BEIJING, Aug. 13, 2013 /PRNewswire/ -- Deyu
Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Shanxi Province, 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 second quarter ended June 30, 2013.
Second Quarter 2013 Results:
- Net revenue was $63.6
million, increased $7.8
million or 13.9%, compared to $55.8
million in Q2 of 2012;
- Gross profit was $5.6
million, decreased $4.9
million or 46.6%, compared to $10.5
million in Q2 of 2012;
- Gross margin was 8.8%, compared to 18.8% in Q2 of
2012;
- Net loss available to common stockholders was
$4.1 million, compared to net income
of $2.8 million in Q2 of
2012;
- Earnings (loss) per diluted share was $(0.38) on 10.6 million shares, compared to
$0.23 on 12.6 million shares in Q2 of
2012.
Mr. Greg Chen, Chief
Executive Officer of the Company commented, "Since its beginning,
2013 has been a very challenging year for the Company. Our Q2 2013
financial results showed large decrease in net income. China's on-going economic slowdown has imposed
and continues to impose challenges for us. In addition, extreme
weather conditions throughout the northern part of China have added to an already challenging
situation."
"For corn division in particular, the decrease in pork
prices and the spread of avian flu H7N9 has affected the livestock
raising industry, which has greatly reduced the demand for animal
feeds, the major market of our corn products. In addition, a good
corn harvest last year increased market supply," continued Mr.
Chen. "Oversupply caused a decrease in market sales prices of corn
while purchase prices from farmers didn't decline consistently due
to the government's protective farming policies in favor of
farmers. The gross margin of our corn trading business declined
significantly, especially in the second quarter."
"Conventional retail sales of grain products in
supermarkets and convenience stores became increasingly
competitive. The deteriorating efficiency of existing retail
distribution channels has caused the Company to re-evaluate its
overall sales approach for packaged grain products and to begin
developing a new marketing strategy. For the time being, we have
begun shifting some of our available resources from grain retail
sales to more wholesale or bulk trading. A
general slowdown in consumer market growth and competition in
the market segment have had a negative impact on the grain bulk
trading business."
"We also met some unexpected and
extreme weather in recent months, which caused serious damage to
our inventories and affected our operations. In late April, an
unexpected heavy snow storm collapsed two of our warehouses and
caused about $1.2 million in damage
to our inventory. Beginning in May
2013, Shanxi had unusually
frequent heavy rainfall which caused extreme humidity. As a result,
we reinforced the warehouses and took measures to prevent
inventories from mildewing, which reduced the efficiency of our
operations and increased operational expenses," added Mr.
Chen.
Financial Results for the Second Quarter Ended
June 30, 2013
The Company's net revenue for Q2 2013 was $63.6 million compared with $55.8 million for Q2 2012, an increase of
$7.8 million, or 13.9%, which was
mainly due to the increase of our bulk trading business with low
margin. Net revenue from our Corn Division for Q2 2013 was
approximately $35.7 million, a
decrease of $1.7 million, or
approximately 4.4%, as compared to $37.4
million for Q2 2012, which was mainly attributable to the
weakening demand for corn from livestock feed factories in the
industry. Net revenue from our Grain Division Q2 2013 was
$10.4 million, a decrease of
$4.2 million, or 29.0%, as compared
to $14.6 million for Q2 2012, which
was mainly attributable to the decline of retail sales in
supermarket and convenience stores. Net revenue from our Bulk
Trading Division for Q2 2013 was $17.5
million, an increase of $13.7
million, or 354.2% as compared to $3.9 million for Q2 2012, which was mainly
attributable to our strategic shift from grain retail sales to
wholesale or bulk trading.
The Company's gross profit decreased by $4.9 million, or 46.6%, from $10.5 million for Q2 2012 to $5.6 million for Q2 2013, which was mainly
attributable to the decrease of sales revenue from the Corn and
Grain Division and the decrease of gross margin. Gross margin
decreased from 18.8% for Q2 2012 to 8.8% for Q2 2013, which was
mainly the combined result of the simultaneous decline of gross
margin in each division and the increased sales percentage of the
bulk trading business, which had a relatively lower gross
margin.
