Deyu Agriculture Corp. Announces First Quarter 2014 Results - KTEN.com - No One Gets You Closer

Deyu Agriculture Corp. Announces First Quarter 2014 Results

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SOURCE Deyu Agriculture Corp.

BEIJING, May 13, 2014 /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 three months ended March 31, 2014.

First Quarter 2014 Results:

  • Net revenue was $15.6 million, as compared to $77.2 million in Q1 of 2013;
  • Gross loss was $5.3 million, as compared to gross profit $8.8 million in Q1 of 2013;          
  • Gross margin was (34.1)%, as compared to 11.4% in Q1 of 2013;
  • Net loss available to common stockholders was $9.4 million, as compared to net income of $3.1 million in Q1 of 2013;
  • Loss per diluted share was $0.87 on 10.8 million shares, as compared to income per diluted share of $0.25 on 12.7 million shares in Q1 of 2013.

"Corn is mainly used as raw material for livestock feeds and deep processed products such as corn starch and ethanol. The demand for corn declined dramatically in 2013. The corn market experienced a downturn, a result of weak demand from the downstream industries with consecutive increases in output in the past few years in China," commented Mr. Hong Wang, Acting Chief Executive Officer. "The on-going downturn continued to impact our business in 2014. In the first quarter of 2014, the trend continued. Pork prices continued to decline and the demand of livestock feeds made of corn remained very weak. In addition, the deep processed corn industry has been depressed for a few years. Many deep processed corn companies have been running under production capacity and have not been profitable. Demand for corn in the deep processed corn industry continues to remain very low. The Company is now undertaking a conservative strategy in sales development as a temporary measure to cope with the weak demand in the market."

Financial Results for the Three Months Ended March 31, 2014

The Company's net revenue for 2014Q1 was $15.6 million, a decrease of $61.6 million, or 79.8%, compared to $77.2 million for2013Q1. This decrease was the combined result of a decrease of $27.1 million in corn sales, a decrease of $5.7 million in grain sales and a decrease of $28.8 million in bulk trading sales. Net revenue from our Corn Division for 2014Q1 was approximately $8.3 million, a decrease of $27.1 million, or approximately 76.5%, as compared to $35.4 million for 2013Q1. The decrease was mainly the combined result of a decrease of 42.8% in sales volume and a decrease of 58.9% in the average annual selling price of corn. The decrease was primarily due to a conservative strategy temporarily taken by the Company to cope with the weak demand in the corn market. Net revenue from our Grain Division for 2014Q1 was approximately $6.7 million, a decrease of $5.7 million, or 46.2%, as compared to $12.4 million for 2013Q1. The decrease was mainly attributable to the reduction in retail sales caused by the deteriorating efficiency of traditional retail sales. Net revenue from our Bulk Trading Division for 2014Q1 was approximately $0.6 million, a decrease of $28.8 million, or 98.0% as compared to $29.4 million for 2013Q1. This decrease was mainly attributable to a conservative strategy temporarily taken by the Company with its bulk trading business.

Gross loss for 2014Q1 was $5.3 million, as compared to gross profit of $8.8 million for 2013Q1. The decrease was a combined result of a decrease in gross profits of $10.5 million in the Corn Division, a decrease of $2.0 million in the Grain Division and a decrease of $1.6 million in the Bulk Trading Division. Our gross margin decreased from 11.4% for 2013Q1 to (34.1)% for 2014Q1. The decrease in gross margin was mainly attributable to the gross loss resulting from the sales of mildewed corn inventory to third parties at prices lower than the cost for 2014Q1. Gross margin for our Corn Division was (68.4)% for 2014Q1, compared with 13.5% for 2013Q1. The Company incurred gross loss of $5.9 million from the sales of the mildewed corn inventory to third parties at prices lower than the cost for 2014Q1. Taking out the impact of disposal of mildewed corn, gross profit and gross margin from the sales of normal corn was $0.2 million and 4.3%, respectively. Gross margin from the sales of normal corn decreased 938 basis points, which was primarily due to the weak demand from corn downstream industries. Gross margin for the Grain Division was 9.1% for 2014Q1, which decreased by 1190 basis points from 21.0% for 2013Q1. This decrease in gross margin was primarily due to the increasing cost of raw materials in addition to the reduction in grain retail sales with higher gross margin. Gross margin for the Bulk Trading Division was (33.9)% for 2014Q1, compared to 4.9% for 2013Q1. This decrease was mainly attributable to the market fluctuation in the first quarter of 2014.

