WEB NEWS Comments & Business Outlook
ITEM 1.01
Entry Into Material Definitive Agreement
Our principal shareholders holding 90.17% of our voting power have taken action by consent without a meeting approving the swap of all of the agricultural management rights of our wholly-owned subsidiary, Gansu Asia-America Trade Co., Ltd. (“GAAT”) in return for the long-term lease management rights to the agricultural properties of our sister company, Gansu Yasheng Agro-Industrial and Commerce Group Co., Ltd. (“GY”). The swap is being implemented pursuant to a Swap Agreement between GAAT and GY. Under the terms of the Swap Agreement, GAAT has transferred to GY its right to manage and operate seven companies which have the agricultural management rights, and GAAT received the agricultural long-term lease management rights held by GY.
The swap was implemented by our parent corporation, Gansu Yasheng Salt Chemical Industrial Group, causing the parties from whom GY received the long-term agricultural lease management rights to transfer such rights directly to GAAT so that GAAT will have separate lease management contracts with each of the parties from whom GY, acquired those management rights. Pursuant to this overall, integrated plan, on September 22, 2015 five Agreements for the Circulation of Land Contracted Management Right (or “Lease Management Rights”) were entered into between GAAT and:
·
Linhai City Tengfei Fruit & Vegetable Professional Cooperative Tangerine Plantation (9,200 MU)
·
Linhai City Sitian Fruit & Vegetable Professional Cooperative Tangerine Plantation (16,000 MU)
·
Linhai City Sitian Fruit & Vegetable Professional Cooperative Broccoli Plantation (24,000 MU)
·
Taizhou City Huang Yan Hou Ao Asparagus and Bamboo Professional Cooperative Moso Bamboo Plantation (18,000 MU)
·
Xianju County Xiajing Golden Plum Farming and Breeding Professional Cooperative Waxberry Plantation (9,057 MU)
EFFECTIVE DATE OF SWAP
The swap out of GAAT’s right to manage and operate the seven companies which have the existing agricultural management rights to GY as described in our Definitive Information Statement filed December 4, 2015, was executed pursuant to the Swap Agreement dated December 29, 2015. Consequently, the swap-in of GY’s Lease Management Rights are now effective.
ITEM 2.01
Completion of Acquisition or Disposition of Assets.
The Information required in answer to this item is incorporated by reference to the Definitive Information Statement filed December 4, 2015 with the Securities and Exchange Commission, (“SEC”) a copy of which is attached hereto as an exhibit.
Comments & Business Outlook
Item 1.01 Entry Into Material Definitive Agreement
Our principal shareholders holding 90.17% of our voting power have taken action by consent without a meeting approving the swap of all of the agricultural lease management rights of our wholly-owned subsidiary, Gansu Asia-America Trade Co., Ltd. (“GAAT”) in return for the long-term lease management rights to the agricultural properties of our sister company, Gansu Yasheng Agro-Industrial and Commerce Group Co. Ltd. (“GY”). The swap is being implemented pursuant to a Swap Agreement between GAAT and GY. Under the terms of the Swap Agreement, GAAT will transfer to GY its right to manage and operate seven companies which have the agricultural lease management rights, and GAAT will receive the agricultural long-term lease management rights held by GY. The swap will be implemented by our parent corporation, Gansu Yasheng Salt Chemical Industrial Group, causing the parties from whom GY received the long-term agricultural lease management rights to transfer such rights directly to GAAT so that GAAT will have separate lease management contracts with each of the parties from whom GY, acquired those management rights. Pursuant to this overall, integrated plan, on September 22, 2015 five Agreements for the Circulation of Land Contracted Management Right (or “Lease Management Rights”) were entered into between GAAT and: ●Linhai City Tengfei Fruit & Vegetable Professional Cooperative Tangerine Plantation (9,200 MU)
●Linhai City Sitian Fruit & Vegetable Professional Cooperative Tangerine Plantation (16,000 MU)
●Linhai City Sitian Fruit & Vegetable Professional Cooperative Broccoli Plantation (24,000 MU)
●Taizhou City Huang Yan Hou Ao Asparagus and Bamboo Professional Cooperative Moso Bamboo Plantation (18,000 MU)
●Xianju County Xiajing Golden Plum Farming and Breeding Professional Cooperative Waxberry Plantation (9,057 MU)
EFFECTIVE DATE OF SWAP The swap out of GAAT’s right to manage and operate the seven companies which have the existing agricultural lease management rights to GY will occur 21 days after the date of mailing of our Preliminary Information Statement filed November 16, 2015, at which time the provisions for divesting all of GAAT’s right to manage and operate the seven companies which have the agricultural lease management rights pursuant to the Swap Agreement will be made effective. The swap in of GY’s Lease Management Rights shall be effective upon GY’s receipt of the rights to manage and operate the seven companies that have the existing agricultural lease management rights. The swap out and swap in will be effective and complete simultaneously. Summary of Contract Terms of the Lease Management Rights GAAT Will Acquire Directly Which are Currently Held by GY ●GAAT is entitled to the profits from managing the property and from the crops grown on the property until 2039.
●GAAT may build production and living facilities on the land for purposes of producing the crops and housing any necessary farmhands on the property.
●GAAT may not use the land for non-agricultural purposes.
●GAAT may not re-lease the land to a third party or transfer the management rights to a third party.
