WEB NEWS Comments & Business Outlook
DEYU AGRICULTURE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
For The Three Months Ended
March 31,
2015
2014
(Unaudited)
(Unaudited)
Net revenue
Normal inventory
$
32,208,047
$
12,152,145
Damaged corn
-
3,421,175
Total Net Revenue
32,208,047
15,573,320
Cost of goods sold
Normal inventory
(30,459,475
)
(11,553,198
)
Damaged corn
-
(9,328,942
)
Total Cost of Goods Sold
(30,459,475
)
(20,882,140
)
Gross Profit (loss)
1,748,572
(5,308,820
)
Selling expenses
(2,900,531
)
(1,098,652
)
General and administrative expenses
(1,125,862
)
(2,678,029
)
Total Operating Expenses
(4,026,393
)
(3,776,681
)
Operating income (loss)
(2,277,821
)
(9,085,501
)
Interest income
2,393
1,080
Interest expense
(187,971
)
(195,653
)
Non-operating income (loss)
128,468
47,265
Total Other Expenses
(57,110
)
(147,308
)
Income (loss) before income taxes
(2,334,931
)
(9,232,809
)
Income taxes
(56,448
)
(83,249
)
Income before extraordinary items
(2,391,379
)
(9,316,058
)
Net income
(2,391,379
)
(9,316,058
)
Net income (loss) attributable to noncontrolling interest
36
159
Net income (loss) attributable to Deyu Agriculture Corp.
(2,391,343
)
(9,315,899
)
Preferred stock dividends
(107,807
)
(102,349
)
Net income (loss) available to common stockholders
(2,499,150
)
(9,418,248
)
Foreign currency translation gain (loss)
(1,358,387
)
(1,445,198
)
Comprehensive income (loss)
(3,857,537
)
(10,863,446
)
Other comprehensive income (loss) attributable to noncontrolling interests
756
(81
)
Comprehensive income (loss) attributable to Deyu Agriculture Corp.
$
(3,856,781
)
$
(10,863,527
)
Net income (loss) attributable to common stockholders per share - basic
$
(0.23
)
$
(0.87
)
Net income (loss) attributable to common stockholders per share - diluted
(0.23
)
(0.87
)
Weighted average number of common shares outstanding - basic
11,044,328
10,793,738
Weighted average number of common shares outstanding - diluted
11,044,328
10,793,738
Management Discussion and Analysis
Our net revenue for the three months ended March 31, 2015 was $32.2 million, an increase of $16.6 million, or 106.8%, compared to $15.6 million for the three months ended March 31, 2014. This increase was the combined result of an increase of $17.1 million in corn sales, an increase of $0.1 million in grain sales and a decrease of $0.6 million in bulk trading sales. Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the three months ended March 31, 2015 were $25.5 million, $6.7 million and $0 million, respectively, accounting for 79.0%, 21.0% and 0% of total net revenue, respectively.
Net revenue from our Corn Division for the three months ended March 31, 2015 was approximately $25.5 million, an increase of $17.1 million, or approximately 205.6%, as compared to $8.3 million for the three months ended March 31, 2014. The increase was mainly the combined result of an increase of 34.6% in sales volume and an increase of 127.1% in the average selling price of corn. The increase was primarily due to the slightly increase of the demand from the downstream industry which coursed the sale volume increase, although the Company still mentioned the conservative strategy. The increase of the average selling price was primarily due to the sales of damaged corn to the customers with lower than cost prices during the three months ended March 31, 2014.
Net revenue from our Grain Division for the three months ended March 31, 2015 was approximately $6.7 million, an increase of $0.1 million, or 1.5%, as compared to $6.6 million for the three months ended March 31, 2014. The increase was the combined result of the increase of export business in Huichun and the reduction in retail sales caused by the costly distribution channel.
Net revenue from our Bulk Trading Division for the three months ended March 31, 2015 was $0, a decrease of $0.6 million, or 100% as compared to $0.6 million for the three months ended March 31, 2014. This decrease was mainly attributable to that the Company temporarily suspended the bulk trading business due to lack of cash resources.
Comments & Business Outlook
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,
2014
2013
2014
2013
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenue
Normal inventory
$ 37,819,996
$ 68,339,368
$ 66,935,029
$ 209,117,183
Damaged corn
-
-
3,421,175
-
Total Net Revenue
37,819,996
68,339,368
70,356,204
209,117,183
Cost of goods sold
Normal inventory
(35,067,741 )
(64,342,240 )
(61,985,481 )
(190,705,629 )
Damaged corn
-
-
(9,328,942 )
-
Total Cost of Goods Sold
(35,067,741 )
(64,342,240 )
(71,314,423 )
(190,705,629 )
Gross Profit (loss)
2,752,255
3,997,128
(958,219 )
18,411,554
Selling expenses
(3,156,574 )
(6,207,310 )
(6,455,802 )
(14,340,936 )
General and administrative expenses
(1,562,640 )
(4,980,266 )
(6,250,903 )
(9,884,504 )
Loss on impairment of assets
-
(6,586,425 )
-
(6,586,425 )
Total Operating Expenses
(4,719,214 )
(17,774,001 )
(12,706,705 )
(30,811,865 )
Operating loss
(1,966,959 )
(13,776,873 )
(13,664,924 )
(12,400,311 )
Interest income
2,557
19,476
4,516
33,148
Interest expense
(200,978 )
(190,183 )
(591,660 )
(593,464 )
Non-operating income (loss)
28,547
(1,107,683 )
96,509
(2,307,679 )
Total Other Expenses
(169,874 )
(1,278,390 )
(490,635 )
(2,867,995 )
Loss before income taxes
(2,136,833 )
(15,055,263 )
(14,155,559 )
(15,268,306 )
Income taxes
(188,581 )
(54,501 )
(372,440 )
(580,054 )
Net loss
(2,325,414 )
(15,109,764 )
(14,527,999 )
(15,848,360 )
Net income attributable to noncontrolling interest
297
194
604
3,998
Net loss attributable to Deyu Agriculture Corp.
(2,325,117 )
(15,109,570 )
(14,527,395 )
(15,844,362 )
Preferred stock dividends
(107,242 )
(122,691 )
(312,096 )
(356,114 )
Net loss available to common stockholders
(2,432,359 )
(15,232,261 )
(14,839,491 )
(16,200,476 )
Foreign currency translation gain (loss)
510,193
141,382
(912,196 )
1,475,116
Comprehensive loss
(1,922,166 )
(15,090,879 )
(15,751,687 )
(14,725,360 )
Other comprehensive income (loss) attributable to noncontrolling interests
(335 )
(92 )
(480 )
9,773
Comprehensive loss attributable to Deyu Agriculture Corp.
