BEIJING, Nov. 15, 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 third quarter ended September 30, 2013.
Third Quarter 2013 Results:
- Net revenue was $68.3 million,
increased $11.9 million or 21.0%,
compared to $56.5 million in Q3 of
2012;
- Gross profit was $4.0 million,
decreased $6.2 million or 60.9%,
compared to $10.2 million in Q3 of
2012;
- Gross margin was 5.8%, compared to 18.1% in Q3 of 2012;
- Net loss available to common stockholders was $15.2 million, compared to net income of
$3.5 million in Q3 of 2012;
- Loss per diluted share was $1.43
on 10.6 million shares, compared to income per diluted share of
$0.28 on 12.6 million shares in Q3 of
2012.
Mr. Greg Chen, Chief Executive
Officer of the Company commented, "2013 has been a very challenging
year. Our Q3 2013 financial results showed a large decrease in net
income. China's on-going economic
slowdown has been imposing challenges on us. In addition,
unexpected extreme weather conditions and increased corn imports
have added to an already challenging situation."
"Corn is mainly used as raw material for livestock feeds and
processed products. The corn market experienced a boom in the past
several years. However, since the beginning of 2013, its market
demand has been decreasing. In contrast, with rising labor costs
and inflation in China, the
minimum farmers' selling prices supported by the government due to
its farming protection policies, continues to rise."
"Livestock farming has been going through a very difficult time
in 2013. The demand for processed corn products has also been very
weak. The price of ethanol hit its lowest level in the past three
years. Meanwhile with a good corn harvest in 2012, there has been
an influx of low cost corns imported into the market in
China. With another good corn
harvest in sight for 2013, anticipated increases in corn imports in
the coming year, and extended current economic conditions in
general, we anticipate the market demand will remain low."
"The deteriorating efficiency of existing retail distribution
channels curtailed our retail grain package sales amidst the
increasing competitiveness in the market. We allocated more grain
resources to bulk trading activity, yet the slowdown in consumer
market growth has had negative impacts on the grain bulk trading
business."
"With the change in market conditions, we assessed the fair
value of the land use rights of the farmlands we own in Yuci,
Shanxi Province and the
construction of the factory facility in our subsidiary Huichun. We
realized that the discounted cash flow generated from those assets
couldn't recover their net book value and we recorded an impairment
loss of $6.6 million in this
quarter," added Mr. Chen.
Financial Results for the Third Quarter Ended September 30, 2013
The Company's net revenue for Q3 2013 was $68.3 million compared with $56.5 million for Q3 2012, an increase of
$11.9 million, or 21.0%. Net revenue
from our Corn Division for Q3 2013 was approximately $47.6 million, an increase of $12.7 million, or approximately 36.5%, as
compared to $34.9 million for Q3
2012, which was mainly attributable to the increase in sales volume
under the strategy of accelerating the sale of our corn inventory
with the management's anticipation of continuous decline of corn's
selling price. Net revenue from our Grain Division for Q3 2013 was
$9.9 million, a decrease of
$7.5 million, or 43.0%, as compared
to $17.4 million for Q3 2012, which
was mainly due to the decline of retail sales in supermarkets and
convenience stores. Net revenue from our Bulk Trading Division for
Q3 2013 was $10.8 million, an
increase of $6.6 million, or 159.4%
as compared to $4.2 million Q3 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 $6.2 million, or 60.9%, from $10.2 million for Q3 2012 to $4.0 million for Q3 2013. Our gross margin
decreased from 18.1% for Q3 2012 to 5.8% for Q3 2013. The decrease
in gross margin 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 margin for our Corn Division was 5.1% for
Q3 2013, down by 1023 basis points from 15.4% for Q3 2012, which
was mainly attributable to the weakening demand in the corn
industry with an oversupply of corn after a good harvest in 2012.
Gross margin for the Grain Division was 13.7% for Q3 2013, which
decreased by 1270 basis points from 26.4% for Q3 2012, which was
primarily due to the increasing cost of raw materials in addition
to the strategic shift from grain retail sales to wholesales with
lower gross margins but with fewer distribution expenses.
Selling expenses increased by $2.4
million, or 63.5%, to $6.2
million for Q3 2013 as compared to $3.8 million for Q3 2012, which was primarily due
to the increase of handling costs caused by the extreme humid
weather conditions and the increase of freight cost resulting from
an increase in sales volume of corn and an increase in railway
delivery prices announced in February
2013. General and administrative expenses for Q3, 2013 was
$5.0 million, an increase of 2.7
million, or 115.5% compared to $2.3
million for Q3 2012, which was primarily due to the increase
of allowance for bad debts, the increase in taxes related to
inter-subsidiary fixed assets transfers and the increase in
expenses caused by obsolete inventories. Loss on impairment of
assets was $6.6 million Q3 2013,
which represented a $5.8 million
impairment loss of the land use rights of farmlands and a
$0.8 million loss resulted from the
termination of the construction of an uncompleted building in our
subsidiary Huichun.
