Deyu Agriculture Corp. Reports Record Highs in Revenues, Net Income and Fully Diluted EPS for the Year 2011

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Apr 02, 2012, 09:00 ET

BEIJING, April 2, 2012 /PRNewswire-Asia-FirstCall/ -- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Beijing, 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 year ended December 31, 2011.

Fiscal Year 2011 Highlights:

Revenue increased 207.1% year-over-year to $261.6 million.
Corn division sales improved 155.7% to $177.7 million.
Grain division sales increased 253.0% to $40.5 million
Bulk trading division sales increased 936.2% to $43.3 million
Gross profit improved 96.8% to $43.1 million
Net income available to common stockholders increased 50.4% to $17.3 million

Summarized Fiscal Year (FY) 2011 Results:
	FY 2011	FY 2010	CHANGE
Revenue	$261.6 million	$85.2 million	+207.1%
Gross profit	$43.1 million	$21.9 million	+96.8%
Net Income*	$17.3 million	$11.5 million	+50.4%
EPS (Diluted)**	$1.42	$1.16	+22.4%

*Represents net income available to common stockholders.
**Earnings per diluted share of $1.42 on 12.5 million shares. For FY 2010, the Company reported fully diluted earnings per share of $1.16 on 10.2 million shares.

"Each of our divisions delivered excellent results in 2011," said Jianming Hao, the Company's Chief Executive Officer and Chairman. "Our business, performed exceedingly well, and our advanced newly-added processing center increased our total storage capacity to over 100,000 tons and also enhanced annual turnover of corn to over 700,000 tons. We have also greatly expanded our sales network. Our wholesale network now covers 15 provinces in China, and our retail sales network grew from 10,000 supermarkets and convenience stores in 2010 to approximately 20,000 supermarkets and convenience stores across 29 of China's provinces in 2011.

Mr. Hao added, "In February of this year, we acquired the Taizihu Group, which has a well-established grain product line that includes bean-based products, fruit vinegars and juices and other grain products, as well as a strong production capacity of 45,000 tons. By enriching our product lines, integrating our broad sales network with the Taizihu Group's sales channels, and expanding our production capacity, we believe that our grain product sales will continue to improve in 2012 and help us maintain our progress."

Fiscal Year 2011 Financial Results

Revenue

In FY 2011, the Company had sales of $261.6 million compared to sales of $85.2 million in FY 2010, an increase of $176.4 million or 207.1%.

Net sales from the Company's corn division increased $108.2 million or 155.7%, from $69.5 million in FY 2010 to $177.7 million in FY 2011. This growth was attributable to the Company's expansion of its sales network, the Company's increase in storage capacity and turnover, as well as the Company obtaining sufficient working capital.

Revenue from the Company's grain division increased $29.0 million or 253.0%, from $11.5 million in FY 2010 to $40.5 million in FY 2011. This increase was primarily due to growth of the Company's market share through the expansion of its sales network and promotional activities.

The Company's revenue from its bulk trading division, which was added in fourth quarter of 2010, increased $39 million or 936.2%, from $4.2 million in FY 2010 to $43.3 million in FY 2011. This growth was primarily due to the leverage of our broad wholesale network, which covers 15 provinces in China, as well as our sufficient working capital.

Gross Profit & Gross Margin

The Company's gross profit increased by $21.2 million or 96.8%, from $21.9 million in FY 2010 to $43.1 million in FY 2011. This improvement was attributable to the Company's growth in sales volume, including an increase of $14 million in its corn division, $3.6 million in its grain division and $3.6 million in its bulk trading division.

The Company's gross margin decreased from 25.7% in FY 2010 to 16.5% in FY 2011. The Company experienced a purchase cost increase on both corn and grains caused by the inflation in the prices of raw materials in China. The Company's sales expansion strategies that it implemented by lowering the average selling price compared with the market price reduced the Company's profit margin. In FY 2011, the increasing percentage of bulk trading of total sales with a relatively low margin of 8.3% also negatively affected the Company's overall profit margin.

Net Income

As a result of the above, the Company's net income available to common stockholders and earnings per diluted share were $17.3 million and $1.42, respectively, compared to $11.5 million and $1.16, respectively, in FY 2010.

Business Outlook

"Our priority is further improving our market share in corn and grains," remarked Mr. Hao. "In view of this goal, we are working very hard to add more sales outlets and to enhance our promotional activities in an effort to increase brand awareness and purchases among consumers. For our emerging bulk trading business, we plan to continue to leverage our existing resources, such as our ample reserves and storage capacity, broad sales and supply networks, and modern logistic centers, to help this division achieve substantial growth again in 2012. Also, we plan to diversify the grain varieties we offer through our bulk trading business to include certain rare grain varieties in China like kidney beans, green beans and sunflower seeds. We plan to look to demand trends in the market to determine which of these varieties would be most beneficial for us to incorporate into our product offerings."

"Due to our expanding economies of scale and the rising demand for our products, it is important that we improve our supply base of raw materials," Mr. Hao added. "Right now, we are strongly considering broadening our operating model to include other main producing areas of corn and grain through establishing new subsidiaries for our corn and grain businesses. In light of the increasing demand we are experiencing for our products, we are looking towards developing or introducing new products through the establishment of partnerships with other grain producers or through business acquisitions."

