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:
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--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.
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--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.
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--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.
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--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.
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--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.
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--Balance sheet is strong; cash and cash equivalents on hand on June 30, 2009 was $30.9 million.
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--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.
Contact:
Investor Relations:
AgFeed Industries, Inc.
Tel: (917) 804-3584
Email: ir@agfeedinc.com
The Company's policy is to handle all questions by email to ir@agfeedinc.com and they will be answered as soon as possible.
AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $38,527,770 $35,635,327 $71,957,044 $47,782,411
Cost of goods sold 33,306,111 24,600,502 60,931,980 33,314,625
---------- ---------- ---------- ----------
Gross profit 5,221,659 11,034,825 11,025,064 14,467,786
Operating expenses
Selling expenses 999,342 873,580 1,863,209 1,627,202
General and
administrative
expenses 1,960,520 1,389,088 3,717,692 2,343,309
--------- --------- --------- ---------
Total operating
expenses 2,959,862 2,262,668 5,580,901 3,970,511
--------- --------- --------- ----------
Income from
operations 2,261,797 8,772,157 5,444,163 10,497,275
Non-operating
income (expense):
Other income
(expense) (189,205) (10,999) 3,476 (25,570)
Interest income 52,554 76,060 113,116 126,235
Interest and
financing costs (624,514) (4,312,559) (777,428) (4,639,201)
Foreign currency
transaction gain
(loss) 5,133 (319,273) 3,302 (543,746)
-------- ---------- -------- ----------
Total non-operating income
(expense) (756,032) (4,566,771) (657,534) (5,082,282)
Income before
provision for
income taxes 1,505,765 4,205,386 4,786,629 5,414,993
Provision for
income taxes 285,958 116,826 501,508 213,089
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Net income
including
noncontrolling
interest 1,219,807 4,088,560 4,285,121 5,201,904
Less: Net income
(loss) attributed
to noncontrolling
interest (6,445) 167,047 40,029 361,094
--------- --------- --------- ---------
Net income
attributed to
AgFeed 1,226,252 3,921,513 4,245,092 4,840,810
Other comprehensive
income
Foreign currency
translation gain
(loss) 5,953 1,776,427 (147,901) 2,788,128
---------- ---------- ---------- ----------
Comprehensive
Income $1,232,205 $5,697,940 $4,097,191 $7,628,938
========== ========== ========== ==========
Weighted average
shares outstanding:
Basic 39,549,944 32,054,366 38,746,009 29,928,503
========== ========== ========== ==========
Diluted 41,446,344 32,404,339 39,581,891 30,233,681
========== ========== ========== ==========
Earnings per share
attributed to AgFeed
common stockholders:
Basic $0.03 $0.12 $0.11 $0.16
===== ===== ===== =====
Diluted $0.03 $0.12 $0.11 $0.16
===== ===== ===== =====
AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND DECEMBER 31, 2008
June 30, December 31,
2009 2008
---- ----
(unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $30,912,081 $24,839,378
Accounts receivable, net of
allowance for doubtful accounts
of $69,660 and $520,413 14,610,095 9,462,380
Advances to suppliers 689,152 518,829
Other receivables 93,811 2,066,030
Inventory 22,519,961 20,616,560
Prepaid expenses 1,351,221 1,166,646
Debt issue costs 49,875 246,223
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Total current assets 70,226,196 58,916,046
PROPERTY AND EQUIPMENT, net 23,547,427 20,810,094
CONSTRUCTION-IN-PROCESS 12,573,209 10,853,389
INTANGIBLE ASSETS 43,770,481 43,833,705
OTHER ASSETS 2,498,826 2,641,902
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TOTAL ASSETS $152,616,139 $137,055,136
============ ============
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES:
Short-term loans $4,541,500 $-