Selling expenses for 2014Q1 were $1.1 million, decreased for $2.1 million, or 65.7% from the $3.2 million for 2013Q1. The decrease was mainly attributable to the decline of freight costs caused by the reduction in sales volume. General and administrative expenses for 2014Q1 were $2.7 million, an increase of $0.8 million or 42.2% compared to 2013Q1. This increase was primarily due to the increase of allowance for bad debts of account receivables.

As a result of the above, we had net loss available to common stockholders of $9.4 million for 2014Q1 compared to a net income of $3.1 million for 2013Q1.Loss per diluted share was $0.87 on 10.8 million shares, as compared to income per diluted share of $0.25 on 12.7 million shares in Q1 of 2013.

Business Outlook

"Given that the decrease in demand of corn from downstream industries, another good corn harvest in 2013 and anticipated increases in corn imports with low prices, we expect the oversupply in the corn market will continue to impact our business in the coming months," said Mr. Wang. "The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. At the same time, the Company is continuing its business development initiatives. We expect these measures, together with new business development, will help us get through this difficult period and restore the growth in the future."

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. 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:

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









March 31,
2014



December
31,
2013



(Unaudited)



(Audited)

Assets








Current Assets








Cash and cash equivalents


$

1,588,678



$

979,282

Restricted cash



16,086




16,519

Accounts receivable, net



27,832,967




32,326,897

Due from related parties



43,277




44,441

Inventory



5,982,523




15,318,224

Advance to supplier



4,449,215




4,363,298

Prepaid expenses



539,556




1,161,302

Other current assets



120,812




115,507

    Total Current Assets



40,573,114




54,325,470









Property, plant, and equipment, net



18,232,850




19,251,051

Construction-in-progress



-




-

Long-term Investment



58,555




60,129

Intangible assets, net



7,545,679




7,827,809









    Total Assets


$

66,410,198



$

81,464,459









Liabilities and Equity
















Current Liabilities








Short-term loan


$

7,269,481



$

7,464,856

Accounts payable



4,582,938




8,538,544

Advance from customers



1,936,326




1,990,479

Accrued expenses



895,157




1,002,885

Tax payable



99,290




73,790

Preferred stock dividends payable



100,474




247,614

Due to related parties



68,626




14,306

Other current liabilities



230,998




282,179

    Total Current Liabilities



15,183,290




19,614,653









Equity








Series A convertible preferred stock, $.001 par value, 10,000,000
  shares authorized, 1,860,900 and 2,182,628 shares
  outstanding, at March 31, 2014 and December 31, 2013,      
  respectively



1,861




2,183

Common stock, $.001 par value; 75,000,000 shares authorized,
  11,015,029 and 10,618,266 shares outstanding, at March 31, 2014
  and December 31, 2013, respectively



11,015




10,618

Additional paid-in capital



21,465,778




21,225,146

Other comprehensive income



6,452,451




7,897,730

Retained earnings



23,263,340




32,681,588

    Total Stockholders' Equity



51,194,445




61,817,265

    Noncontrolling Interests



32,463




32,541

    Total Equity



51,226,908




61,849,806









Total Liabilities and Equity


$

66,410,198



$

81,464,459

 

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)






For The Three Months Ended



March 31,



2014



2013



(Unaudited)



(Unaudited)

Net revenue








  Normal inventory


$

12,152,145



$

77,167,714

  Damaged corn



3,421,175




-

      Total Net Revenue



15,573,320




77,167,714

Cost of goods sold








  Normal inventory



(11,553,198)




(68,363,540)