$ (1,922,501 )
$ (15,090,971 )
$ (15,752,167 )
$ (14,715,587 )
Net loss attributable to common stockholders per share - basic
$ (0.22 )
$ (1.43 )
$ (1.36 )
$ (1.52 )
Net loss attributable to common stockholders per share - diluted
(0.22 )
(1.43 )
(1.36 )
(1.52 )
Weighted average number of common shares outstanding - basic
11,031,807
10,618,266
10,951,418
10,627,497
Weighted average number of common shares outstanding - diluted
11,031,807
10,618,266
10,951,418
10,627,497
Management Discussion and Analysis
Net Revenue
Our net revenue for the three months ended September 30, 2014 was $37.8 million, a decrease of $30.5 million, or 44.7%, compared to $68.3 million for the three months ended September 30, 2013. This decrease was the combined result of a decrease of $19.0 million in corn sales, a decrease of $0.7 million in grain sales and a decrease of $10.8 million in bulk trading sales. Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the three months ended September 30, 2014 were $28.6 million, $9.2 million and $0 million, respectively, accounting for 75.7%, 24.3% and 0% of total net revenue, respectively.
Net revenue from our Corn Division for the three months ended September 30, 2014 was approximately $28.6 million, a decrease of $19.0 million, or approximately 39.9%, as compared to $47.6 million for the three months ended September 30, 2013. The decrease was mainly the combined result of a decrease of 44.1% in sales volume and an increase of 7.6% in the average annual selling price of corn. The decrease was primarily due to a conservative strategy of reducing the sales volume temporarily taken by the Company to cope with the weak demand in the corn market.
Net revenue from our Grain Division for the three months ended September 30, 2014 was approximately $9.2 million, a decrease of $0.7 million, or 7.5%, as compared to $10.0 million for the three months ended September 30, 2013. 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 the three months ended September 30, 2014 was $0, a decrease of $10.8 million, or 100% as compared to $10.8 million for the three months ended September 30, 2013. This decrease was mainly attributable to a conservative strategy of reducing sales volume temporarily taken by the Company for bulk trading business.
Net Income (Loss)
As a result of the above, we had net loss available to common stockholders of $2.4 million for the three months ended September 30, 2014 compared to a net loss of $15.2 million for the three months ended September 30, 2013.
Comments & Business Outlook
DEYU AGRICULTURE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
For The Three Months Ended
For The Six Months Ended
June 30,
June 30,
2014
2013
2014
2013
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenue
Normal inventory
$
16,962,888
$
63,610,101
$
29,115,033
$
140,777,815
Damaged corn
-
-
3,421,175
-
Total Net Revenue
16,962,888
63,610,101
32,536,208
140,777,815
Cost of goods sold
Normal inventory
(15,364,542
)
(57,999,849
)
(26,917,740
)
(126,363,389
)
Damaged corn
-
-
(9,328,942
)
-
Total Cost of Goods Sold
(15,364,542
)
(57,999,849
)
(36,246,682
)
(126,363,389
)
Gross Profit
1,598,346
5,610,252
(3,710,474
)
14,414,426
Selling expenses
(2,200,576
)
(4,935,031
)
(3,299,228
)
(8,133,626
)
General and administrative expenses
(2,010,234
)
(3,021,371
)
(4,688,263
)
(4,904,238
)
Total Operating Expenses
(4,210,810
)
(7,956,402
)
(7,987,491
)
(13,037,864
)
Operating income (loss)
(2,612,464
)
(2,346,150
)
(11,697,965
)
1,376,562
Interest income
879
5,572
1,959
13,672
Interest expense
(195,029
)
(227,577
)
(390,682
)
(403,281
)
Non-operating income (loss)
20,697
(1,200,809
)
67,962
(1,199,996
)
Total Other Expenses
(173,453
)
(1,422,814
)
(320,761
)
(1,589,605
)
Income (loss) before income taxes
(2,785,917
)
(3,768,964
)
(12,018,726
)
(213,043
)
Income taxes
(100,610
)
(185,120
)
(183,859
)
(525,553
)
Net income (loss)
(2,886,527
)
(3,954,084
)
(12,202,585
)
(738,596
)
Net loss attributable to noncontrolling interests
148
185
307
3,804
Net income (loss) attributable to Deyu Agriculture Corp.
(2,886,379
)
(3,953,899
)
(12,202,278
)
(734,792
)
Preferred stock dividends
(102,505
)
(117,368
)
(204,854
)
(233,423
)
Net income (loss) available to common stockholders
(2,988,884
)
(4,071,267
)
(12,407,132
)
(968,215
)
Foreign currency translation gain
22,809
1,045,132
(1,422,389
)
1,333,734
Comprehensive income (loss)
(2,966,075
)
(3,026,135
)
(13,829,521
)
365,519
Other comprehensive income (loss) attributable to noncontrolling interests
(64
)
(384
)
(145
)
9,865
Comprehensive income (loss) attributable to Deyu Agriculture Corp.
$
(2,966,139
)
$
(3,026,519
)
$
(13,829,666
)
$
375,384
Net income (loss) attributable to common stockholders per share - basic
$
(0.26
)
$
(0.38
)
$
(1.14
)
$
(0.09
)
Net income (loss) attributable to common stockholders per share - diluted
(0.26
)
(0.38
)
(1.14
)
(0.09
)
Weighted average number of common shares outstanding - basic
11,026,091
10,618,266
10,910,557
10,632,189
Weighted average number of common shares outstanding - diluted
11,026,091
10,618,266
10,910,557
10,632,189
Management Discussion and Analysis
Net Revenue
Our net revenue for the three months ended June 30, 2014 was $17.0 million, a decrease of $46.6 million, or 73.3%, compared to $63.6 million for the three months ended June 30, 2013. This decrease was the combined result of a decrease of $27.2 million in corn sales, a decrease of $1.9 million in grain sales and a decrease of $17.5 million in bulk trading sales. Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the three months ended June 30, 2014 were $8.5 million, $8.5 million and $0 million, respectively, accounting for 49.9%, 50.1% and 0% of total net revenue, respectively.
As a result of the above, we had net loss available to common stockholders of $3.0 million for the three months ended June 30, 2014 compared to a net loss of $4.1 million for the three months ended June 30, 2013.
Comments & Business Outlook
BEIJING, April 8, 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 fiscal year ended December 31, 2013.
Fiscal Year 2013 Results:
Net revenue was $246.4 million, a decrease of $7.7 million or 3.0%, compared to $254.0 million in 2012;
Gross profit was $14.6 million, a decrease of $30.1 million or 67.3%, compared to $44.7 million in 2012;
Gross margin was 6.0%, as compared to 17.6% in 2012;
Net loss available to common stockholders was $26.8 million, as compared to net income of $16.0 million in 2012;
Loss per diluted share was $2.52 on 10.6 million shares, as compared to income per diluted share of $1.30 on 12.6 million shares in 2012.
The Company also announced that Mr. Greg Chen resigned from his positions as Chief Executive Officer and Director effective as of March 31, 2014 and April 1, 2014, respectively, and effective as of March 31, 2014, Mr. Jan Poulsen resigned from his position as President of the Company. Effective as of April 1, 2014, the Board appointed Mr. Hong Wang, Chairman of the Board of Directors to serve as Acting Chief Executive Officer. The Company intends to replace the vacancy created by the resignation of Mr. Jan Poulsen, in the near future. Effective as of March 31, 2014, the Company closed its New York office.
