. In 2008, we saw uneven growth throughout the year due to a variety of one time factors. During the third quarter, many of our downstream customers lowered demand as they were forced to shut down due to electricity conservation measures and pollution restrictions put in place by the government due to the Olympics. What's more, our production was uneven as we ramped up capacity throughout the year. In 2009 we expect to exhibit more consistent results from quarter to quarter now that many of our expansion projects have been completed and are operational," stated Mr. Gao.

"While the recent outbreak of swine flu in North America has heightened concerns over livestock-borne illness, we foresee no imminent threats to our operations or the poultry industry in general in China. On the contrary, after the last outbreak of bird flu several years ago, the government implemented stringent safety and hygiene measures in the broiler industry. Yuhe not only meets, but exceeds these standards as we view product quality and safety as our top priority. As a result, we remain confident about trends in our operations and in the industry as a whole," Mr. Gao concluded.

Upcoming Events

Yuhe International, Inc. will present at the upcoming China Rising Investment Conference to be held on May 18, 2009 at the Yale Club in New York. During the conference, Yuhe's management will be available for one-on-one meetings.

Conference Call

The Company will host a conference call at 10:00 a.m. eastern time on Monday, May 18, 2009 to discuss results for the first quarter of fiscal year 2009. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-888-419-5570. International callers should dial +1-617-896-9871. When prompted by the operator, mention conference pass code 208 590 72. The call will be available to replay beginning at 12:00 p.m. eastern time for fourteen days after it occurs. If you would like to listen to the replay, please dial 1-888-286-8010 or +1-617-801-6888 from outside the US and enter pass code 21975169.

About Yuhe International, Inc.

Founded in 1996, Yuhe is the second largest day-old broiler breeder in China. The Company's main operations involve breeding, as all broilers are sold within a day of hatching. With headquarters 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, 85% of the Company's sales are in Shandong province with a customer base of 27 local agents. 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.

                         -FINANCIAL TABLES FOLLOW-


    Table 1               YUHE INTERNATIONAL, INC.
          CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                           (Stated in US Dollars)

                                                   For The Three Months Ended
                                                           March 31
                                                        2009          2008

    Net revenue                                $    10,914,390 $   1,103,551
    Cost of revenue                                 (6,852,353)     (874,707)
     Gross profit                                    4,062,037       228,844

    Operating Expenses
    Selling expenses                                   (92,940)      (48,540)
    General and administrative expenses               (743,990)     (260,969)

    Total operating expenses                          (836,930)     (309,509)

    Income (loss) from operations                    3,225,107       (80,665)

    Non-operating income (expenses)
     Bad debts recovery                                     --        13,145
     Interest income                                        96           158
     Other income                                       15,509         5,900
     Interest expenses                                (325,427)     (180,474)
     Other expenses                                       (465)      (30,545)
    Total other income (expenses)                     (310,287)     (191,816)

    Net income (loss) before income taxes            2,914,820      (272,481)
     Income taxes                                           --            --

    Net income (loss)                          $     2,914,820 $    (272,481)

    Other comprehensive income
     Foreign currency translation                       48,272       417,921
    Comprehensive income                       $     2,963,092 $     145,440

    Earnings (Loss) per share
    Basic                                      $          0.19 $       (0.03)
    Diluted                                    $          0.19 $       (0.03)

    Weighted average shares outstanding
    Basic                                           15,722,178    10,146,353
    Diluted                                         15,722,178    10,146,353



    Table 2                  YUHE INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Stated in US Dollars)

                                                  March 31,      December 31,
                                                    2009            2008
                                                 (unaudited)
                      ASSETS
    Current assets:
     Cash and cash equivalents                 $  18,091,979   $  13,412,205
     Accounts receivable, net of allowances of
      $18,845 and $18,845                                904             902
     Inventories                                   7,076,604       6,644,961
     Advances to suppliers                         4,521,030       4,472,509

    Total current assets                          29,690,517      24,530,577

     Plant and equipment, net                     26,751,684      27,112,276
     Deposits paid for acquisition of
      long term assets                             2,219,243       2,280,988
     Notes receivable, net and other
      receivable, net                                103,228          74,720
     Unlisted investments held for sale              299,804         299,427
     Intangible assets, net                        2,897,034       2,909,752
     Due from related companies                    3,669,798       3,706,589
     Deferred expenses                               596,287         604,973

    Total assets                               $  66,227,595   $  61,519,302

           LIABILITIES AND STOCKHOLDERS'
                      EQUITY
    Current liabilities:
     Accounts payable                          $     5,661,377  $  4,606,055
     Current portion of long term loans                292,158     1,356,832
     Other payables                                  1,225,619       937,535
     Accrued expenses and payroll related
      liabilities                                    2,000,062     2,125,587
     Advances from customers                           725,807       673,528
     Loan from director                                292,158       291,792
     Other liabilities                                 286,107       285,132
     Due to related companies                          491,095       210,633

