American Lorain Corporation Reports Financial Results for the Third Quarter 2010

JUNAN COUNTY, China, Nov. 16, 2010 /PRNewswire-Asia-FirstCall/ -- American Lorain Corporation (NYSE Amex: ALN) ("American Lorain" or "the Company"), an international processed snack foods, convenience foods, and frozen foods company based in Shandong Province, China, today announced its financial results for its third quarter ended September 30, 2010.

Third Quarter 2010 Highlights

• Revenue was $48.1 million, up 24.3% from Q3 2009 with convenience food sales increasing 72.5% year over year
• Gross profit was $10.8 million, up 18.4% from Q32009 with gross margins of 22.4%
• Net income was $5.1 million, up 13.1% from Q3 2009 and earnings per diluted shares were $0.16, down from $0.18 in Q3 2009 based on 31.7 million shares

*Weighted average shares outstanding for Q3 2009 and Q3 2010 were 31,679,871 and 25,200,136 on a fully diluted basis, respectively.

"Sales of chestnut and convenience food products remain the driving force of our operating performance," began Chairman Si Chen of American Lorain. "We were pleased to see our chestnuts gain traction in the third quarter as we expanded our retail sales network.  Convenience food products remain an exciting growth category for our Company. After a series of new product launches, including lunch box entrées, bean products and cold dishes, we are pleased to report that customers have been purchasing popular items in each product family and we thus expect strong re-orders for these items through the balance of the year."

Third Quarter 2010 Revenue Segments

Total revenue for the third quarter of 2010 ended September 30, 2010 was $48.1 million, up 24.3% from $38.7 million for the quarter ended September 30, 2009.  Sales of chestnuts increased by $2.9 million, or 16.0%, to $21.2 due to effective marketing efforts and a growing domestic and international distribution network. In the third quarter of 2010 revenues from convenience food products were $18.6 million, up 72.5% from the comparable period last year.  Products in American Lorain's convenience foods product line include 'ready to eat' meals and snack foods, 'ready to heat' lunch box entrees and 'self-heating' meals for military personnel.

American Lorain's core product line includes more than 50 varieties of chestnuts and chestnut-based snacks.  Sales in this category increased 16.0% from the third quarter 2009. American Lorain's chestnut business accounted for 44.2% of the Company's revenues in the third quarter 2010 and is derived from a combination of domestic and international sales of chestnuts and chestnut-based snack foods.  

Sales of frozen foods were $8.3 million compared to $9.6 million last year, representing 17.2% of revenues in the third quarter of 2010.  American Lorain only services a select group of commercial accounts and it is not actively growing this business segment due to its lower margin profile.

Gross profit for the third quarter of 2010 was $10.8 million, an 18.4% increase from $9.1 million in the third quarter of 2009 as a result of higher labor and depreciation expenses. Overall gross profit margin was 22.4% for the third quarter of 2010 compared to 23.6% for the third quarter of 2009 as percentage revenue contribution for convenience food products, which has slightly lower gross margin compared with chestnut products, continue to increase. Targeted gross margins for each product category are detailed below:

Operating income for the quarter increased by 0.4% to $7.1 million, with operating margin of 14.7%, versus $7.0 million with operating margin of 18.2% in the third quarter of 2009.  Sales and marketing expenses increased from $1.2 million in the third quarter of 2009 to $2.1 million in the third quarter of 2010 due the Company's ongoing efforts to expand distribution. General and administrative expenses increased 81.3% to $1.6 million.

Net income for the quarter was $5.1 million, an increase of 13.4% from $4.5 million in the same period in 2009.  Based on 31.7 million fully diluted shares outstanding, earnings per diluted share were $0.16 per share, an 11.1% decrease over the $0.18 in the prior year's period.  

Nine Months Results

Total revenue for the first nine months of 2010 was $101.9 million, up 21.5% from $83.8 million in the prior year's period. Chestnut sales grew 9.4% to $49.1 million. For the nine months ended September 30, 2010, China's domestic market accounted for 79.4% of overall revenue. Export markets accounted for the balance of revenues in which Japan, Korea and the United Kingdom remained the largest export markets for the Company.