"2013 was a very difficult year for the Company. Since the beginning of 2013, the corn market has been experiencing weak demand from downstream industries, while the output of the corn harvest continued to increase. China's on-going economic slowdown also impacted the grain and bulk trading businesses," said Mr. Hong Wang, the Acting Chief Executive Officer. "We saw a substantial decrease in gross margins, especially in corn sales, and an increase in the cost of raw materials for grain products, operating expenses, as well as nonrecurring losses including impairment losses of certain assets and corn inventory damages due to weather-related conditions."
"The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. InDecember 2013, Management conducted a cost-savings, internal control and efficiency assessment review of all of the Company's subsidiaries and divisions, with a particular focus on reducing administrative costs. After the reviews, improved policies were introduced and implemented forthwith," added Mr. Wang.
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 anticipate 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."
Comments & Business Outlook
BEIJING, February 25, 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, based on its preliminary review of the Company's unaudited consolidated financial statements, it was expected that the Company would record a loss of between $24 million and $28 million for the fiscal year ended December 31, 2013 as compared to a profit of $16 million for fiscal year ended December 31, 2012.
The expected loss was mainly attributable to: (i) the substantial decrease in the gross margin of corn sales caused by a decrease in demand in the corn market; (ii) the increase in cost of raw materials for grain products; (iii) the increase in operating expenses including, without limitation, freight costs, warehouse and handling expenses and allowance of bad debts; and (iv) the nonrecurring losses that occurred in 2013, which included impairment losses of certain assets and corn inventory damages due to weather related conditions.
"China's on-going economic slowdown continued to impose challenges on our business in 2013," Mr. Greg Chen, Chief Executive Officer of the Company commented. "Given that the decrease in demand of corn from the downstream industries, another good corn harvest in 2013 and anticipated increases in corn imports with low prices, we anticipate the oversupply in the corn market will continue to impact our business in the coming months. 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."
The information contained in this announcement is only based on a preliminary assessment by management in accordance with the unaudited accounting balance of the Company for the year ended December 31, 2013, and is not based on any information or figures which have been audited or reviewed by the Company's independent auditors and may be subject to possible adjustments. Shareholders and potential investors are advised to read carefully the annual report on Form 10-K of the Company for the year ended December 31, 2013, which is expected to be filed in March 2014.
Comments & Business Outlook
Third Quarter 2013 Financial Results:
Net revenue was $68.3 million, increased $11.9 million or 21.0%, compared to $56.5 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.
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.
Comments & Business Outlook
BEIJING , Aug. 16, 2013 /PRNewswire / -- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Shanxi Province , China -based vertically integrated producer, processor, marketer and distributor of agricultural products made from corn and grains, today outlined its new strategic direction.
The Company will continue to focus on its core businesses in the farming and in the consumer markets. For its agriculture business, Deyu intends to streamline its operations by reducing the number of partners involved when it comes to trading with parties within the value chain from farmer to end customer. We believe such changes will be possible as a result of the implementation of a digital, on-line tool that will create scalability and efficiency. The tool will soon be introduced as well as the creation of new sourcing and sales teams.
"We believe that these initiatives will provide a valuable platform for sustainable growth in a market that continues to be more and more challenging," said Greg Chen , Chief Executive Officer of the Company. "And we have confidence that the Company can compete more effectively with our new digital operational approach."
Comments & Business Outlook
Second Quarter 2013 Financial Results:
Net revenue was $63.6 million, increased $7.8 million or 13.9%, compared to $55.8 million in Q2 of 2012;
Gross profit was $5.6 million, decreased $4.9 million or 46.6%, compared to $10.5 million in Q2 of 2012;
Gross margin was 8.8%, compared to 18.8% in Q2 of 2012;
Net loss available to common stockholders was $4.1 million, compared to net income of $2.8 million in Q2 of 2012;
Earnings (loss) per diluted share was $(0.38) on 10.6 million shares, compared to $0.23 on 12.6 million shares in Q2 of 2012.
Mr. Greg Chen, Chief Executive Officer of the Company commented, "Since its beginning, 2013 has been a very challenging year for the Company. Our Q2 2013 financial results showed large decrease in net income. China's on-going economic slowdown has imposed and continues to impose challenges for us. In addition, extreme weather conditions throughout the northern part of Chinahave added to an already challenging situation."
"For corn division in particular, the decrease in pork prices and the spread of avian flu H7N9 has affected the livestock raising industry, which has greatly reduced the demand for animal feeds, the major market of our corn products. In addition, a good corn harvest last year increased market supply," continued Mr. Chen. "Oversupply caused a decrease in market sales prices of corn while purchase prices from farmers didn't decline consistently due to the government's protective farming policies in favor of farmers. The gross margin of our corn trading business declined significantly, especially in the second quarter."
"Conventional retail sales of grain products in supermarkets and convenience stores became increasingly competitive. The deteriorating efficiency of existing retail distribution channels has caused the Company to re-evaluate its overall sales approach for packaged grain products and to begin developing a new marketing strategy. For the time being, we have begun shifting some of our available resources from grain retail sales to more wholesale or bulk trading. A general slowdown in consumer market growth and competition in the market segment have had a negative impact on the grain bulk trading business."
"We also met some unexpected and extreme weather in recent months, which caused serious damage to our inventories and affected our operations. In late April, an unexpected heavy snow storm collapsed two of our warehouses and caused about $1.2 million in damage to our inventory. Beginning in May 2013, Shanxi had unusually frequent heavy rainfall which caused extreme humidity. As a result, we reinforced the warehouses and took measures to prevent inventories from mildewing, which reduced the efficiency of our operations and increased operational expenses," added Mr. Chen.
Business Outlook
"Evolving market conditions in China present not only challenges, but opportunities," said Mr. Chen. "At this new stage of China'seconomic development, in which innovation and resource consolidation will be the key to competing in the China and global marketplaces, we realize the urgent need to develop a more sustainable growth strategy. We are currently developing new strategies and measures on several fronts, including product line enhancements and expansion, marketing and sales strategies and the development of digital platforms which are designed to go beyond conventional channels to meet market needs."
"We believe our new IT infrastructure, which is currently under development, will become a crucial operational platform to provide high level resource integration, information access and risk management," continued Mr. Chen. "We expect that the platform will offer extended services to farmers in the co-ops and to clients alike, will build strategic partnerships and serve Deyu's brand building strive. We believe the Company can compete more effectively with our new digital operational approach to turn some key barriers imposed by conventional approaches into strategic advantages."
"In the meantime, in order to adapt to the changing market for grain products sold to consumers, we are streamlining our operational structure, introducing 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," added Mr. Chen."However, while the Company's strategic and operational adjustments to the changing economic and market conditions in China will take some time, we could expect some more volatile quarters ahead of us."
Comments & Business Outlook
First Quarter 2013 Financial Results:
Net revenue was $77.2 million, compared to $62.7 million in Q1 of 2012;
Gross profit was $8.8 million, compared to $12.4 million in Q1 of 2012;
Gross margin was 11.4%, compared to 19.8% in Q1 of 2012;
Net income available to common stockholders was $3.1 million, compared to $6.2 million in Q1 of 2012;
Earnings per diluted share was $0.25 on 12.7 million shares, compared to $0.50 on 12.6 million shares in Q1 of 2012.