The Company had net loss available to common stockholders of
$15.2 million for Q3 2013, as
compared to net income of $3.5
million for Q3 2012, a decrease of $18.7 million, or 537.1%. Loss per diluted share
was $1.43 on 10.6 million shares for
Q3 2013, compared to income per diluted share of $0.28 on 12.6 million shares for Q3 2012.
Business Outlook
"Evolving market conditions in China present not only challenges, but
opportunities," said Mr. Chen. "We are developing a new operating
model supported by digital infrastructures to achieve resource
integration, execution efficiency, and the ability to reduce the
exposure to market volatility by hedging features, while at the
same time forming strategic partnerships with our suppliers and
clients via a more brand and service driven approach for trading
activities. We believe the introduction of this new operating
structure could also have a positive impact on the Company's
internal controls."
"We are also streamlining our operational structure, developing
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."
"Strengthening the Company's internal and financial controls
will remain one of our top priorities. Management will continue its
cost-saving and efficiency assessment review of all of our
subsidiaries and their divisions, with particular focus on reducing
administrative costs, and will allocate resources towards business
development activities. We recently reviewed the Company's overall
corporate governance, internal control and financial controls and
some weaknesses on operations of some subsidiaries were noticed.
Measures are being taken to strengthen the Company's, including
subsidiaries, resources sharing, strategic planning and management
of funds. With the implementation of new business strategies and
resource consolidation/sharing, we believe that we can compete
effectively in the industry under the new emerging market
conditions," continued Mr. Chen.
Conference Call
The Company will host a conference call on November 25, 2013 at 9:00
AM EST to discuss the Company's results for the third
quarter ended September 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:
|
11/25/2013
|
Time:
|
9:00 AM
EST
|
Conference Line
Dial-In (US):
|
877-407-9205
|
International
Dial-In:
|
201-689-8054
|
Conference
ID#:
|
13572935
|
Webcast
Link:
|
http://www.investorcalendar.com/IC/CEPage.asp?ID=171926
|
Dial in at least 10 minutes before the call to ensure timely
participation. A Teleconference Replay will be available until
11:59 PM December 2, 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: 13572935
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
|
|
|
|
September 30,
|
|
December 31,
|
2013
|
2012
|
|
|
(Unaudited)
|
|
(Audited)
|
Assets
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
3,733,395
|
|
$
|
4,937,279
|
Restricted
cash
|
|
|
16,340
|
|
|
815,348
|
Accounts receivable,
net
|
|
|
27,103,487
|
|
|
33,991,288
|
Due from related
parties
|
|
|
43,959
|
|
|
397,214
|
Inventory
|
|
|
21,497,307
|
|
|
30,322,191
|
Advance to
supplier
|
|
|
5,469,003
|
|
|
6,145,840
|
Prepaid
expenses
|
|
|
1,243,073
|
|
|
1,453,184
|
Other current
assets
|
|
|
618,951
|
|
|
340,456
|
Total Current
Assets
|
|
|
59,725,515
|
|
|
78,402,800
|
|
|
|
|
|
|
|
Property, plant, and
equipment, net
|
|
|
19,644,652
|
|
|
19,442,599
|
Construction-in-progress
|
|
|
66,993
|
|
|
2,614,491
|
Long-term
Investment
|
|
|
59,477
|
|
|
58,426
|
Intangible assets,
net
|
|
|
8,598,408
|
|
|
13,389,075
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
88,095,045
|
|
$
|
113,907,391
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Short-term
loan