Gross profit in the Corn Division was $3.4 million, contributing to 60.0% of total
gross profit for Q2 2013. Gross margin for our Corn Division was
9.4% for Q2 2013, down by 610 basis points from 15.5% for Q2, 2012,
which was mainly attributable to the weakening demand caused
by the decrease of pork prices and the spread of bird flu H7N9, in
addition to over supply as a result of a good harvest last year.
Gross profit in the Grain Division was $1.8
million, contributing to 32.0% of total gross profit for Q2
2013. Gross margin for the Grain Division was 17.3% for Q2 2013,
down by 1270 basis points from 30.0% for Q2 2012, which was
primarily due to the increasing cost of raw materials in addition
to the strategic shift from grain retail sales to wholesales, which
has relatively lower gross margins but with fewer distribution
expenses. Gross profit in the Bulk Trading Division was
$0.5 million, contributing to 8.0% of
total gross profit for Q2 2013. Gross margin in the Bulk Trading
Division was relatively lower compared to our other Divisions as a
result of its high turnover rate and relatively lower cost
maintenance. Gross margin for the Bulk Trading Division was 2.6%
for Q2 2013, a decrease of 540 basis points from 8.0% for Q2 2012,
which was mainly attributable to negative margin for some
transactions caused by severe market fluctuations of grains in
May 2013.
The Company's operating expenses
increased $1.9 million or 30.9% for
Q2 2013 as compared to $6.1 million
for Q2 2012. This increase was primarily the combined result of (a)
an increase of $0.8 million of the
expenses of handling, warehousing and freight, caused by frequent
heavy rainfall in recent months; (b) an increase of $0.8 million of farmer seeding subsidies, of
which parts were paid in the first quarter of 2012; (c) an increase
of $0.5 million for management team enhancement, as well as
business developments at the corporate level and (d) an increase of
$0.4 million of professional service fees, mainly spent on
financing consulting, internal control consulting, legal and other
services; and offset by (e) a decrease of $0.8 million of
advertisement and distribution expenses incurred as a result of the
reduction of retail sales.
Interest expense for Q2 2013 was $0.2 million compared to $0.4 million for Q2 2012, a decrease of
$0.2 million, or 48.9%, which was
mainly due to the decrease in balances on loans. Non-operating loss
for Q2 2013 was $1.2 million, mainly
representing inventory loss due to the collapse of warehouses under
an unexpected heavy snow storm on April 19,
2013. Non-operating income for the three months ended
June 30, 2012 was not
material.
The Company had net loss available to common stockholders
of $4.1 million for Q2 2013, as
compared to net income of $2.8
million for Q2 2012, a decrease of $6.9 million, or 244.8%. Earnings (loss) per
diluted share was $(0.38) on 10.6
million shares for Q2 2013, compared to $0.23 on 12.6 million shares for Q2
2012.
Business Outlook
"Evolving market conditions in China present not only challenges, but
opportunities," said Mr. Chen. "At this new stage of China's economic development, in which
innovation and resource consolidation will be the key to competing
in the China and global
marketplaces, we realize the urgent need to develop a more
sustainable growth strategy. We are currently developing new
strategies and measures on several fronts, including product line
enhancements and expansion, marketing and sales strategies and the
development of digital platforms which are designed to go beyond
conventional channels to meet market needs."
"We believe our new IT infrastructure, which is currently
under development, will become a crucial operational platform to
provide high level resource integration, information access and
risk management," continued Mr. Chen. "We expect that the platform
will offer extended services to farmers in the co-ops and to
clients alike, will build strategic partnerships and serve Deyu's
brand building strive. We believe the Company can compete more
effectively with our new digital operational approach to turn some
key barriers imposed by conventional approaches into strategic
advantages."
"In the meantime, in order to adapt to the changing market
for grain products sold to consumers, we are streamlining our
operational structure, introducing new product lines, exploring new
venues and utilizing a brand-driven approach to go beyond
traditional distribution channels. Our new initiatives still
continue to cultivate the whole value chain concept, by offering
agricultural services to secure strategic production resources, to
offer efficient commercial orders and other value-added services,"
added Mr. Chen. "However, while the Company's strategic and
operational adjustments to the changing economic and market
conditions in China will take some
time, we could expect some more volatile quarters ahead of
us."