"The results of the first quarter of 2013 certainly is disappointing, in comparison with the same period of the previous year," said Greg Chen, Chief Executive Officer of the Company. "The decrease of pork prices and the spread of avian flu H7N9 in the recent months have greatly reduced the demand for animal feeds, which is the major market of our corn products. At the same time, with a good corn harvest last year, market sales prices decreased yet purchase prices did not decline consistently due to the government's protective farming policies in favor of farmers."
"For the grain division, the deteriorating efficiency of current retail distribution channels curtailed much of our retail grain package sales, This highlights the urgent need to focus more on strategic business development for a sustainable growth," added Mr. Chen. "The fast advancing economy and evolving market conditions in China present both opportunities and challenges. The Company is exploring new venues to achieve competitiveness by streamlining its operation structure and by focusing more on strategic planning, resource integration, strategic partnership building and more brand-driven approaches to present our products and services."
"On the bulk trading end, we are considering a new operation structure to integrate business resources into a single trading platform to serve more farmers in the co-ops and clients across several regions. We plan to reorient our retail business toward a better targeted market segment with revamped product lines in a more brand-driven approach with media and service support to assist the retailers, the distributors and institutional buyers in order to efficiently promote packaged grain retail sales to consumers," continued Mr. Chen.
Business Outlook
"2013 is a very important transition period. We are working on new initiatives to 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, to continue to engage the retail market by introducing new product lines utilizing a brand-driven approach to go beyond the traditional distribution channels," said Mr. Chen.
"To achieve the goals set by our new initiatives, we believe our new IT infrastructure, which is currently under development, will become a crucial operation platform to provide high level resource integration, information access, risk management, et cetera. We expect that the platform will offer extended services to farmers in the co-ops and clients alike, will build strategic partnerships and serve Deyu's brand building strive. We believe the Company can compete more effectively with our new operation approach to turn some key barriers imposed by the conventional approaches into strategic advantages," added Mr. Chen.
Investor Alert
On
April 15, 2013 , the Board of Directors (the “Board”) of Deyu Agriculture Corp., a Nevada corporation (the “Company”),
accepted the amicable resignations of Jianming Hao as Chief Executive Officer, Greg Chen as President and Jan Poulsen as a Director of the Company, effective immediately. Also on April 15, 2013, the Board appointed Greg Chen to serve as Chief Executive Officer and Jan Poulsen to serve as President of the Company until the next annual meeting of the Board or until their successors are duly elected, qualified and seated, effective immediately. Jianming Hao shall continue to serve as Chairman of the Board and Greg Chen shall remain as a Director of the Company.
Comments & Business Outlook
Second Quarter Highlights:
From Q2 2011 to Q2 2012, revenue increased 12.9% to $55.8 million;
Gross profit improved 17.8% to $10.5 million ;
Net income available to common stockholders decreased 9.5% to $2.8 million ;
Earning per diluted share for the quarter decreased 11.5% to $0.23
"I am very pleased with our solid revenue and increasing cash flow from operating activities," said Jianming Hao, Deyu's Chief Executive Officer. "Our corn division continued to drive results and our grain division sustained its progress. In terms of gross margin in our gain division, we are excited to see increasing brand awareness and new price strategies providing us with higher gross margins."
Mr. Hao continued, "We are also thrilled to see the Taizihu Group, which we acquired in February 2012, add $5.8 million in sales revenue to our grain division this past quarter. In 2012, we have been shifting our business strategy away from rapidly growing our business through supplementing our working capital with bank debts towards a more stable developmental approach that is focusing on maintaining our sales network resources, improving cash flow from operating activities, and managing a stable capital structure. By acquiring the Taizihu Group, which has advanced technologies and a management team with significant experience in the deep-processed grain industry, and by adding a supply relationship with Guangdong Wen's Food Group Co., Ltd. which has four feed mills that collectively use approximately 200,000 tons of raw corn per year and business operations in 20 Provinces in China, we are confident that that we are in a much better position to meet these objectives in future quarters."
Business Outlook
"We believe that we are well-positioned to continue building on our success in upcoming quarters," remarked Mr. Hao. "During the past several years, we have accumulated resources and advantages through our operation model of "Company + Farmers + Base," which is supplemented by our advanced production technologies, strong warehousing capacity, exclusive logistics and an extensive sale network. With that said, we plan to continue to grow our business through extending our operating model to other producing areas of corn and grain such as in Hebei Province and North East China. In the meantime, we plan to enrich our product lines by introducing new products into our operational chain as a way to capture more market share of other food product sectors such as oils and staple foods. Additionally, we are also carefully considering other vertical or horizontal acquisitions to further grow our business, although we do not currently have any agreements in place at this time."
Mr. Hao continued, "In 2012, we are focused on promoting our name brand and products, and increasing customer purchases on a per store basis in our over 20,000 supermarkets and convenience stores acrossChina. Moreover, we will explore gift market in China which we believe is in great demand at a fast growth rate by selling our refined packaged grain products to corporate client. We expect that our recent initiatives, acquisitions and partnerships will enable us to better meet the demands of Chinese consumers. To supplement our corn division, which we consider the foundation of our business, we are strategically exploring and maintaining solid supplier relationships with large livestock feed manufacturers such as WFG. We also anticipate that our acquisition of the Taizihu Group, which has very popular products among consumers in China such as its LongQuan Villa brand fruit beverages and Huichun brand pure soybean products, will play a key role in boosting our brand's awareness in the future."
Comments & Business Outlook
BEIJING , June 12, 2012 /PRNewswire-Asia-FirstCall / -- Deyu Agriculture Corp. (OTCQB: DEYU - News) ("the Company " or "Deyu "), announced today that it has formed a supply relationship with Guangdong Wen's Food Group Co., Ltd. ("WFG "), in which Deyu shall provide raw corn to four of WFG's feed mills in Southwestern China on a non-exclusive basis.
The Company has recorded $3 million ( RMB 20 million ) in sales revenue attributable to WFG since shipments commenced to WFG in January, 2012, which is equal to approximately 7,600 tons of raw corn. The Company anticipates this to be an on-going supply relationship with WFG. Overall, the four feed mills use approximately 200,000 tons of raw corn per year.
Founded in 1983, WFG is a large-scale modern multi-industry and trans-regional livestock enterprise that is engaged mainly in the feed, poultry and pig industries. WFG's business operations involve bio-pharmaceutical and food processing in 20 of China 's Provinces, and it has established more than 110 integrated companies. In 2010, WFG achieved sales revenue of RMB 21.94 billion and its feed production amounted to 5.14 million tons. In 2011, WFG's feed production approached 10 million tons. In view of this growth, Deyu believes it will we well positioned to serve WFG's trending demand for its feed products.
