BEIJING, Aug. 18 /Xinhua-PRNewswire-FirstCall/ -- Yongye Biotechnology International, Inc. (“Yongye” or the “Company”), a leading developer, producer and distributor of nutrients for plants and animals in the People’s Republic of China, today announced its financial results for the quarter ended June 30, 2008.
Second Quarter 2008 Financial Results
“The second quarter of the year is typically our strongest quarter for sales of plant and animal nutrient products, and this year’s second quarter had exceptionally good results, with both revenue and earnings more than doubling from the prior year period,” said Mr. Zishen Wu, Chief Executive Officer of Yongye. “We attribute this to the very strong benefits our customers are able to gain from the use of our technologically advanced products and the rapid expansion of our distribution network to cover new geographic regions and build strong brand recognition for our products.”
Second Quarter 2008 Results
Revenue was $17.6 million in the second quarter of 2008, an increase of 136.6% from $7.4 million in the second quarter of 2007. This significant revenue increase was due mainly to the rapid expansion of the Company’s sales network. An additional 425 branded stores were added to the distribution network in the second quarter of 2008, bringing the total number of such stores through which the Company distributes its products to 775 by the end of the quarter. The Company had 200 stores at the end of 2007. The Company and its local distributor approach existing agricultural product store owners to contract with them and bring them into the Yongye branded store network.
Gross profit was $9.6 million in the second quarter of 2008, an increase of 171.8% from $3.5 million in the second quarter of 2007. Gross margin rose to 54.6% from 47.5% in the second quarter of 2007. Gross margin increased because of cost efficiencies resulting from increased production and more stable product prices.
Selling expenses were $777,012 in the second quarter of 2008, compared to $62,135 in the second quarter of 2007. Selling expenses increased because of rapidly adding new sales people and a proportionate increase in expenses associated with a dramatic increase in sales volume. General and administrative expenses were $454,697 in the second quarter of 2008, compared to $108,350 in the second quarter of 2007. General and administrative expenses grew because of adding new executive staff and new expenses associated with becoming a public company.
Operating income was $8.4 million in the second quarter of 2008, with operating margin of 47.6%, compared to $3.4 million in the second quarter of 2007, with operating margin 45.2%.
Net income was $7.2 million in the second quarter of 2008, or $0.41 per diluted share, compared to net income of $3.3 million, or $0.29 per diluted share, in the second quarter of 2007.
The diluted weighted average number of shares outstanding increased from 11,444,775 in the second quarter of 2007 to 17,435,896 in the second quarter of 2008 because additional shares were issued in the private placement which took place in April 2008.
Six Months 2008 Results
Net revenue was $27.0 million in the six months ended June 30, 2008, up 232.0% from $8.1 million in the six months ended June 30, 2007. Gross profit was $14.6 million with a gross margin of 54.0%, compared to $3.8 million with a gross margin of 46.5% in the six months ended June 30, 2007. Operating income was $9.8 million with an operating margin of 36.2%, compared to $3.6 million with an operating margin of 43.7% in the six months ended June 30, 2007. Net income was $7.7 million, or $0.54 per diluted share, compared to $3.4 million, or $0.29 per diluted share, in the six months ended June 30, 2007.
Financial Condition
On June 30, 2008, cash totaled $1.4 million, compared to $376,002 as of December 31, 2007. Accounts receivable were $20.6 million as of June 30, 2008, compared to $1.6 million as of December 31, 2007. The Company made substantial investments to increase its inventory and expand its distribution network throughout the first half of 2008, which significantly offset the Company’s cash balance as of June 30, 2008. It is also customary in China’s agriculture industry to extend credit terms which allow distributors to pay over a longer period of time than what may be customary in other industries. Consequently, the Company has every reason to believe that its accounts receivable will be paid under the terms extended to its customers. As of June 30, 2008, the Company had total assets of $28.1 million, compared to $23.1 million as of December 31, 2007. Working capital was $17.8 million, total current liabilities were $9.6 million and the Company did not have any short term bank loans or long term liabilities as of June 30, 2008. Stockholders’ equity totaled $17.3 million as of June 30, 2008, compared to $12.9 million at the end of 2007.
Recent Events
On April 17, 2008, Yongye Biotechnology International Inc. entered into a share exchange agreement with Fullmax Pacific Limited, British Virgin Islands. All the historical financial statements prior to January 1, 2008 are solely those of the predecessor, Inner Mongolia Yongye Biotechnology Company, Ltd
On April 17, 2008, Yongye Biotechnology International Inc. signed a private financing agreement to raise $10.0 million gross proceeds. The transaction closed in May 2008.
In June, the Company signed construction contracts to begin construction of a new facility at its current location with processing capacity of 8,000 TPA. The value of these contracts is approximately RMB 25,000,000 (approximately $3.6 million). This additional facility will increase total production capacity to 10,000 TPA and is critical for the Company to be able to keep up with anticipated demand. As of July 2008, the new facility was forecast to be operational by the end of September 2008.
In June, Yongye engaged MSPC Certified Public Accountants and Advisors, P.C. as the Company’s independent auditor.
Business Outlook
“As food production in China continues to increase, we believe demand will continue to increase for our plant and animal nutrients. We plan to sustain our business growth by expanding our distribution and sales network, and broadening our geographic market coverage. We also plan to provide more technical assistance to our customers and help them achieve the best possible consistent results by using our products,” stated Mr. Wu.
Conference Call
The Company will host a conference call at 08:00 a.m. Eastern time on Monday, August 18, 2008 to discuss its second quarter 2008 results.
To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-888- 339-2688. International callers should dial +1-617-847-3007. The conference pass code is 899 273 89.
For those who are unable to participate in the conference call at the time of the call, a replay will be available for fourteen days after the call is held. To access the replay, please dial 1-888-286-8010. International callers should dial +1-617-801-6888. The replay pass code is 522 821 17.
About Yongye Biotechnology International, Inc.
Yongye Biotechnology International, Inc., headquartered in Beijing, is engaged in the development, distribution and sales of fulvic acid based nutrients for plants and animals. The Company’s patent pending processes and proprietary formulas allow it to create products which increase crop yields and improve the health of livestock. Its sole operating subsidiary, Yongye Nongfeng Biotechnology Company, Ltd., is located in Inner Mongolia. The Company sells its products through distributors and directly to farmers located in ten provinces throughout China.
Forward Looking Statements
Certain statements set forth in this press release constitute “Forward- looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words “estimate,” “project,” “intend,” “forecast,” “anticipate,” “plan,” “planning,” “expect,” “believe,” “will,” “will likely,” “should,” “could,” “would,” “may” or words or expressions of similar meaning. All such forward-looking statements involve risks and uncertainties, including, but not limited to: statements regarding the Company’s products; marketing and sales; patents and regulatory approvals; the effect of competition and proprietary rights of third parties; the need for and availability of additional financing and access to capital; the seeking of joint development, licensing or distribution and collaboration and marketing arrangements with other companies. There can be no assurance that such forward-looking statements will prove to be accurate and Yongye undertakes no obligation to update any forward-looking statements or to announce revisions to any of the forward-looking statements.
CONTACT: Mr. Larry Gilmore of Yongye Biotechnology International, Inc.,
+86-10-8231-8626, or larry.gilmore@gmail.com; or Mr. Crocker Coulson,
President, of CCG Investor Relations, Inc. for Yongye Biotechnology
International, Inc., +1-646-213-1915 (New York), or
crocker.coulson@ccgir.com
Web site: http://www.ccgir.com/