Conference Call
The Company will host a conference call on August 21, 2013 at 9:00 AM
EDT to discuss the Company's results for the second quarter
ended June 30, 2013.
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:
|
8/21/2013
|
Time:
|
9:00 AM EDT
|
Conference Line Dial-In (US):
|
877-407-9205
|
International Dial-In:
|
201-689-8054
|
Conference ID#:
|
419592
|
Webcast Link:
|
http://www.investorcalendar.com/IC/CEPage.asp?ID=171488
|
Dial in at least 10 minutes before the call to ensure
timely participation. A Teleconference Replay will be available
until 11:59 PM August 28, 2013. To listen, please call
877-660-6853 within the United
States or 201-612-7415 if calling
internationally.
Utilize the conference ID # for replay: 419592.
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 in 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.
We have a nationwide sales network covering manufacturers, grain
traders, wholesalers, distributors, institutional clients and
retail stores in China. Deyu
Agriculture Corp.'s facilities include sophisticated 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 Agriculture Corp.'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.
Company Contact:
Mr. Greg Chen, Chief
Executive Officer
Deyu Agriculture
Corp.
Tel: +1-646-499-5475
Email:
gregchen@china-deyu.com
Ms. Amy He, Chief
Financial Officer
Deyu Agriculture
Corp.
Tel: +86-10-8273-2870 x8522
Email: amy@china-deyu.com
Financial Tables
DEYU AGRICULTURE CORP. AND
SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
Assets
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
(Unaudited)
|
|
|
(Audited)
|
Current Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
8,013,686
|
|
|
$
|
4,937,279
|
Restricted cash
|
|
|
505,100
|
|
|
|
815,348
|
Accounts receivable,
net
|
|
|
27,183,764
|
|
|
|
33,991,288
|
Due from related
parties
|
|
|
43,834
|
|
|
|
397,214
|
Inventory
|
|
|
25,947,135
|
|
|
|
30,322,191
|
Advance to
supplier
|
|
|
15,966,506
|
|
|
|
6,145,840
|
Prepaid expenses
|
|
|
722,350
|
|
|
|
1,453,184
|
Other current
assets
|
|
|
146,281
|
|
|
|
340,456
|
Total Current
Assets
|
|
|
78,528,656
|
|
|
|
78,402,800
|
|
|
|
|
|
|
|
|
Property, plant, and equipment, net
|
|
|
19,714,631
|
|
|
|
19,442,599
|
Construction-in-progress
|
|
|
1,970,542
|
|
|
|
2,614,491
|
Long-term Investment
|
|
|
59,309
|
|
|
|
58,426
|
Intangible assets, net
|
|
|
13,378,641
|
|
|
|
13,389,075
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
113,651,779
|
|
|
$
|
113,907,391
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Short-term loan
|
|
$
|
8,832,242
|
|
|
$
|
8,323,623
|
Accounts payable
|
|
|
2,458,315
|
|
|
|
5,179,729
|
Advance from
customers
|
|
|
3,581,751
|
|
|
|
2,249,282
|
Accrued expenses
|
|
|
1,741,161
|
|
|
|
1,506,776
|
Tax payable
|
|
|
249,074
|
|
|
|
305,712
|
Preferred stock dividends
payable
|
|
|
235,344
|
|
|
|
229,171
|
Due to related
parties
|
|
|
9,472,252
|
|
|
|
8,668,552
|
Other current
liabilities
|
|
|
431,527
|
|
|
|
986,153
|
Total Current
Liabilities
|
|
|
27,001,666
|
|
|
|
27,448,998
