China New Borun Announces Second Quarter 2013 Unaudited Financial Results

BEIJING, Aug. 15, 2013 /PRNewswire/ -- China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced its unaudited financial results for the second quarter of 2013. 

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "We are encouraged that we were able to once again beat top line guidance. Although market conditions remained challenging, we sold more edible alcohol in the second quarter than we did in the last quarter, as our capacity utilization improved to nearly 90%, contributing to gross margin improvement.

"We are excited with the completion of our new chlorinated polyethylene ("CPE") plant at the end of July and expect completion of the foam insulation plant by the end of third quarter, marking a new milestone in our expanded business scope. We have commenced limited trial CPE productions and anticipate accomplishing initial sales by this fourth quarter.  Looking ahead, we will continue to forge ahead with our strategy and operations, and we are confident to maintain our leading position in the edible alcohol market, while capturing new market share in the CPE and foam insulation business." Mr. Wang concluded.

Second Quarter 2013 Quick View

• Total revenue decreased 21.8% to RMB628.5 million ($101.7 million[1]) from RMB803.7 million in the second quarter of 2012.
• Gross profit decreased 38.2% to RMB71.4 million ($11.6 million) from RMB115.5 million in the second quarter of 2012.
• Net income decreased 62.5% to RMB25.5 million ($4.1 million) from RMB68.1 million in the second quarter of 2012.
• Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.99 ($0.16) for the quarter ended June 30, 2013. Each ADS represents one of the Company's ordinary shares.

Second Quarter 2013 Financial Performance

For the second quarter of 2013, revenue decreased by 21.8% year-over-year to RMB628.5 million ($101.7 million) from RMB803.7 million in the same period of 2012. The decrease in revenue was mainly attributable to lower average selling price and a decrease in sales volume of edible alcohol due to weaker demand from the baijiu and chemical industries.

Revenue breakdown by product lines is as follows:  

• Revenue from edible alcohol decreased by 27.3% to RMB409.0 million ($66.2 million) in the second quarter of 2013, compared to RMB562.3 million in the second quarter of 2012. The sales volume of edible alcohol in the second quarter of 2013 decreased by 21.4% year-over-year to 78,683 tons, primarily due to lower production as a result of weaker demand, and the average selling price of edible alcohol decreased by 7.5% year-over-year to RMB5,198 per ton.
• Revenue from DDGS Feed decreased by 5.2% to RMB156.5 million ($25.3 million) in the second quarter of 2013, compared to RMB165.1 million in the second quarter of 2012. The sales volume of DDGS Feed in the second quarter of 2013 decreased by 12.5% year-over-year to 75,048 tons, and the average selling price increased by 8.3% year-over-year to RMB2,085 per ton.
• Revenue from liquid carbon dioxide decreased by 17.5% to RMB13.7 million ($2.2 million) in the second quarter of 2013 compared to RMB16.6 million in the second quarter of 2012. The sales volume of liquid carbon dioxide in the second quarter of 2013 decreased by 7.4% year-over-year to 33,612 tons, and the average selling price decreased by 10.8% year-over-year to RMB407 per ton.
• Revenue from crude corn oil decreased by 17.6% to RMB49.2 million ($8.0 million) in the second quarter of 2013 compared to RMB59.7 million in the second quarter of 2012. The sales volume of crude corn oil in the second quarter of 2013 decreased by 16.4% year-over-year to 6,484 tons, and the average selling price decreased by 1.4% year-over-year to RMB7,583 per ton.

During the second quarter of 2013, gross profit decreased by 38.2% to RMB71.4 million ($11.6 million) from RMB115.5 million in the same period of 2012. Gross margin for the second quarter of 2013 decreased to 11.4%, from 14.4% in the same period of 2012, which was primarily attributable to a continued decrease in average selling price.

Operating income, despite a lower year-over-year level of operating expenses, decreased by 40.6% to RMB60.0 million ($9.7 million) in the second quarter of 2013, from RMB101.0 million in the same period of 2012, primarily due to lower gross profit earned.

Selling expenses increased by RMB0.3 million, or 30.9% to RMB1.5 million ($0.2 million) in the second quarter of 2013, from RMB1.2 million in the same period of 2012.

General and administrative expenses decreased by RMB3.4 million, or 25.7% to RMB 9.9 million ($1.6 million) in the second quarter of 2013, from RMB13.3 million in the same period of 2012, benefiting from disciplined cost control.

Income tax expenses in the second quarter of 2013 were RMB9.1 million ($1.5 million), representing an effective tax rate of 26.4%. It is mainly due to the under provision in prior years.

Net income decreased by 62.5% to RMB25.5 million ($4.1 million) in the second quarter of 2013, compared to RMB68.1 million in the same quarter of 2012. In the second quarter of 2013, basic and diluted earnings per share and per ADS were RMB0.99 ($0.16), and the Company had 25.7 million weighted average basic and diluted shares outstanding.  

As of June 30, 2013, reflecting the large volume of corn reserves, cash and bank deposits of RMB419.2 million ($67.9 million) decreased by RMB191.5 million, compared with RMB610.7 million as of December 31, 2012.  Correspondingly, inventories increased to RMB333.1 million ($53.9 million) as of June 30, 2013, compared with RMB138.3 million as of December 31, 2012 and cash flows used in operating activities for the second quarter of 2013 were RMB148.1 million ($24.0 million) mainly due to cash payment for the corn reserves.

Financial Outlook

During the third quarters, the Company historically conducts an annual maintenance of its production facilities, which typically requires a temporary shut down of all production lines for approximately two weeks.  However this summer, the Company extended the maintenance period to one month, due to abnormally hot weather. 

Reflecting a longer annual maintenance period this summer, the Company estimates that its revenue for the third quarter of 2013 will be in the range of RMB400 million ($64.7 million) to RMB450 million ($72.8 million), a decrease of approximately 19.5% to 28.5% over the same quarter of 2012.

This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

Conference Call

Borun's management will hold a corresponding earnings conference call and live webcast at 8:00 a.m. E.T. on Friday, August 16, 2013 (8:00 p.m. Beijing time on Friday, August 16, 2013) to discuss the results and highlights from the second quarter and answer questions from investors. A webcast of the call will be available at http://ir.chinanewborun.com.  Listeners may access the call by dialing:

A replay of the webcast will be accessible through August 23, 2013 on http://ir.chinanewborun.com or by dialing:

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol in China.  Borun's edible alcohol products are primarily sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage that is sold throughout China in retail stores, restaurants and bars. The Company also produces DDGS Feed, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production.  China New Borun is based in Shouguang, Shandong Province.  Additional information about the company can be found at http://www.chinanewborun.com and in documents filed with the U.S. Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

Contact Information

Asia Bridge Capital Limited
Wendy Sun
Phone: +86-10-8556-9033 (China)
            +1-888-870-0798  (U.S.)
Email:  [email protected]

SOURCE China New Borun Corporation