"As we aim to enrich our product line and provide goods that better meet consumer diet trends, we also anticipate expanding our overseas channels and our export product portfolio," Mr. Hao continued. "Our subsidiary Huichun has established export channels that we want to build on in 2012, with our focus being on the sales of bean-based products, refined packaged grains and large packaged grains. While 2011 was an excellent year for us in terms of financial gains and our development as a company, we are confident that we have sound strategies that can help us build upon our progress in 2012 and increase global awareness of our brand."

Conference Call

The Company will host a conference call on Friday, April 6, 2012 at 8:30 AM EDT to review and discuss the Company's results for the year ended December 31, 2011.

To join the conference call, use the dial-in information below. When prompted, ask for the "Deyu Agriculture Call" and/or be prepared to provide the conference ID.

Date: 04/06/2012
Time: 8:30 AM Eastern
Conference Line Dial-In (US): 877-407-9205
International Dial-In: 201-689-8054
Conference ID#: 391617
Webcast Link: http://www.investorcalendar.com/IC/CEPage.asp?ID=166702

Dial in at least 10 minutes before the call to ensure timely participation. A playback will be available until 11:59 PM April 20, 2012. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally.

Utilize the pass code below for replay (both required)

Account#: 286
Conference ID#: 391617

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 of the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. Deyu has an extensive wholesale network in over 15 provinces and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. Deyu's facilities include advanced 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'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.

Investor Contact:

Mr. Kevin Fickle, President
NUWA Group LLC.
Tel: +1-925-330-8315
Email: [email protected]

Company Contact:

Ms. Amy He, Acting Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-5224-1802 X389
Email: [email protected]

Ms. Cynthia Yang, Assistant to Acting CFO
Tel: +1-646-820-8060
Email: [email protected]

DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

Assets	December 31, 2011		December 31, 2010

Current Assets
Cash and cash equivalents	$	8,741,703	$	5,665,858
Restricted cash		1,850,999		125,560
Accounts receivable, net		36,167,136		11,160,959
Due from related parties		587,108		-
Inventory		20,314,090		16,541,999
Advance to supplier		7,233,371		1,178,532
Prepaid expenses		391,537		1,324,251
Assets held for sale		1,634,274		-
Other current assets		2,204,934		669,134
Current assets of discontinued operations		-		5,806,884
Total Current Assets		79,125,152		42,473,177

Property, plant, and equipment, net		12,355,946		4,287,372
Construction-in-progress		-		6,732,189
Other assets		727,535		10,394,246
Intangible assets, net		10,651,844		-
Non-current assets of discontinued operations		-		2,042,168

Total Assets	$	102,860,477	$	65,929,152

Liabilities and Equity

Current Liabilities
Short-term loan	$	14,413,480	$	2,631,364
Accounts payable		1,833,190		197,012
Note payables		1,588,840		-
Advance from customers		8,488,272		6,451,782
Accrued expenses		1,149,205		1,291,227
Preferred stock dividends payable		219,721		238,620
Due to related parties		5,445,115		-
Other current liabilities		583,196		23,779
Current liabilities of discontinued operations		-		11,654,915
Total Current Liabilities		33,721,019		22,488,699

Equity
Series A convertible preferred stock, $.001 par value, 10,000,000 shares authorized, 1,997,467 and 2,106,088 shares outstanding, respectively		1,997		2,106
Common stock, $.001 par value; 75,000,000 shares authorized, 10,564,774 and 10,349,774 shares issued and outstanding, respectively		10,565		10,350
Additional paid-in capital		20,367,138		18,770,230
Other comprehensive income		4,831,353		2,272,633
Retained earnings		43,491,465		22,385,134
Total Stockholders' Equity		68,702,518		43,440,453
Noncontrolling Interests		436,940		-
Total Equity		69,139,458		43,440,453

Total Liabilities and Equity	$	102,860,477	$	65,929,152

DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

	For The Years Ended
	December 31,
	2011		2010

Net revenue	$	261,576,666	$	85,174,884
Cost of goods sold		(218,480,009)		(63,250,363)
Gross Profit		43,096,657		21,924,521

Selling expenses		(13,231,094)		(6,281,768)
General and administrative expenses		(8,222,182)		(3,627,860)
Total Operating Expense		(21,453,276)		(9,909,628)
Operating income		21,643,381		12,014,893

Interest income		42,159		17,505
Interest expense		(805,601)		(341,555)
Non-operating income		(180,294)		(18,174)
Total Other Expense		(943,736)		(342,224)

Income from continuing operations before income taxes		20,699,645		11,672,669
Income taxes		(184,384)		913,785
Income from continuing operations		20,515,261		12,586,454
Loss from discontinued operations, net of income taxes		(3,891,830)		(756,480)

