China One Corporation (TSX VENTURE: IND) today announced financial
results for the year ended December 31, 2008. The audited annual
consolidated financial statements along with management's
discussion and analysis have been filed with SEDAR (www.sedar.com)
and are also available at the website of the Company
(www.inddairytech.com).
Revenue for the year was $9.6 million compared to $2.5 million
in fiscal 2007. Net loss for fiscal 2008 was $2.6 million or $0.03
per share as compared to a loss of $0.6 million in the prior year.
On an EBITDA basis, the Company earned $1.5 million for the year
ended December 31, 2008, compared to EBITDA loss of 0.2 million in
fiscal 2007. For the fourth quarter ended December 31, 2008, the
Company achieved revenue of $8.2 million and net earnings of $0.6
million.
Revenue in 2008 includes $2.3 million from milk sales and $7.3
million from the sale of 3,000 cows to Yili Group. In 2007, no milk
was produced as the herd was too young, and revenue was derived
primarily from activities that are no longer as part of the
Company's business strategy. Management expects milk revenue to
increase in 2009, as the milking herd size expands.
At December 31, 2008, the Company had a herd size of just more
than 7,000. The Company continues to use its inventory of over
200,000 embryos to produce Canadian Holsteins. These embryos have
historically been implanted in Chinese domestic cows as surrogates.
The Company has paid the owner of the surrogate a fee on the
successful birth of a cow. As the herd has developed, the Company
has also sought to grow its herd by artificially inseminating the
best of breed of its China-born Canadian heifers. As of the end of
March 2009, the total herd size had increased to more than 9,000
cows.
As a result of new government regulations adopted after the
melamine scandal in 2008, management believes that a new market
opportunity for further growth presents itself in 2009. New Chinese
government regulations encourage dairy processors to purchase raw
milk from larger-scale farms. The government has established a goal
that all dairy processors obtain at least 70% of their raw milk
from these scaled farms by October 2011. This has provided the
Company with the opportunity to acquire Chinese Holsteins at
favorable prices as small-scale dairy farms transition out of dairy
farming. By purchasing mature Chinese Holstein cows locally, the
Company expects to increase the herd size on its large scale farms
faster and at lower costs. So far, during the month of April 2009,
the Company has acquired more than 2,000 Chinese Holsteins at
approximately $900 (5,000 RMB) per cow.
During 2008, the Company signed a cow sales agreement with the
largest dairy processor in China, Yili Group, to sell 5,000 cows at
$2,955 (RMB16,250) each. The Company delivered 3,000 cows in 2008
and realized $7.3 million in revenue. The remaining 2,000 cows are
expected to be delivered in the second half of 2009, pending the
construction of new farms by Yili, generating expected revenue of
approximately $5.8 million. As specified in the sales agreement,
the Company has the right to buy back newly born Canadian Holsteins
from those cows sold to Yili at approximately $1,091 (6,000
RMB).
As of December 31, 2008, the Company reported cash and cash
equivalents of $8.8 million. The Company's resources are dedicated
to expanding farms and herd size in China.
With favourable financing facilities and terms provided by local
partners and subsidies from government agencies as announced in
March 2009, and taking into account certain planned purchases of
Chinese Holstein cows, the Company expects the herd size to
increase to 30,000 by the end of 2009 and to 60,000 by 2010, making
the Company the largest Canadian Holstein dairy company in
China.
China One, through its operating subsidiaries, is an emerging
raw milk producer in China that is seeking to become a leading
provider of high quality raw milk to the Chinese dairy industry. To
meet China's increasing demand for dairy products, the Company is
using Canadian cattle genetics and North American farming practices
to establish and increase its dairy herd in China. At its 2009
shareholder meeting, China One intends to seek shareholder approval
to change its name to IND DairyTech Ltd.
The Company plans to develop its herd in China through the use
of advanced breeding techniques employing Canadian Holstein embryos
that it intends to use to impregnate surrogate cows. These embryos
have been created through in vitro fertilization using sexed semen
to achieve an approximate 90% female birth rate. The use of these
advanced breeding techniques is expected to allow the Company to
rapidly expand its herd. The use of Canadian Holstein embryos also
provides a practical solution to China's ban on the import of live
Canadian cattle.
FORWARD LOOKING INFORMATION
This news release contains forward-looking statements and
information that are based on the beliefs of management and reflect
China One's current expectations. Such statements and information
reflect the current view of China One with respect to risks and
uncertainties that may cause actual results to differ materially
from those contemplated in those forward-looking statements and
information.
By their nature, forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements, or other future
events, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. The forward-looking information in this
news release includes revenue expected from cow sales, the
development and increases in herd size in China, the purchase of
Chinese Holstein cows (including cost savings expected to result
from the investment made in purchasing these cows), the use of
Canadian Holstein embryos to impregnate surrogate cows, the
establishment of large scale North American-style farming
operations in China, the size of China One as a Canadian Holstein
dairy company in China, and the aim of becoming a leading provider
of high quality raw milk to the Chinese dairy industry.
There are a number of important factors that could cause China
One's actual results to differ materially from those indicated or
implied by forward-looking statements and information. Such factors
include, among others, risks related to China One's business such
as failure of the business strategy and limited operating history,
reliance on farm development partners, disruptions due to bovine
diseases, dependence on biotechnology, reduction in government
support and access to raw materials; risks related to China One's
operations, such as additional financing requirements and access to
capital, the ability to repay debt, reliance on key personnel,
fluctuation in feedstock costs, fluctuations in costs of
production, product spoilage and liability, loss of embryo
inventory, factors related to milk production, fluctuations in milk
prices, fluctuations in milk demand, lack of specificity in certain
agreements, litigation, indemnities, insurance, competition,
intellectual property and variations in cow lactation periods;
risks related to China One and its business generally such as
potential exposure to tax under Canadian tax, regulations of the
Peoples' Republic of China (the "PRC") relating to offshore special
purpose companies, recent PRC regulations relating to cross-border
mergers and acquisitions, environmental protection, currency
exchange rates and conflicts of interest; and risks related to
doing business in the PRC such as tax, repatriation of profit and
currency conversion, acquisition and appropriation of land use
rights, foreign investment, permits and business licences,
employment contracts, government intervention, shareholders' rights
and enforcement of judgments and a developing legal system.
China One cautions that the foregoing list of material factors
is not exhaustive. When relying on China One's forward-looking
statements and information to make decisions, investors and others
should carefully consider the foregoing factors and other
uncertainties and potential events. China One has assumed a certain
progression of its business, which may not be realized. It has also
assumed that the material factors referred to in the previous
paragraph will not cause such forward-looking statements and
information to differ materially from actual results or events.
However, the list of these factors is not exhaustive and is subject
to change and there can be no assurance that such assumptions will
reflect the actual outcome of such items or factors. For additional
information with respect to certain of these and other factors,
refer to the risk factors section of China One's Management's
Discussion & Analysis dated April 28, 2009 available on SEDAR
at www.sedar.com.
The forward-looking information contained in this news release
represents the expectations of China One as of the date of this
news release and, accordingly, is subject to change after such
date. Readers should not place undue importance on forward-looking
information and should not rely upon this information as of any
other date. While China One may elect to, it does not undertake to
update this information at any particular time except as required
in accordance with applicable securities legislation.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
Contacts: China One Corporation Jay Hussey Investor Relations
416-482-1411 jhussey@inddairytech.com www.inddairytech.com China
One Corporation James Xiang Chief Financial Officer 416-886-1261
james.xiang@ind.ca
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