"Corn is the foundation of our business and we are very pleased to establish a new relationship that supports this segment," said Jianming Hao , Chief Executive Officer and Chairman of Deyu. "By working with WFG, we are confident that will be able to build upon the success that our corn division experienced last year, as this business segment increased its sales 156% from $69.5 million in fiscal 2010 to $177.7 million in fiscal 2011. Our new advanced processing center boosted our total storage capacity and annual turnover of corn to over 100,000 tons and 700,000 tons, respectively, and we believe that our robust corn reserves and output capabilities will facilitate our supply to WFG, and help foster further progress in our corn division."
CFO Trail
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective May 23, 2012, the Board of Directors of Deyu Agriculture Corp., a Nevada corporation (the “Company ”) promoted Ms. Amy He from Acting Chief Financial Officer to Chief Financial Officer of the Company. Ms. He has served as the Company’s Acting Chief Financial Officer since February 3, 2012.
Comments & Business Outlook
First Quarter (Q1) Highlights:
From Q1 2011 to Q1 2012, revenue increased 71.2% to 62.7 million;
Corn division sales improved 110.8% to $43.2 million;
Grain division sales rose 117.5% to $14.7 million;
Bulk trading division gross margin increased by 437 basis points;
Gross profit improved 58.4% to $12.4 million;
Net income available to common stockholders increased 85.7% to $6.2 million
Earnings per diluted share for the quarter increased 108.3% to $0.50
"I am very pleased with our solid revenue, cash flow and earnings growth," said Jianming Hao, Deyu's Chief Executive Officer. Our corn division continued to drive results, our grain division sustained its progress, and we further developed the bulk trading division. In particular, we were especially delighted to see the Taizihu Group, which we acquired in February 2012, generate$4.3 million in sales revenue. In terms of our products, we are excited to see that the incorporation of new and rare grain varieties which have provided us with higher gross margins."
"With our corn sales network expanding from 7 of China's provinces to 15 provinces since the first quarter of last year, and our retail distribution network doubling to approximately 20,000 supermarkets and convenience stores during the same time period, we were able to provide our products to a broader spectrum of customers across the nation," added Mr. Hao. "Our new processing center has considerably enhanced our storage and turnover capabilities, and has facilitated our supply to our growing customer base. We believe we are off to a great start this year and we look forward to continuing to provide customers with our quality grain products."
Comments & Business Outlook
Full Year 2011 Results
Revenue increased 207.1% year-over-year to $261.6 million .
Corn division sales improved 155.7% to $177.7 million .
Grain division sales increased 253.0% to $40.5 million
Bulk trading division sales increased 936.2% to $43.3 million
Gross profit improved 96.8% to $43.1 million
Net income available to common stockholders increased 50.4% to $17.3 million
EPS for FY 2011 $1.42 vs $1.16 in 2010
Each of our divisions delivered excellent results in 2011," said Jianming Hao , the Company's Chief Executive Officer and Chairman. "Our business, performed exceedingly well, and our advanced newly-added processing center increased our total storage capacity to over 100,000 tons and also enhanced annual turnover of corn to over 700,000 tons. We have also greatly expanded our sales network. Our wholesale network now covers 15 provinces in China , and our retail sales network grew from 10,000 supermarkets and convenience stores in 2010 to approximately 20,000 supermarkets and convenience stores across 29 of China 's provinces in 2011.
Mr. Hao added, "In February of this year, we acquired the Taizihu Group, which has a well-established grain product line that includes bean-based products, fruit vinegars and juices and other grain products, as well as a strong production capacity of 45,000 tons. By enriching our product lines, integrating our broad sales network with the Taizihu Group's sales channels, and expanding our production capacity, we believe that our grain product sales will continue to improve in 2012 and help us maintain our progress."
CFO Trail
Item 1.02 Termination of a Material Definitive Agreement.
On January 10, 2011, Deyu Agriculture Corp., a Nevada corporation (the “Company ”) filed a Current Report on Form 8-K with the U.S. Securities and Exchange Commission, which included a copy of that certain employment agreement, effective January 10, 2011, by and between the Company and the Company’s former Chief Financial Officer, Mr. Charlie Lin (the “Employment Agreement ”). On February 3, 2012, the Company provided a 30-day notice of termination to Mr. Lin whereby Mr. Lin was relieved of his duties as Chief Financial Officer of the Company effective February 3, 2012, and whereby Mr. Lin’s employment as Chief Financial Officer and the Employment Agreement shall terminate on March 5, 2012 (the “Termination ”). The Company is filing this Current Report on Form 8-K to disclose the effectiveness of the Termination on March 5, 2012.
CFO Trail
Effective February 3, 2012, the Board of Directors of Deyu Agriculture Corp., a Nevada corporation (the “Company”)
promoted Ms. Amy He to Acting
Chief Financial Officer of the Company.
Acquisition Activity
Item 1.01 Entry into a Material Definitive Agreement.
On February 2, 2012, Redsun Technology (Shenzhen) Co. Limited (“Redsun ”), a company organized under the laws of the People’s Republic of China (“PRC ”) and a wholly-owned subsidiary of Deyu Agriculture Corp., a Nevada corporation (the “Registrant ”) entered into a Stock Equity Transfer Agreement (the “Agreement ”) whereby Redsun acquired 100% of the issued and outstanding registered share capital of Shanxi Taizihu Food Co. Ltd. (“ Taizihu ”) and its subsidiary, Shanxi Huichun Bean Products Co., Ltd. (“ Huichun ”, and together with Taizihu, the “Taizihu Group ”). In consideration for the acquisition of Taizihu, Redsun paid RMB14,773,222 ($2,342,168) in cash to HE Hao, an individual, for 50% of Taizihu, RMB9,602,594 ($1,522,409) in cash to XU Qinghe, an individual, for 32.5% of Taizihu and RMB5,170,628 ($819,759) in cash to XIE Jinqing, an individual, for the remaining 17.5% of Taizihu. Immediately prior to the execution of the Agreement, Taizihu owned 85% of the issued and outstanding registered share capital of Huichun, and pursuant to the terms of the Agreement, Redsun acquired the remaining 15% of the share capital of Huichun from Beijing Kanggang Food Development Co., Ltd. for RMB5,158,556 ($817,845). The total amount of the consideration paid for the acquisition of the Taizihu Group is RMB34,705,000 ($5,502,181), and such consideration was determined pursuant to arm’s length negotiations between the parties. As a result of the acquisition, the Registrant now owns and controls 100% of the Taizihu Group.
The Taizihu Group, which is located in Shanxi Province in an industrial park with a production base of 100,000 square meters, is in the business of producing and selling fruit beverages under the brand name “LongQhan Villa” and soybean products under the brand name “Huichun” throughout the PRC.