Net income		16,623,431		11,829,974

Net loss attributable to noncontrolling interests:
Net loss from continuing operations		38,673		-
Net loss from discontinued operations		1,101,255		-
Total net loss attributable to noncontrolling interests		1,139,928		-
Net income attributable to Deyu Agriculture Corp.		17,763,359		11,829,974
Preferred stock dividends		(427,917)		(327,721)
Net income available to common stockholders		17,335,442		11,502,253
Foreign currency translation gain		2,751,687		1,363,322
Comprehensive income		20,087,129		12,865,575
Less: Other comprehensive income attributable to noncontrolling interests		(130,653)		-
Comprehensive income attributable to Deyu Agriculture Corp.	$	19,956,475	$	12,865,575

Amounts attributable to common stockholders:
Net income from continuing operations, net of income taxes	$	20,126,017	$	12,258,733
Discontinued operations, net of income taxes		(2,790,575)		(756,480)
Net income attributable to common stockholders	$	17,335,442	$	11,502,253

Net income attributable to common stockholders per share - basic:
Income from continuing operations	$	1.91	$	1.45
Loss from discontinuing operations		(0.27)		(0.09)
Net income attributable to common stockholders	$	1.64	$	1.36

Net income attributable to common stockholders per share - diluted:
Income from continuing operations	$	1.64	$	1.23
Loss from discontinuing operations		(0.22)		(0.07)
Net income attributable to common stockholders	$	1.42	$	1.16

Weighted average number of common shares outstanding - basic		10,522,432		8,445,880
Weighted average number of common shares outstanding - diluted		12,497,164		10,249,041

DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

	For The Years Ended
	December 31,
	2011		2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income available to common stockholders	$	17,335,442	$	11,502,253
Loss from discontinued operations attributable to Deyu Agriculture Corp.		2,790,575		756,480
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation & amortization		979,297		489,379
Share-based compensation		428,702		549,106
Preferred stock dividends accrued		219,721		232,642
Dividends paid with Series A preferred stock		212,420		-
Common stocks issued for services		78,000		-
Deferred income tax expense (benefit)		184,384		(913,785)
Noncontrolling interests		(38,673)		-
Loss on disposal of fixed assets		-		7,573
Decrease (increase) in current assets:
Accounts receivable		(23,824,017)		(6,645,744)
Related-parties trade receivable		(494,752)		-
Inventories		(2,873,705)		(7,816,702)
Advance to suppliers		(5,840,601)		(947,913)
Prepaid expense and other current assets		(539,339)		(853,455)
Increase (decrease) in liabilities:
Accounts payable		1,584,038		192,077
Advance from customers		1,677,638		6,284,419
Accrued expense and other liabilities		346,492		1,097,413
Net cash (used in) provided by operating activities of continuing operations		(7,774,378)		3,933,743
Net cash used in operating activities of discontinued operations		(3,858,325)		(3,727,140)
Net cash (used in) provided by operating activities		(11,632,703)		206,603

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of machinery and equipment		(3,759,859)		(1,987,716)
Construction and remodeling of factory and warehouses		(109,856)		(3,281,762)
Purchase of software and other assets		(8,902)		(960,175)
Advances to related parties		(76,995)		-
Prepayments for acquisition of land use rights		(76,715)		(6,889,032)
Proceeds from disposal of fixed assets		-		274,727
Net cash used in investing activities of continuing operations		(4,032,327)		(12,843,958)
Net cash used in investing activities of discontinued operations		(2,476,523)		(117,583)
Net cash used in investing activities		(6,508,850)		(12,961,541)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital contributions		464,180		1,831,718
Net proceeds from short-term loans from related parties		3,101,839		3,101,989
Cash restricted for credit line of bank acceptance notes		(1,802,568)		-
Release of cash restricted held at a trust account		125,560		-
Payment of preferred dividends		(243,678)		-
Net proceeds from short-term loans from bank		11,349,219		-
Net proceeds from short-term bank acceptance notes		1,547,269		-
Net proceeds from short-term loan from others		952		(1,079,701)
Net repayments of short-term loans from related parties		-		(1,113,632)
Proceeds from private placement, net of restricted cash held in escrow		-		8,827,123
Release of restricted cash related to private placement		-		298,848
Net cash provided by financing activities of continuing operations		14,542,773		11,866,345
Net cash used in financing activities of discontinued operations		5,918,988		4,277,243
Net cash used in financing activities		20,461,761		16,143,588

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		352,429		204,593

NET INCREASE IN CASH & CASH EQUIVALENTS		2,672,637		3,593,243
NET INCREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS		(403,208)		489,886
NET INCREASE IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS		3,075,845		3,103,357

CASH & CASH EQUIVALENTS, BEGINNING BALANCE		5,665,858		2,562,501
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	8,741,703	$	5,665,858

SUPPLEMENTAL DISCLOSURES:
Income tax paid	$	62	$	-
Interest paid	$	809,448	$	323,829
NONCASH INVESTING AND FINANCING ACTIVITIES:
Construction completed and transferred to property, plant, and equipment	$	5,914,602	$	-
Construction completed and transferred to land use rights	$	2,320,904	$	-
Obtained certificates of farmland use rights	$	8,221,569	$	-

Note: Please refer to the Company's annual report on Form 10-K for the year ended December 31, 2011 for additional notes, which are an integral part of these consolidated financial statements

SOURCE Deyu Agriculture Corp.