Gross profit in the first nine months of fiscal year 2010 was $23.2 million, an increase of 18.7% from $19.6 million in the prior year's corresponding period. The gross profit margin decreased slightly to 22.8% for the first nine months ended September 30, 2010 compared 23.3% in the same period of fiscal 2009.

Operating income in the first nine months of 2010 was $15.0 million, with operating margin of 14.7%, a 13.5% increase from $13.2 million in the prior year's period.

Net income for the first nine months of fiscal year 2010 was $9.6 million, compared to $8.1 million in the prior year's corresponding period, up 18.7% year-over-year. Earnings per diluted share were $0.31 based on 31.2 million diluted shares, compared with $0.32 per diluted share during the same period in 2009.

Financial Condition

As of September 30, 2010, the Company had $11.9 million in cash, down from $12.1 million as of December 31, 2009; working capital was $58.6 million on September 30, 2010 and accounts receivable turnover in days for the third quarter of 2010 was 48.5 days. Year-to-date cash outflows from operations and capital expenditures were $9.4 million and $13.4 million, respectively. With our sales and receivables collection being strongest in the fourth quarter, we expect to generate healthy cash flows for the full year of 2010.

Recent Events

November, 2 2010 – American Lorain announced it has expanded its Lorain®-branded counters for three of its chestnut products including Bottom Open Chestnut, Roasted Chestnut and Roasted Sweet Chestnut, to 1,190 by the end of September 2010. American Lorain Corporation sells over 50 branded chestnut products across 24 provinces in China. As of September 30, 2010, Lorain®-branded counter number for the Company's Bottom Open Chestnut, introduced experimentally last year, and Roasted Chestnut, introduced this year, reached 513 and 428, respectively. Counter number for Roasted Sweet Chestnut reached 249 as of September 30, 2010 as compared to 179 as of December 31, 2009. These branded counters are located primarily in supermarkets, including Wal-Mart, Carrefour, Trust-Mart, and Lotus, mid-sized supermarkets such as Times Supermarkets and Anyang Supermarkets, and small retail stores, including Family Mart, Circle K and QUIK convenient stores.

September 13, 2010 – The Company completed a $9.6 million equity financing with Tongley Investment Ltd., a private fund in China, together with other accredited investors. American Lorain plans to use the proceeds for raw material procurement as we enter the chestnut season.

On June 28, 2010, the Company signed a Letter of Intent to acquire 100% ownership of Shandong Greenpia Foodstuff Co., Ltd., a manufacturer of retail-packaged, Korean-style kimchi cold dishes. The acquisition included cash and stock offer of $2.1 million in cash and 731,707 shares of American Lorain common stock, respectively. On September 23, 2010, the Company, through its subsidiaries Junan Hongrun and International Lorain, completed its acquisition of all the outstanding registered capital of Shandong Greenpia Foodstuff Co., Ltd. ("Shandong Greenpia") by paying $2,100,000 cash to Taebong Inc, who owned 50% owner of Shandong Greenpia, and issuing 731,707 shares of the Company's restricted common stock, valued at $2.87 per share, to Mr. Zhenwei Ji, owner of Shandong Green Safety Import Export Co., Ltd, who owned 50% of Shandong Greenpia. Accordingly, beginning September 23, 2010, the Company has accounted for Shandong Greenpia as an indirectly held wholly owned subsidiary.

Third Quarter 2010 Conference Call

To attend the call, please use the dial in information below.  When prompted, ask for the "American Lorain Conference Call" and/or be prepared to provide the conference ID.

Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through November 24, 2010. To listen, please call 1-877-870-5176 within the United States or +1-858-384-5517 when calling internationally. Utilize the pass code 4385954 for the replay.

About American Lorain Corporation

American Lorain Corporation products include chestnut products, convenience food products and frozen food products. The Company currently sells over 230 products to 26 provinces and administrative regions in China as well as to 42 foreign countries. The Company operates through its four direct and indirect subsidiaries and one leased factory located in China. For further information about American Lorain Corporation, please visit the Company's website at http://www.americanlorain.com

Forward-Looking Statements

This press release contains certain "forward-looking statements" that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to, the Company's ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems, political and economic factors in the PRC, compliance requirement of laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE American Lorain Corporation