Comments & Business Outlook
Third Quarter 2011 Results
Revenue increased 313%, from $21.0 million in Q3 2010 to $86.6 million in Q3 2011
Corn division sales rose 249%, from $17.8 million in Q3 2010 to $62.2 million in Q3 2011
Simple processed grains division revenues grew 588%, from $3.2 million in Q3 2010 to $21.7 million in Q3 2011
Gross profit improved 177%, from $4.9 million in Q3 2010 to $13.5 million in Q3 2011
Net income increased 241%, from $2.2 million in Q3 2010 to $7.6 million in Q3 2011
EPS for Q3 2011 were $0.61 vs $0.18 in prior year
"We are very pleased with our performance in the third quarter of 2011," said Jianming Hao , Deyu's Chief Executive Officer and Chairman. "By recently adding a new warehousing, processing, and logistics center in Shanxi Province , we were able to boost our supply of grains and achieve tremendous growth in our overall sales, gross profit and net income. This facility includes six warehouses and five cylinder storage units capable of housing more than 70,000 tons of food products with an annual turnover rate of over 350,000 tons, and as a result of our capacity expansion efforts, our storage capacity now stands at more than 120,000 tons with an annual turnover rate of greater than 600,000 tons. Our exclusive lease agreements with three railway lines in China for freight transportation also played an important part in our success this past quarter, as these agreements continued to ensure the speedy delivery of our products at lower costs than truck transportation."
Mr. Hao continued, "We are now supplying our products to well over 16,000 stores across China compared to around 10,000 stores last year. Additionally, we have display counters in more than 49 of these locations where our packaged and unpackaged grain products as well as other goods are prominently set apart from competing products. This "shop-in-shop" approach is continuing to be very beneficial in terms of building brand awareness and increasing customer purchases on a per store basis. Also, we hosted several promotional and marketing activities in the third quarter of 2011, such as our national product release conference in Beijing , where we introduced our new packaged and unpackaged and deep processed grain products to wholesale distributors in July. We were delighted to have over 200 wholesale distributors and twelve media companies from all over China attend this conference and to have several of China 's media outlets broadcast the event. Through these promotional and marketing activities, our brand name is gaining recognition and as a result, we saw considerable growth in our customer base in the third quarter of 2011."
Business Outlook
"As we head into 2012, our primary objectives are to continue to develop our corn and simple processed grain divisions, and we are confident that our latest capacity expansion efforts have put us in a better position to achieve these goals. In regards to our emerging deep processed grain division, we are considering trading organic food products through our extensive distribution network. Also, we are looking to enhance our relationships with corn farmers by providing them with updated technology services, as well as improving our inventory turnover efficiency by optimizing our logistics chain management and working capital management. Additionally, we are really excited about the potential of our 'China Grain Trading Center' project, and we believe completing this project will strengthen our competitive advantages and contribute to increases in corn sales and the bulk trading of grains in China ", says Mr. Hao.
Corporate Structure Info.
BEIJING , October 11, 2011 /PRNewswire-Asia-FirstCall / -- Deyu Agriculture Corp. (OTCBB: DEYU - News) (the "Company "), a Beijing, China -based vertically integrated producer and distributor of organic and non-organic corn and grain products, announced today that it is preparing to terminate its control over Deyufarm, which is currently part of Deyu's deep processed grain product division, by cancelling its VIE agreements.
"Maximizing shareholder value is our utmost priority," said Jianming Hao , Chief Executive Officer and Chairman of Deyu. "Our investors had been experiencing a loss from Deyufarm due to the current financial and market challenges facing Deyufarm, and after several meetings with our shareholders, legal counsel and board of directors, we believe that it is in the best interest of our Company and our investors to terminate our relationship with Deyufarm. As we look for ways to improve our deep processed grain product division, we believe that our core businesses, including corn products, which more than doubled its sales in the last quarter and our simple processed grains division , which increased its revenues more than 500% last quarter, will help us maintain our progress."
Our CEO's letter to our shareholders is available on the Company's website: www.deyuagri.com under Investors/Investor Presentation.
Comments & Business Outlook
Second Quarter Results
Summarized Second Quarter 2011 Results
Q2 2011
Q2 2010
CHANGE
Revenue
$52.0 million
$18.5 million
+182%
Gross profit
$8.9 million
$4.7 million
+88%
Net Income
$3.1 million
$2.9 million
+8%
EPS (Diluted)*
$0.26
$0.29
-10%
*Earnings per diluted share of $0.26 on 12.5 million shares. For the second quarter of 2010, the Company reported fully diluted earnings per share of $0.29 on 10.1 million shares.
"We are quite pleased with our second quarter results," said Jianming Hao , Deyu's Chief Executive Officer and Chairman. "Our corn division, the foundation of our business, more than doubled its sales and our simple processed grains division improved its revenues more than 500%, driving our total revenue to over 180%. We also continued to see growth in our newest business segments, unpacked grains and bulk flour and rice sales, and we finished construction of a new warehousing, processing, and logistics center. Our priority in 2011 has been promoting our brand name and products regionally, and increasing customer purchases on a per store basis. We are glad to see this strategy continue to work well for us this past quarter while we continued to utilize our regional strengths and environmental resources in Shanxi Province , our extensive production capacity, our established network of farmer agents, our steady supply of quality crops from excellent farmland, our bank loans and our efficient distribution network to gain further leverage in China 's agriculture sector. As we head towards 2012, we are confident that we can maintain our progress while we strive to provide our expanding customer base with what we believe to be delicious, healthy grain products."
Acquisitions
On July 18, 2011, Detian Yu Biotechnology (Beijing) Co., Ltd. (“Detian Yu”), a wholly-owned subsidiary of Deyu Agriculture Corp., a Nevada corporation (the “Registrant”), entered into a
Collaboration Agreement of Incorporation with Yalin Gu, an individual, pursuant to which Detian Yu shall invest RMB7,000,000 (
US$1,083,590 ), equal to 70% of the total initial registered share capital of, and Yalin Gu shall invest RMB3,000,000 (
US$464,400 ), equal to 30% of the total initial registered share capital of, Hebei YuGu Grain Co., Ltd., a company which shall be incorporated and registered in Gaocheng City of Shijiazhuang, Hebei Province, China for the investment and operation base in a new project in Gaocheng City entitled the “China Grain Trading Center” (the “Subsidiary”). The scope of operation of the new Subsidiary shall be sales of grains, beans and potatoes and the import and export of goods and technology. As of the date of this report, the Subsidiary has no operations. A copy of the Agreement is attached to this report as Exhibit 10.1 and the information therein is incorporated herein by reference.
Investor Alert
.
BEIJING , January 7, 2012 /PRNewswire-Asia-FirstCall / -- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company "), a Beijing, China -based vertically integrated producer and distributor of organic and non-organic corn and grain products, announced today that it has terminated its VIE control agreements with Deyufarm, which had been a part of Deyu's deep processed grain division.
"Maximizing shareholder value is our utmost priority," said Jianming Hao , Chief Executive Officer and Chairman of Deyu. "Our investors had been experiencing a loss due to the current financial and market challenges facing Deyufarm, and after several meetings with our legal counsel and board of directors, we believe that it is in the best interest of our Company and our investors to end our relationship with Deyufarm. We are confident that our core business, corn products, which more than doubled its sales last quarter, and our simple processed grain division, which increased its revenues more than 500% last quarter, will help us maintain our progress as we look for ways to improve our deep processed grain division and to further expand and enhance our business in general."
Deyu's management team is currently exploring several post VIE strategies that focus on leveraging and expanding the Company's distribution network of over 15,000 stores across China. "Our extensive retail network is one of our key competitive advantages," said Mr. Hao, "and by further capitalizing on it and maintaining the momentum we are experiencing in both our corn and simple processed grain businesses, we are confident that we can achieve greater success and provide larger returns to our investors in the future."