Accounts payable 6,357,298 5,214,596
Other payables 3,716,938 5,766,741
Unearned revenue 263,329 321,664
Accrued expenses 302,681 164,558
Accrued payroll 661,496 818,052
Tax and welfare payable 282,867 465,875
Interest payable 84,642 121,139
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Total current liabilities 16,210,751 12,872,625
CONVERTIBLE NOTES, net of debt
discount of $117,371 and $579,444 882,629 3,220,556
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TOTAL LIABILITIES 17,093,380 16,093,181
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COMMITMENTS AND CONTINGENCIES
(Note 11) - -
--- ---
EQUITY:
AgFeed stockholders' equity:
Common stock, $0.001 per share;
75,000,000 shares authorized;
41,285,554 issued and 40,918,259
outstanding at June 30, 2009
38,300,436 issued and 37,933,141
outstanding at December 31, 2008 41,286 38,300
Additional paid-in capital 102,179,512 90,903,261
Other comprehensive income 4,019,316 4,167,217
Statutory reserve 3,838,442 3,236,054
Treasury stock (367,295 shares
held in treasury) (1,811,746) (1,811,746)
Retained earnings 25,953,962 22,311,258
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Total AgFeed stockholders'
equity 134,220,772 118,844,344
Noncontrolling interest 1,301,987 2,117,611
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Total equity 135,522,759 120,961,955
------------ ------------
TOTAL LIABILITIES AND EQUITY $152,616,139 $137,055,136
============ ============
AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2009 2008
---- ----
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including
noncontrolling interest $4,285,121 $5,201,904
Adjustments to reconcile net
income including noncontrolling
interest to net cash provided by
operating activities:
Depreciation 1,282,959 548,435
Amortization 38,779 26,297
Loss on disposal of assets 524,409 16,774
Stock based compensation 282,497 30,882
Amortization of debt issuance
costs 196,348 1,292,858
Amortization of discount on
convertible debt 462,073 3,042,523
(Increase) / decrease in assets:
Accounts receivable (5,163,082) (1,181,173)
Other receivable 1,530,631 (261,770)
Inventory (1,932,432) (6,734,125)
Due from former stockholders - (320,799)
Advances to suppliers (171,112) (716,690)
Prepaid expense (186,209) (152,889)
Other assets 139,541 (1,714,363)
Increase / (decrease) in current
liabilities:
Accounts payable 1,150,362 1,752,653
Other payables (2,011,532) 2,754,802
Due to related party -
Unearned revenue (57,926) (32,436)
Accrued expenses 138,378 385,186
Accrued payroll (155,514) 157,328
Tax and welfare payable (182,459) 122,047
Interest payable (36,497) 296,033
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Net cash provided by operating
activities 134,335 4,513,477
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and
equipment (6,336,942) (3,097,732)
Acquisition of intangible
assets (35,309) (71,646)
Cash paid for purchase of
subsidiaries (1,266,374) (47,798,825)
Cash from the sale of subsidiary 307,650 -
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Net cash used in investing
activities (7,330,975) (50,968,203)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of
common stock 10,000,000 57,200,058
Offering costs paid (1,380,720) (5,908,325)
Proceeds from short-term loans 4,541,500 -
Proceeds from the exercise of
warrants - 2,061,760
Proceeds from the issuance of
convertible notes - 19,000,000
Issuance costs for convertible
notes - (1,716,666)
Payment on note payable - (1,110,413)
Capital contributed by
noncontrolling interest
holders 118,664 -
---------- ----------
Net cash provided by financing
activities 13,279,444 69,526,414
---------- ----------
Effect of exchange rate changes on
cash and cash equivalents (10,101) 499,830
------- -------
NET INCREASE IN CASH & CASH
EQUIVALENTS 6,072,703 23,571,518
CASH & CASH EQUIVALENTS, BEGINNING
BALANCE 24,839,378 7,696,209
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CASH & CASH EQUIVALENTS, ENDING
BALANCE $30,912,081 $31,267,727
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid $147,982 $40,696
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Income taxes paid $416,012 $90,878
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