|
|
$
|
7,383,987
|
|
$
|
8,323,623
|
Accounts
payable
|
|
|
4,138,736
|
|
|
5,179,729
|
Advance from
customers
|
|
|
1,974,413
|
|
|
2,249,282
|
Accrued
expenses
|
|
|
1,661,792
|
|
|
1,506,776
|
Tax
payable
|
|
|
114,578
|
|
|
305,712
|
Preferred stock
dividends payable
|
|
|
122,818
|
|
|
229,171
|
Due to related
parties
|
|
|
563,351
|
|
|
8,668,552
|
Other current
liabilities
|
|
|
343,469
|
|
|
986,153
|
Total Current
Liabilities
|
|
|
16,303,144
|
|
|
27,448,998
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Series A convertible preferred stock, $.001 par value, 10,000,000 shares
|
|
|
|
|
|
|
authorized, 2,182,628
and 2,039,970 shares outstanding, respectively
|
|
|
2,183
|
|
|
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
|
|
|
21,224,421
|
|
|
20,781,439
|
Other comprehensive
income
|
|
|
7,222,682
|
|
|
5,737,793
|
Retained
earnings
|
|
|
43,299,658
|
|
|
59,500,134
|
Total Stockholders'
Equity
|
|
|
71,759,562
|
|
|
86,032,064
|
Noncontrolling
Interests
|
|
|
32,339
|
|
|
426,329
|
Total
Equity
|
|
|
71,791,901
|
|
|
86,458,393
|
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
|
$
|
88,095,045
|
|
$
|
113,907,391
|
DEYU AGRICULTURE
CORP. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
(UNAUDITED)
|
|
|
|
For The Three
Months Ended
|
|
For The Nine
Months Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
Net
revenue
|
|
$
|
68,339,368
|
|
$
|
56,472,324
|
|
$
|
209,117,183
|
|
$
|
175,048,803
|
Cost of goods
sold
|
|
|
(64,342,240)
|
|
|
(46,256,954)
|
|
|
(190,705,629)
|
|
|
(141,911,226)
|
Gross
Profit
|
|
|
3,997,128
|
|
|
10,215,370
|
|
|
18,411,554
|
|
|
33,137,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
(6,207,310)
|
|
|
(3,795,367)
|
|
|
(14,340,936)
|
|
|
(11,926,786)
|
General and
administrative expenses
|
|
|
(4,980,266)
|
|
|
(2,311,508)
|
|
|
(9,884,504)
|
|
|
(6,276,679)
|
Loss on impairment of
assets
|
|
|
(6,586,425)
|
|
|
-
|
|
|
(6,586,425)
|
|
|
-
|
Total Operating
Expenses
|
|
|
(17,774,001)
|
|
|
(6,106,875)
|
|
|
(30,811,865)
|
|
|
(18,203,465)
|
Operating income
(loss)
|
|
|
(13,776,873)
|
|
|
4,108,495
|
|
|
(12,400,311)
|
|
|
14,934,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
19,476
|
|
|
7,242
|
|
|
33,148
|
|
|
24,918
|
Interest
expense
|
|
|
(190,183)
|
|
|
(330,771)
|
|
|
(593,464)
|
|
|
(1,260,810)
|
Non-operating income
(loss)
|
|
|
(1,107,683)
|
|
|
(7,063)
|
|
|
(2,307,679)
|
|
|
569,587
|
Total Other
Expenses
|
|
|
(1,278,390)
|
|
|
(330,592)
|
|
|
(2,867,995)
|
|
|
(666,305)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
|
(15,055,263)
|
|
|
3,777,903
|
|
|
(15,268,306)
|
|
|
14,267,807
|
Income
taxes
|
|
|
(54,501)
|
|
|
(184,485)
|
|
|
(580,054)
|
|
|
(1,475,181)
|
Net income
(loss)
|
|
|
(15,109,764)
|
|
|
3,593,418
|
|
|
(15,848,360)
|
|
|
12,792,626
|
Net loss attributable to noncontrolling
interests:
|
|
|
194
|
|
|
3,826
|
|
|
3,998
|
|
|
44,695
|
Net income (loss)
attributable to Deyu
Agriculture
Corp.
|
|
|
(15,109,570)
|
|
|
3,597,244
|
|
|
(15,844,362)
|
|
|
12,837,321
|
Preferred stock
dividends
|
|
|
(122,691)
|
|
|
(112,035)
|
|
|
(356,114)
|
|
|
(332,087)
|
Net income (loss)
available to common
stockholders
|
|
|
(15,232,261)
|
|
|
3,485,209
|
|
|
(16,200,476)
|
|
|
12,505,234
|
Foreign currency
translation gain (loss)
|
|
|
141,382
|
|
|
822,431
|
|
|
1,475,116
|
|
|
187,472
|
Comprehensive income
(loss)
|
|
|
(15,090,879)
|
|
|
4,307,640
|
|
|
(14,725,360)
|
|
|
12,692,706
|
Other comprehensive
income (loss)
attributable to
noncontrolling interests
|
|
|
(92)
|
|
|
(4,157)
|
|
|
9,773
|
|
|
(306)
|
Comprehensive income (loss) attributable
to Deyu Agriculture
Corp.