Shareholder Letters
On June 24, 2011, Deyu Agriculture Corp., a Nevada corporation (“Deyu”),
released a letter to investors (the “Press Release”) discussing, in part, certain information contained in Deyu’s Quarterly Report on Form 10-Q for the period ending March 31, 2011 filed with the U.S. Securities and Exchange Commission
Comments & Business Outlook
BEIJING, June 24, 2011 /PRNewswire-Asia-FirstCall / -- Deyu Agriculture Corp. (OTCBB: DEYU) ("Deyu" or "the Company"), aBeijing, China based vertically integrated producer and distributor of organic and non-organic grain products, recently released a report analyzing the Company's progress in the first quarter of 2011 and Deyu's future prospects. In particular, the report highlights the latest growth in each of the Company's divisions—corn products and simple and deep processed grain products—as well as Deyu's future strategies. Deyu's report is available on the Company's website: www.deyuagri.com under Investors/Investor Presentation.
Jianming Hao, Deyu's Chief Executive Officer and Chairman commented, "We are committed to transparent communication and accountability. Specifically, we strive to keep our investors apprised of our developments and inform them of the steps we are taking to maximize shareholder value. In providing this report, we seek to open a dialogue with our investors so that together we can build a better future for the Company and accordingly, for them. Due in large part to the strength of our shareholder base, our Company is quickly emerging in China's agricultural sector as a prominent supplier of healthy, nutritious grain products. We are very optimistic about our future and we look forward to working with each of our investors to make the best use of our potential and their investments."
Comments & Business Outlook
First Quarter Results :
Revenue increased 187%, from $14.4 million in Q1 2010 to $41.4 million in Q1 2011
Gross profit improved 138%, from $3.5 million in Q1 2010 to $8.4 million in Q1 2011
Net income grew 27%, from $2.6 million in Q1 2010 to $3.3 million in Q1 2011
EPS: $0.24 vs. $0.52
"We are thoroughly pleased with our strong first quarter results ," commented Jianming Hao, Deyu's Chief Executive Officer and Chairman. "All three aspects of our business—corn, simple processed and deep processed grains—experienced tremendous growth in sales. Notably, our corn division, which is the foundation of our Company, increased its sales 87 percent. Also, our new unpacked grain products that provided a 57 percent gross margin sold extremely well and contributed significantly to our improved gross profit ."
In 2010, Deyu obtained additional supply sources in an effort to position itself for long-term success. For approximately $7 million dollars, the Company acquired land use rights to two pieces of farmland totaling approximately 17,300 acres. The growing season for these parcels started in April 2011. Deyu believes that it has achieved economies of scale through its exclusive rights of use to over 109,000 acres of what the Company believes to be some of China's most fertile agricultural land, approximately 19,000 acres of which the Company holds the ownership rights to.
Liquidity Requirements
We believe that our current levels of cash, cash flows from operations, and bank/related party borrowings
will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions.
Comments & Business Outlook
Year End 2010 Results :
Jianming Hao, Chief Executive Officer and Chairman of Deyu, said: "We are delighted with the Company's solid financial results and growth this past year. We experienced significant growth in both revenue and net income. In particular, our corn division increased its revenue by $37.3 million in 2010, a 116% increase compared to 2009. This surge in revenues is attributable to the strong demand for corn from our loyal customer base and also our high production capacity, ability to promptly fulfill supply orders, large number of warehouses, accessibility to railway and transportation, superior quality of customer service and products and competitive pricing ."
Deyu's revenue for the year ended December 31, 2010 was $89.2 million compared with $40.7 million for the year endedDecember 31, 2009, an increase of $48.4 million, or 119%
Net income, before income taxes and preferred stock dividends, increased by approximately $3.5 million, or 49%, from $7.2 million in the year ended December 31, 2009 to $10.7 million in the year ended December 31, 2010.
The Company believes that its current levels of cash, cash flows from operations, and bank/related party borrowings will be sufficient to meet its anticipated cash needs for at least the next 12 months .
Mr. Hao stated: "In the coming year 2011, for sales and marketing strategy, instead of rapidly increasing the number of stores selling our products across Beijing and China as a whole, we have shifted our focus on promoting our name brand and products regionally, and increasing customer purchases on a per store basis. Since we have been successful promoting and selling our products through all of our distribution channels and networks, including B2B and B2C E-Commerce, and our brand names are becoming widely known, to support this growth, the Company has carefully planned to build more warehouses and plants and to acquire companies in the future that either fit in or expand Deyu product lines. It also helps ease requests of many of our wholesalers and retail stores for providing other non-existing Deyu product lines. Thus, we plan to make a few strategic acquisitions per year vertically or horizontally to sell either under our own brands name or theirs through our distribution networks ."
CFO Trail
BEIJING, Jan. 10, 2011 /PRNewswire-Asia-FirstCall / -- Deyu Agriculture Corp. today announced the appointment of Charlie Lin as Chief Financial Officer and Michael Han as Secretary of the Board of Directors.
Comments & Business Outlook
For the fourth quarter of 2010 , the Company expects
revenue to be in the range of $31.5 to $35.0 million
$3.5 to $4.5 million .
For the fiscal year ending December 31, 2010 , the Company expects
revenue to be in the range of $85.4 to $88.9 million
net income available to common stockholders to be in the range of $ 11.0 to $12.0 million .
"Our expected strong results for the quarter are due to the combination of higher sequential and year-over-year corn and grain volumes and the addition of revenues from our recent agreements with Deyufarm Innovation Food Co.," said Mr. Jianming Hao , Chairman and Chief Executive Officer of Deyu Agriculture. "As 2010 comes to a close and we look ahead to fiscal year 2011, we expect our growth to be driven by the launch of a wide range of branded instant organic grain products including instant grain noodles, ready-to-eat grain rice, instant grain beverages and instant grain soups. As Chinese consumers are becoming increasingly health and nutrition conscious, demand for high quality organic grain food is growing rapidly. In addition, we expect to continue to grow our corn products segment as demand remains strong from our existing customer base."
"Overall, we are optimistic about our business prospects and look forward to capitalizing on the attractive growth opportunities in the markets we serve," concluded Mr. Hao.
Comments & Business Outlook
Third Quarter 2010 Highlights
Net revenue increased 79% year-over-year to $21.0 million
Gross profit increased 58% year-over-year to $4.9 million
Net income was $ 2.1 million or $0.18 per fully diluted share vs. $0.50.
Enhanced access to high quality farmland; acquired rights to 8,700 acres in the Shanxi Province
Expanded warehouse capacity by approximately 70,000 tons to over 120,000 tons
CEO Commentary
"We generated strong revenue growth in the third quarter due to record sales in both our corn and grain segments," said Mr. Jianming Hao , Chairman and Chief Executive Officer of Deyu Agriculture. "Consumer demand in China for high quality, healthy, organic grain foods continues to increase. Retailers are responding to the growing demand and we are now selling our branded grain food products in over 8,500 retail outlets throughout China ."