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $.001 par value,
10,000,000 shares authorized, 2,110,094
and
2,039,970 shares outstanding,
respectively
|
|
|
2,110
|
|
|
|
2,040
|
Common stock, $.001 par value; 75,000,000
shares
authorized, 10,618,266 and
10,658,266 shares
outstanding,
respectively
|
|
|
10,618
|
|
|
|
10,658
|
Additional paid-in
capital
|
|
|
20,991,645
|
|
|
|
20,781,439
|
Other comprehensive
income
|
|
|
7,081,392
|
|
|
|
5,737,793
|
Retained
earnings
|
|
|
58,531,919
|
|
|
|
59,500,134
|
Total
Stockholders' Equity
|
|
|
86,617,684
|
|
|
|
86,032,064
|
Noncontrolling
Interests
|
|
|
32,429
|
|
|
|
426,329
|
Total
Equity
|
|
|
86,650,113
|
|
|
|
86,458,393
|
|
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
|
$
|
113,651,779
|
|
|
$
|
113,907,391
|
DEYU AGRICULTURE CORP. AND
SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(UNAUDITED)
|
|
|
For The Three Months Ended
|
|
For The Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
63,610,101
|
|
$
|
55,837,010
|
|
$
|
140,777,815
|
|
$
|
118,576,479
|
Cost of goods sold
|
|
(57,999,849)
|
|
|
(45,334,604)
|
|
|
(126,363,389)
|
|
|
(95,654,272)
|
Gross Profit
|
|
5,610,252
|
|
|
10,502,406
|
|
|
14,414,426
|
|
|
22,922,207
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
(4,935,031)
|
|
|
(3,973,047)
|
|
|
(8,133,626)
|
|
|
(8,131,419)
|
General and administrative expenses
|
|
(3,021,371)
|
|
|
(2,106,397)
|
|
|
(4,904,238)
|
|
|
(3,965,171)
|
Total Operating Expenses
|
|
(7,956,402)
|
|
|
(6,079,444)
|
|
|
(13,037,864)
|
|
|
(12,096,590)
|
Operating income (loss)
|
|
(2,346,150)
|
|
|
4,422,962
|
|
|
1,376,562
|
|
|
10,825,617
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
5,572
|
|
|
6,138
|
|
|
13,672
|
|
|
17,676
|
Interest expense
|
|
(227,577)
|
|
|
(445,495)
|
|
|
(403,281)
|
|
|
(930,039)
|
Non-operating income (loss)
|
|
(1,200,809)
|
|
|
8,304
|
|
|
(1,199,996)
|
|
|
576,650
|
Total Other Expenses
|
|
(1,422,814)
|
|
|
(431,053)
|
|
|
(1,589,605)
|
|
|
(335,713)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
(3,768,964)
|
|
|
3,991,909
|
|
|
(213,043)
|
|
|
10,489,904
|
Income taxes
|
|
(185,120)
|
|
|
(1,089,402)
|
|
|
(525,553)
|
|
|
(1,290,696)
|
Net income (loss)
|
|
(3,954,084)
|
|
|
2,902,507
|
|
|
(738,596)
|
|
|
9,199,208
|
Net loss attributable to
noncontrolling
interests:
|
|
185
|
|
|
19,435
|
|
|
3,804
|
|
|
40,869
|
Net income (loss) attributable to Deyu
Agriculture Corp.
|
|
(3,953,899)
|
|
|
2,921,942
|
|
|
(734,792)
|
|
|
9,240,077
|
Preferred stock dividends
|
|
(117,368)
|
|
|
(109,977)
|
|
|
(233,423)
|
|
|
(220,052)
|
Net income (loss) available to common
stockholders
|
|
(4,071,267)
|
|
|
2,811,965
|
|
|
(968,215)
|
|
|
9,020,025
|
Foreign currency translation gain (loss)
|
|
1,045,132
|
|
|
(672,232)
|
|
|
1,333,734
|
|
|
(634,959)
|
Comprehensive income (loss)
|
|
(3,026,135)
|
|
|
2,139,733
|
|
|
365,519
|
|
|
8,385,066
|
Other comprehensive income (loss)
attributable to noncontrolling interests
|
|
(384)
|
|
|
3,559
|
|
|
9,865
|
|
|
3,851
|
Comprehensive income (loss) attributable to
Deyu Agriculture Corp.