    Total current liabilities                       10,974,383    10,487,094

    Non-current liabilities
     Long-term loans                                10,488,489     9,410,289

    Total liabilities                               21,462,872    19,897,383

    Commitments and contingencies                           --            --

    Stockholders' Equity
    Common stock at $.001 par value; authorized
     500,000,000 shares authorized, 15,722,178
     equivalent shares issued and outstanding           15,722        15,722
    Additional paid-in capital                      30,123,728    29,944,016
    Retained earnings                               13,437,493    10,522,673
    Accumulated other comprehensive income           1,187,780     1,139,508

    Total stockholders' equity                      44,764,723    41,621,919

    Total liabilities and stockholders' equity $    66,227,595  $ 61,519,302



    Table 3                 YUHE INTERNATIONAL, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Stated in US Dollars)

                                                    For The Three Months Ended
                                                              March 31
                                                         2009          2008
    Net cash provided by (used in) operating
     activities                                   $  4,386,943 $  (2,544,215)

    Cash flows from investing activities
     Deposit paid and acquisition of property,
      plant and equipment                              (41,133)     (248,616)
     Advance to notes receivable                          (335)  (11,036,697)
     Acquisition of subsidiaries                            --   (10,567,946)
     Proceeds received from related parties
      receivables                                       41,442            --
     Advance to related companies                           --      (208,458)

    Net cash used in investing activities                  (26)  (22,061,717)

    Cash flows from financing activities
     Proceeds from loan payable                             --       778,870
     Proceeds from related party payable               275,336     1,285,168
     Capital contribution by shareholder                    --    12,149,750
     Proceeds from common stock sale -                                     -
      net of offering costs                                 --    12,205,586

    Net cash flows provided by financing
     activities:                                       275,336    26,419,374

    Effect of foreign currency translation on cash      17,521       124,985

    Net increase in cash                             4,679,774     1,938,427

    Cash- beginning of period                       13,412,205     1,050,168

    Cash- end of period                           $ 18,091,979 $   2,988,595

    Cash paid during the period for:
     Interest paid                                $    357,632 $     181,474
     Income taxes paid                            $         -- $          --

    Non-cash investing activities:
     Transfer of construction in progress to
     fixed assets                                 $  1,831,131 $          --



    Table 4        PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

                               All amounts,   All amounts,     All amounts,
                                other than     other than       other than
                             percentage, in  percentage, in   percentage, in
                              U.S. dollars    U.S. dollars     U.S. dollars
                              For the three   For the three    For the three
                                 months          months            months
                                  ended           ended            ended
                                 31-Mar          31-Mar            31-Mar
                                  2009             2008              2008
                                               (Pro forma)     (As reported)

    Sales revenue               10,914,390     2,594,880         1,103,551
    Costs of goods sold          6,852,353     2,212,145           874,707
    Gross profit                 4,062,037       382,735           228,844
    Selling expenses                92,940        77,537            48,540
    General and administrative
     expenses                      743,990       383,664           260,969
    Operating (loss) income      3,225,107       -78,466           -80,665
    Bad debts recovery                  --       233,038            13,145
    Interest income                     96           163               158
    Other income                    15,509        11,504             5,900
    Interest expenses              325,427       266,641           180,474
    Other expenses                     465        30,545            30,545
    Income taxes                        --            --                --
    Net income (loss)            2,914,820      -130,947          -272,481

The pro forma financial information above was prepared based on the unaudited financial results for the Company's Weifang and Taihong subsidiaries for the three months ended March 31, 2008.

The pro forma financial information has been prepared based upon available information and assumptions that the Company believes are reasonable. However, the pro forma financial information is presented for illustrative and informational purposes only and does not purport to represent the Company's actual results during the corresponding reporting periods nor is it necessarily indicative of the Company's future performance.

    For more information, please contact:

    Yuhe International, Inc.
     Mr. Vincent Hu, CFO
     Tel:   +86-536-7300-667
     Email: vincent.hu@yuhepoultry.com
     Web:   http://www.yuhepoultry.com

    CCG Investor Relations Inc.
     Mr. Crocker Coulson, President
     Tel:   +1-646-213-1915 (New York)
     Email: crocker.coulson@ccgir.com

     Mr. Graham Reed, Financial Writer
     Tel:   +1-646-213-1915
     Email: graham.reed@ccgir.com
     Web:   http://www.ccgirasia.com

SOURCE Yuhe International, Inc.