|
|
$
|
(15,090,971)
|
|
$
|
4,303,483
|
|
$
|
(14,715,587)
|
|
$
|
12,692,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common
stockholders per
share - basic:
|
|
$
|
(1.43)
|
|
$
|
0.33
|
|
$
|
(1.52)
|
|
$
|
1.18
|
Net income (loss)
attributable to common
stockholders per
share - diluted:
|
|
|
(1.43)
|
|
|
0.28
|
|
|
(1.52)
|
|
|
1.02
|
Weighted average
number of common
shares outstanding -
basic
|
|
|
10,618,266
|
|
|
10,604,081
|
|
|
10,627,497
|
|
|
10,578,570
|
Weighted average
number of common
shares outstanding -
diluted
|
|
|
10,618,266
|
|
|
12,632,585
|
|
|
10,627,497
|
|
|
12,585,860
|
DEYU AGRICULTURE
CORP. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
|
For The Nine
Months Ended
|
|
September
30,
|
|
2013
|
|
|
2012
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income (loss)
available to common stockholders
|
$
|
(16,200,476)
|
|
$
|
12,505,234
|
Adjustments to
reconcile net income (loss) to net cash
provided by operating
activities:
|
|
|
|
|
|
Depreciation &
amortization
|
|
1,766,231
|
|
|
1,801,515
|
Loss of impairment of
assets
|
|
6,586,425
|
|
|
-
|
Allowance for
doubtful accounts
|
|
1,330,398
|
|
|
16,314
|
Share-based
compensation
|
|
43,187
|
|
|
250,290
|
Preferred stock
dividends accrued
|
|
356,114
|
|
|
332,087
|
Common stocks issued
for services
|
|
(57,200)
|
|
|
114,400
|
Grain on bargain
purchase
|
|
-
|
|
|
(499,079)
|
Deferred income tax
expense
|
|
-
|
|
|
875,706
|
Noncontrolling
interests
|
|
(3,998)
|
|
|
(44,695)
|
Decrease (increase)
in current assets:
|
|
|
|
|
|
Accounts
receivable
|
|
6,894,009
|
|
|
8,616,800
|
Related-parties trade
receivable
|
|
357,671
|
|
|
466,980
|
Inventories
|
|
9,326,772
|
|
|
(5,060,976)
|
Advance to
suppliers
|
|
781,438
|
|
|
2,988,738
|
Prepaid expense and
other current assets
|
|
(724,623)
|
|
|
907,358
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
(1,136,732)
|
|
|
8,987
|
Advance from
customers
|
|
(312,946)
|
|
|
(6,415,884)
|
Accrued expense and
other liabilities
|
|
(864,448)
|
|
|
517,019
|
Net cash provided by
operating activities
|
|
8,141,822
|
|
|
17,380,794
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction and
remodeling of factory and warehouses
|
|
(100,169)
|
|
|
(5,166,095)
|
Purchase of machinery
and equipment
|
|
(532,353)
|
|
|
(312,588)
|
Consideration paid
for acquisition
|
|
-
|
|
|
(47,829)
|
Advances to related
parties
|
|
-
|
|
|
(78,604)
|
Cash held by the
Taizihu Group at acquisition date
|
|
-
|
|
|
20,272
|
Net cash used in
investing activities
|
|
(632,522)
|
|
|
(5,584,844)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
|
Net proceeds
(repayment) from short-term loans from bank and others
|
|
(1,021,616)
|
|
|
1,104,382
|
Net repayment of
short-term loans from related parties
|
|
(8,480,651)
|
|
|
(9,690,871)
|
Cash released from
restriction (restricted) for credit line of bank loans
|
|
807,515
|
|
|
(1,579,604)
|
Net repayments of
short-term bank acceptance notes
|
|
-
|
|
|
1,812,544
|
Payment of preferred
dividends
|
|
-
|
|
|
(266,795)
|
Net cash provided by
(used in) financing activities
|
|
(8,694,752)
|
|
|
(8,620,344)
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS
|
|
(18,432)
|
|
|
45,899
|
|
|
|
|
|
|
NET (DECREASE)
INCREASE IN CASH & CASH EQUIVALENTS
|
|
(1,203,884)
|
|
|
3,221,505
|
CASH & CASH
EQUIVALENTS, BEGINNING BALANCE
|
|
4,937,279
|
|
|
8,741,703
|
CASH & CASH
EQUIVALENTS, ENDING BALANCE
|
$
|
3,733,395
|
|
$
|
11,963,208
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
Income tax
paid
|
$
|
775,198
|
|
$
|
180,705
|
Interest
paid
|
$
|
605,843
|
|
$
|
765,725
|
NONCASH INVESTING
AND FINANCING ACTIVITIES:
|
|
|
|
|
|
Construction
completed and transferred to property, plant, and
equipment
|
$
|
767,494
|
|
$
|
-
|
Construction
transferred to land use rights
|
$
|
1,045,640
|
|
$
|
-
|
Note: Please refer to the Company's quarterly report on Form
10-Q for the three months ended September
30, 2013 for additional notes, which are an integral part of
these consolidated financial statements.
SOURCE Deyu Agriculture Corp.