  Damaged corn



(9,328,942)




-

      Total Cost of Goods Sold



(20,882,140)




(68,363,540)

Gross Profit



(5,308,820)




8,804,174









Selling expenses



(1,098,652)




(3,198,595)

General and administrative expenses



(2,678,029)




(1,882,867)

     Total Operating Expenses



(3,776,681)




(5,081,462)

Operating income (loss)



(9,085,501)




3,722,712









Interest income



1,080




8,100

Interest expense



(195,653)




(175,704)

Non-operating income (loss)



47,265




813

     Total Other Expenses



(147,308)




(166,791)









Income (loss) before income taxes



(9,232,809)




3,555,921

Income taxes



(83,249)




(340,433)

Net income



(9,316,058)




3,215,488

Net loss attributable to noncontrolling interests



159




3,619

Net income (loss) attributable to Deyu Agriculture Corp.



(9,315,899)




3,219,107

Preferred stock dividends



(102,349)




(116,055)

Net income (loss) available to common stockholders



(9,418,248)




3,103,052

Foreign currency translation gain



(1,445,198)




288,602

Comprehensive income (loss)



(10,863,446)




3,391,654

Other comprehensive income (loss) attributable to noncontrolling interests



(81)




10,249

Comprehensive income (loss) attributable to Deyu Agriculture Corp.


$

(10,863,527)



$

3,401,903









Net income (loss) attributable to common stockholders per share - basic


$

(0.87)



$

0.29

Net income (loss) attributable to common stockholders per share - diluted



(0.87)




0.25

Weighted average number of common shares outstanding - basic



10,793,738




10,646,266

Weighted average number of common shares outstanding - diluted



10,793,738




12,738,439

 


DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)






For The Three Months Ended



March 31,



2014



2013



(Unaudited)



(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES








Net income (loss) available to common stockholders


$

(9,418,248)



$

3,103,052

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:








Depreciation & amortization



602,646




599,415

Allowance for doubtful accounts



825,993




-

Share-based compensation



585




42,208

Preferred stock dividends accrued



102,349




116,055

Common stocks issued for services



-




(57,200)

Noncontrolling interests



(159)




(3,619)

Decrease (increase) in current assets:








        Accounts receivable



2,889,940




7,511,752

        Related-parties trade receivable



-




235,390

        Inventories



9,101,545




5,576,393

        Advance to suppliers



(203,851)




(10,215,902)

        Prepaid expense and other current assets



593,903




1,074,083

Increase (decrease) in liabilities:








        Accounts payable



(3,801,786)




(1,639,659)

        Advance from customers



(2,094)




3,239,176

        Accrued expense and other liabilities



(99,669)




(476,135)

   Net cash provided by operating activities



591,154




9,105,009









CASH FLOWS FROM INVESTING ACTIVITIES








Purchase of machinery and equipment



-




(4,414)

Construction and remodeling of factory and warehouses



-




(50,172)

    Net cash used in investing activities



-




(54,586)









CASH FLOWS FROM FINANCING ACTIVITIES








Net proceeds (repayment) of short-term loans from related parties



55,715




(5,735,157)

Net repayment from short-term loans from bank and others



-




417,818

Cash released from restriction for credit line of bank loans



-




318,137

    Net cash provided by (used in) financing activities



55,715




(4,999,202)









EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
    EQUIVALENTS



(37,473)




7,961









NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS



609,396




4,059,182

CASH & CASH EQUIVALENTS, BEGINNING BALANCE



979,282




4,937,279

CASH & CASH EQUIVALENTS, ENDING BALANCE


$

1,588,678



$

8,996,461









SUPPLEMENTAL DISCLOSURES:








Income tax paid


$

55,306



$

215,166

Interest paid


$

105,272



$

182,471

NONCASH INVESTING AND FINANCING ACTIVITIES:








Construction completed and transferred to property, plant, and equipment


$

-



$

767,494

Construction transferred to land use rights


$

-



$

-


Note: Please refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2014 for additional notes, which are an integral part of these consolidated financial statements.

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