|
$
|
(3,026,519)
|
|
$
|
2,143,292
|
|
$
|
375,384
|
|
$
|
8,388,917
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to
common
stockholders per share - basic:
|
$
|
(0.38)
|
|
$
|
0.27
|
|
$
|
(0.09)
|
|
$
|
0.85
|
Net income (loss) attributable to
common
stockholders per share - diluted:
|
|
(0.38)
|
|
|
0.23
|
|
|
(0.09)
|
|
|
0.73
|
Weighted average number of common shares
outstanding - basic
|
|
10,618,266
|
|
|
10,566,574
|
|
|
10,632,189
|
|
|
10,565,674
|
Weighted average number of common
shares
outstanding – diluted
|
|
10,618,266
|
|
|
12,588,098
|
|
|
10,632,189
|
|
|
12,578,579
|
DEYU AGRICULTURE CORP. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
For The Six Months Ended
|
|
June 30,
|
|
2013
|
|
2012
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
|
Net income (loss) available to
common stockholders
|
$
|
(968,215)
|
|
$
|
9,020,025
|
Adjustments to reconcile net income
(loss) to net cash
provided by operating
activities:
|
|
|
|
|
|
Depreciation &
amortization
|
|
1,195,722
|
|
|
1,159,709
|
Allowance for doubtful
accounts
|
|
-
|
|
|
15,518
|
Share-based
compensation
|
|
43,039
|
|
|
290,051
|
Preferred stock
dividends accrued
|
|
233,423
|
|
|
226,737
|
Common stocks issued
for services
|
|
(57,200)
|
|
|
-
|
Grain on bargain
purchase
|
|
-
|
|
|
(499,079)
|
Deferred income tax
expense
|
|
-
|
|
|
790,260
|
Noncontrolling
interests
|
|
(3,804)
|
|
|
(40,869)
|
Decrease (increase) in
current assets:
|
|
|
|
|
|
Accounts
receivable
|
|
7,261,186
|
|
|
8,453,627
|
Related-parties trade
receivable
|
|
356,446
|
|
|
484,382
|
Inventories
|
|
4,820,912
|
|
|
(7,652,753)
|
Advance to
suppliers
|
|
(9,648,449)
|
|
|
4,326,823
|
Prepaid expense and
other current assets
|
|
943,714
|
|
|
(302,034)
|
Increase (decrease) in
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
(2,787,907)
|
|
|
171,344
|
Advance from
customers
|
|
1,287,414
|
|
|
(6,224,402)
|
Accrued expense and
other liabilities
|
|
(456,788)
|
|
|
479,664
|
Net cash provided by
operating activities
|
|
2,219,493
|
|
|
10,699,003
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
Construction and remodeling of
factory and warehouses
|
|
(92,473)
|
|
|
(157,328)
|
Purchase of machinery and
equipment
|
|
(193,003)
|
|
|
(46,992)
|
Consideration paid for
acquisition
|
|
-
|
|
|
(5,175,006)
|
Advances to related
parties
|
|
-
|
|
|
(78,739)
|
Cash held by the Taizihu Group at
acquisition date
|
|
-
|
|
|
20,272
|
Net
cash used in investing activities
|
|
(285,476)
|
|
|
(5,437,793)
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
Net proceeds (repayment) from
short-term loans from
bank and others
|
|
379,773
|
|
|
(7,650,559)
|
Net proceeds of short-term loans
from related parties
|
|
343,616
|
|
|
330,856
|
Cash released from restriction
(restricted) for credit line of
bank loans
|
|
319,931
|
|
|
1,582,245
|
Net repayments of short-term bank
acceptance notes
|
|
-
|
|
|
(1,582,329)
|
Payment of preferred
dividends
|
|
-
|
|
|
(226,737)
|
Net cash
provided by (used in) financing activities
|
|
1,043,320
|
|
|
(7,546,524)
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND
CASH
EQUIVALENTS
|
|
99,070
|
|
|
18,372
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH & CASH
EQUIVALENTS
|
|
3,076,407
|
|
|
(2,266,942)
|
CASH & CASH EQUIVALENTS, BEGINNING
BALANCE
|
|
4,937,279
|
|
|
8,741,703
|
CASH & CASH EQUIVALENTS, ENDING
BALANCE
|
$
|
8,013,686
|
|
$
|
6,474,761
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
Income tax paid
|
$
|
586,307
|
|
$
|
113,456
|
Interest paid
|
$
|
402,649
|
|
$
|
652,757
|
NONCASH INVESTING AND FINANCING
ACTIVITIES:
|
|
|
|
|
|
Construction completed and
transferred to property, plant,
and equipment
|
$
|
767,494
|
|
$
|
-
|
Note: Please refer to the Company's quarterly report on
Form 10-Q for the three months ended June
30, 2013 for additional notes, which are an integral part of
these consolidated financial statements.
SOURCE Deyu Agriculture Corp.