Agfeed Inc

On Tuesday August 11, 2009, 6:55 am EDT

NEW YORK, Aug. 11 /PRNewswire-Asia/ -- AgFeed Industries, Inc. (Nasdaq: FEED - News), one of the largest commercial hog producers and the largest animal nutrients company in China, today announced financial results for the second quarter and first six months of 2009:

--Revenue of $38.5 million and $71.9 million, up from $35.6 million and $47.8 million for the second quarter and first six months of 2008, respectively.

--Income from operations of $2.3 million and $5.4 million, compared to $8.8 million and $10.5 million for the three and six month periods of 2008, respectively.

--Net Income of $1.2 million and $4.2 million for the three and six month 2009 periods, compared to $3.9 million and $4.8 million for the comparable 2008 periods.

--Earnings per share of $0.03 and $0.11 for the three and six month 2009 periods, compared to $0.12 and $0.16 for the comparable 2008 periods.

--Gross Profit of $5.2 million and $11.0 million, as compared to $11.0 million and $14.5 million for the second quarter and first six months of 2008, respectively.

--Balance sheet is strong; cash and cash equivalents on hand on June 30, 2009 was $30.9 million.

--Gross margins for the first six months of 2009 were 26.76% in the Company's animal nutrients business and 10.53% (an average price of $159.40 versus a cost of $142.40 per head) on the sale of 316,000 hogs in that business segment.

Management Comments

Dr. Songyan Li, AgFeed's Chairman, commented that, "I am pleased to report on the progress we are making in implementing our previously announced strategic plan. Our second quarter results were stronger, in light of the challenges that we faced - the macro decline in the global economy, hog prices that dipped to a two-year low and the rising cost of corn, soy and fuel. In spite of this, our operating income was a healthy $2.26 million. Hog prices are generally beginning to firm and I believe we will see these prices rise about 15% in the short run and over 25% by 2010 from recent lows. In several key markets, we have already begun to see our hog prices rise significantly above the average national average."

Dr. Li continued, "We are on target across the various phases of our strategic plan. Earlier this year we announced our intention to lead the way in China with the adoption of the western model of hog production. We have begun the transition with our alliance with Hypor, the formation of AgFeed International Protein Technology, our joint venture with M2P2 LLC, and the ongoing upgrading of our existing farms. As we continue to upgrade our facilities and invest in our genetics programs, improve our bio-security, and upgrade our environmental protection systems over the next 30 months we believe that AgFeed will be the standard for top quality, green-certified pork in China. We anticipate producing approximately 2.5 million hogs from now through 2011."

In discussing AgFeed's animal nutrients business, Junhong Xiong, AgFeed's Chief Executive Officer, provided "our revenues in this business were $11.1 million in the second quarter and $21.2 million for the first six months of 2009. Our pre-mix, condensed, complete and fine feed sales totaled 43,500 metric tons for six months. We were able to meet our earlier projections in this business in spite of the down hog market and we are poised to meet our goal of 100,000 metric tons to be sold in 2009. We also added significant numbers to our distribution network, including more than 200 independently owned, AgFeed-exclusive feed distribution chain stores and over 100 large-size commercial hog farms to our network in the last six months for totals of 1,239 stores and 712 farms, respectively. We believe that all of these signs are indicative of an increasing recognition of our brand and the quality of our 'green-certified' feed products and signal a rise in both production and sales going forward."

Mr. Xiong additionally commented on the opportunities the changing Chinese diet presents for AgFeed's animal nutrients business, saying "food preferences in China are rapidly changing and there is a growing diversity in the consumer's meat diets. Distribution and standardization of a wider range of animal feed is becoming more important to the commercial market for meat and meat products. We see a major opportunity for AgFeed to diversify its manufacturing ability to provide quality feed and nutrients for the expanding meat markets, including poultry, lamb, mutton, veal and beef, as the urbanization of the population continues and the demand for a wider diversity of products increases as the standard of life in China continues to improve."

Gerard Daignault, AgFeed's Chief Operating Officer, commented specifically on the growth of the hog business, saying "AgFeed's hog sales for the first six months of the year totaled 316,000 hogs, with 183,000 sold in the second quarter. This puts us in line to meet our goal of 650,000 hogs produced for 2009." Mr. Daignault continued, "The rural to urban migration of the Chinese population is fostering the industrialization and consolidation by the central and local government of the pork industry. As small farmers are slowly eliminated and larger scale commercial breeding farms (typically holding 3000-5000 head) evolve, opportunities unfold for AgFeed in the hog production of weaned pigs. We have been able to capitalize on this trend and we are making great strides to continue this growth, reaching tentative agreements with local governments in Jiangxi and Guangxi provinces to begin the building of very large farms as a reflection of the consolidation of the hog industry in China."

About AgFeed Industries, Inc.

NASDAQ Global Market listed AgFeed Industries (www.agfeedinc.com) is a U.S. company with its primary operations in China. AgFeed has two profitable business lines -- premix and blended animal feed and hog production. AgFeed is China's largest commercial hog producer in terms of total annual hog production as well as the largest premix feed company in terms of revenues. China is the world's largest hog producing country that produces over 600 million hogs per year, compared to approximately 100 million hogs in the U.S. China also has the world's largest consumer base for pork consumption. Over 62% of total meat consumed in China is pork. Hog production in China enjoys income tax free status. The pre-mix feed market in which AgFeed operates is an approximately $1.6 billion segment of China's $40 billion per year animal feed market, according to the China Feed Industry Association.

Safe Harbor Disclosure Notice

The information contained in this earnings release and the attachments is as of August 10, 2009. The Company assumes no obligation to update any forward-looking statements contained in this earnings release or the attachments as a result of new information or future events or developments.

This earnings release and the attachments contain forward-looking information about the Company's financial results and estimates, business plans and prospects that involve substantial risks and uncertainties. You can identify these statements by the fact that they use words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans and prospects. Among the factors that could cause actual results to differ materially are the following: the availability and prices of live hogs, raw materials, fuel and supplies; food safety; livestock disease; live hog production costs; product pricing; the competitive environment and related market conditions; operating efficiencies; interest rate and foreign currency exchange rate fluctuations; access to capital; the cost of compliance with environmental and health standards; actions of the Chinese government; governmental laws and regulations affecting our operations, including tax obligations; the ability to make effective acquisitions at the prices we expect and successfully integrate newly acquired businesses into existing operations; the success of our research and development activities, changes in generally accepted accounting principles; uncertainties related to general economic, political, business, industry, regulatory and market conditions; any changes in business, political and economic conditions due to the threat of terrorist activity; and other risks and uncertainties described in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 and in its subsequent Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements because actual results may differ materially from those expressed in, or implied by, the statements. Any forward-looking statement that the Company makes speaks only as of the date of such statement, and the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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