"The shortage of arable land in China is a key hurdle to keeping pace with growing demand for more and better quality food and Deyu is fortunate to be operating in the Shanxi Province , the breadbasket of China . To support our long-term growth strategy of becoming a large-scale producer in the area, we recently acquired the rights to 8,700 acres of high-quality farmland in Jinzhong City, bringing our total land under cultivation to over 100,000 acres. This enables us to secure long term access to high-quality grains, a very important component to our plans to expand our product offering to include grain based food products that require no preparation, such as instant grain noodles, ready-to-eat grain rice, instant grain drinks and instant grain soups," added Mr. Hao.
Outlook
"Demand for high quality and healthy organic grain foods is growing as the population in China has become more health and nutrition conscious," commented Mr. Hao. "At the same time, consumer preferences are changing and demand is shifting toward 'ready-to-eat' grain food products. We remain focused on expanding our line of branded grain food products to include instant noodles and ready-to-drink beverages to meet this growing demand. We are on track to expand our nationwide network of over 8,500 retail outlets to 10,000 stores by the end of 2010."
"Our corn products business continues to provide a solid base of strong cash flow to fund operations and growth. We plan to continue expanding our corn acreage and processing capacity to drive economies of scale and profitability. We anticipate that all of our strategic
Up-Listing Watch
BEIJING, Aug. 23 /
PRNewswire - -- Deyu Agriculture Corp. (OTC Bulletin Board: ECBI) ("Deyu Agriculture" or the "Company"), an emerging, vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and various grains, today announced the appointment of three new independent directors, which increases the total number of directors to five. The Company also appointed a Chief Scientist. Deyu Agriculture appointed Messrs. Timothy C. Stevens, Al Carmona, and Longjiang Yuan as independent directors and appointed Dr. Wei Zhong Cai as Chief Scientist.
Comments & Business Outlook
Second Quarter 2010 Highlights
Net revenue increased 139.0% year-over-year to $18.5 million.
Gross profit increased 135.3% year-over-year to $4.7 million with a gross margin of 25.7%. Net income was $3.0 million up 85.8% year-over-year with diluted net income per share of $0.29 vs. $0.32.
"We are pleased to report record revenue and earnings in the second quarter of 2010," said Mr. Jianming Hao , Chairman and Chief Executive Officer of Deyu Agriculture. "During the second quarter, we rapidly scaled up our supermarket network from previously serving only Beijing and Shanxi province in the first quarter, to serving 12 provinces at the end of July. We moved our headquarters to Beijing , which gives us access to a larger pool of talent and research institutes, with which we can collaborate on marketing and product development. Finally, we became a public company via a share-exchange transaction and raised capital to support our future growth."
"In the second quarter, our traditional corn business maintained strong momentum while we focused on developing the market for our grain products, which expanded significantly to over 3,300 retail outlets as of the end of July 2010 . While corn continues to account for the majority of our revenues, we remain focused on our strategy of aggressively expanding into the largely untapped and higher-margin market for grain products," added Mr. Hao.
Business Outlook
"We're optimistic about the vast opportunities presented by an increasingly health and nutrition-conscious population, and about growing demand for natural, green and organic foods," commented Mr. Hao. "As one of the first companies to market branded grain products nationwide , we are focused on providing deeply processed grain foods, which are set to become a major driver in our future growth. We plan to use the funds we raised in our private placement to roll out grain-based instant noodles and ready-to-drink beverages starting in the third quarter of 2010 and expand our retail outlets to 10,000 supermarkets by the end of 2010, as we believe sales of grain products will start to pick up in the fourth quarter and gain momentum in 2011."
"The corn business will continue to provide an essential platform for the Company to grow, as it provides a solid base and is a strong cash contributor. We plan to expand our corn acreage and capacity to further realize economies of scale," added Mr. Hao.
Reverse Merger Activity
Deyu Agriculture became an public entity via a reverse merger transaction on April 27, 2010 .
Simultaneously with the acquisition, the company completed a $$10,805,749 private placement of its securities to accredited investors at $4.40 per unit, with each “Unit” consisting of one share of Series A Convertible Preferred Stock, and a warrant to purchase 0.4 shares of common stock with an exercise price of $5.06 per share.
Company Snapshot:
Emerging organic and non-organic agricultural products distributor.
Industry Snapshot:
Grain products contain high levels of vitamin B1, dietary fiber and trace elements. Coarse grains are beneficial to people with diabetes or high blood pressure. The Chinese Nutrition Society, commissioned by the Ministry of Health in 2007 to formulate Dietary Guidelines, recommends consumption of 250-400 grams per day of processed grain foods for adults. They also recommended that adults consume 50-100 grams per day of coarse grains and whole grain foods. 72% of adults in China, amounting to 607 million people, are urban residents. Based on these guidelines, the demand of people in urban cities could reach 7.66 million tons. As a result of the economic growth and improved living standards in China, the dietary components of the Chinese population have changed dramatically. In general, the population pays more attention to diet and nutrition. Management believes that the increased awareness of the value and benefits of grain products has resulted in an increased demand for our organic grain products .
Post Merger Share Calculation :
4,930,000: Pre reverse merger outstanding shares
3,000,000: Shares cancelled as part of the Share Exchange
8,736,932: Newly issued shares of Common Stock
2,455,863 : Shares from convertible preferred stock associated with private placement
1,105,156: Shares from warrants associated with private placement
GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions: 14,227,941
Note: Our calculation differs from the company's calculation of $13,561,018 via a press release on may 11, 2010.
Financial Snapshot:
Operating revenue for the year ended December 31, 2009 was $40,732,447, representing a 135.86% increase from the year ended December 31, 2008. Net income for the year ended December 31, 2009 was $7,181,132, representing a 107.24% increase from $3,465,115 for the year ended December 31, 2008.
Financials
2009
2008
Net Revenue
$ 40,732,447 $ 17,269,937
Cost of Goods Sold
(30,136,581 ) (12,673,361 )
Gross profit
10,595,866 4,596,576
Operating expenses
(1,947,613 ) (770,157 )
(719,910 ) (272,091 )
(556,312 ) -
(98,087 ) (43,364 )
(3,321,922 ) (1,085,612 )
Operating Income
7,273,944 3,510,964
Other income (expenses):
Interest Income
10,081 1,440
(102,893 ) (47,289 )
Total other expenses
(92,812 ) 45,849
Income before income tax
7,181,132 3,465,115
Provision(benefit) for income tax
- -
Net Income
$ 7,181,132 $ 3,465,115
Financial Target Agreements
The Company also entered into a make good escrow agreement with the Investors, pursuant to which 1,866,174 shares of Common Stock were placed in an escrow account.
The Escrow Shares are being held as security in the event the Company does not achieve
$11 million in audited net income for the fiscal year 2010
$15 million in audited net income for the fiscal year 2011
If the Company achieves the 2010 Performance Threshold and the 2011 Performance Threshold, the Escrow Shares will be released back to the City Zone Shareholders.
If either the 2010 Performance Threshold or 2011 Performance Threshold is not achieved , an aggregate number of Escrow Shares, to be determined by the formula, will be distributed to the Investors.