●At expiration of the lease management term, GAAT will be required to clean up all ground facilities and installations on the land.
Comments & Business Outlook
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Three Months Ended September 30,
2015
2014
Net sales
269,797,992
273,143,594
Cost of goods sold
226,685,889
229,635,659
Gross profit
43,112,103
43,507,935
Operating expenses:
Sales and marketing
526,766
544,282
General and administrative
1,310,060
1,353,764
Total operating expenses
1,836,827
1,898,046
Operating profit
41,275,276
41,609,889
Interest expense
-34,444
-517,671
Other income (expense)
93,370
1,321,294
Income before income tax expense
41,403,090
43,448,854
Income tax expense
Net income
41,403,090
43,448,854
Basic earnings per share
0.26
0.28
Weighted average number of shares
157,165,783
155,097,355
Management Discussion and Analysis
Net Sales. Sales are generated primarily from our farming operations and related side line products in China. Net sales for the nine months ended September 30, 2015 increased by $1.06 million, or 0.1% to $710 million as compared to $709 million for the nine months ended September 30, 2014. Net sales for the three months ended September 30, 2015 decreased by $3.3 million, or 1.2% to $268 million as compared to $273 million for the three months ended September 30, 2014.
The overall increase in net sales for nine months was primarily the result of Yasheng Group concentrating on modern agriculture to successfully create industrial clusters including cultivation, transportation, farm products processing, and sales of modern agricultural development systems. We also benefited from our expanded marketing network which covers more provinces, with more distributors and direct clients.
Notable Share Transactions
REDWOOD CITY, CA --(Marketwired - October 19, 2015) - Yasheng Group, (HERB), a China-based agricultural growing Company with U.S. headquarters in Redwood City, California today announced that Yasheng's principal shareholders holding 90.17% of the outstanding shares of Yasheng Group, took Action by Consent without a Meeting approving the swap between Yasheng Group, Gansu Yasheng Salt Chemical Industrial Group, Gansu Asia-America Trade Co. Ltd and Gansu Yasheng Agro-Industrial and Commerce Group Co. Ltd. pursuant to which Yasheng Group will swap out all of its agricultural properties in exchange for certain long-term lease management rights in agricultural properties held by Gansu Yasheng Agro-Industrial and Commerce Group Co Ltd., our sister company.
A Preliminary Information Statement concerning the swap transaction was filed on October 6, 2015 with the Securities and Exchange Commission, copies of which are available at
https://www.sec.gov/Archives/edgar/data/11233121000119983515000456/0001199835-15-000456-index.htm.
The swap out of Yasheng's existing agricultural assets will be effective 21 days after the final Information Statement is mailed to the Yasheng shareholders. The swap in portion of the transaction is already in effect.
The reason for the swap is that the agricultural properties of our sister company are rich in water resources and more suitable for farming than our properties. Furthermore, the mix of crops grown by our sister company are not as subject to downward price pressures as are our hop and cotton crops because they grow premium-value fruit and vegetables which can be sold at higher prices.
In the swap transaction, we received from our sister company, Gansu Yasheng Agro-Industrial and Commerce Co. Ltd, the long term lease management rights until 2039 of 76,557 mu (12,633 acres) of land in Taizhou City, Zhejiang Province, PRC, among which are: 24,300 mu (4,010 acres) of a broccoli plantation, 18,000 mu (2,970 acres) of a moso bamboo and bamboo shoot plantation, 25,200 mu (4,158 acres) of tangerine plantations, and 9,057 mu (1,495 acres) of a waxberry plantation.
Notable Share Transactions
REDWOOD CITY, CA --(Marketwired - October 13, 2015) - Yasheng Group,(HERB),a China-based agricultural growing Company with U.S. headquarters in Redwood City, California today announced that Yasheng's principal shareholders holding 90.17% of the outstanding shares of Yasheng Group, took Action by Consent without a Meeting approving the swap between Yasheng Group, Gansu Yasheng Salt Chemical Industrial Group, Gansu Asia-America Trade Co. Ltd and Gansu Yasheng Agro-Industrial and Commerce Group Co. Ltd. pursuant to which Yasheng Group will swap out all of its agricultural properties in exchange for certain long-term lease management rights in agricultural properties held by Gansu Yasheng Agro-Industrial and Commerce Group Co Ltd., our sister company.
A Preliminary Information Statement concerning the swap transaction was filed on October 6, 2015 with the Securities and Exchange Commission, copies of which are available athttps://www.sec.gov/Archives/edgar/data/11233121000119983515000456/0001199835-15-000456-index.htm.
The swap out of Yasheng's existing agricultural assets will be effective 21 days after the final Information Statement is mailed to the Yasheng shareholders. The swap in portion of the transaction is already in effect.
The reason for the swap is that the agricultural properties of our sister company are rich in water resources and more suitable for farming than our properties. Furthermore, the mix of crops grown by our sister company are not as subject to downward price pressures as are our hop and cotton crops because they grow premium-value fruit and vegetables which can be sold at higher prices.
In the swap transaction, we received from our sister company, Gansu Yasheng Agro-Industrial and Commerce Co. Ltd, the long term lease management rights until 2039 of 76,557 mu (12,633 acres) of land in Taizhou City, Zhejiang Province, PRC, among which are: 24,300 mu (4,010 acres) of a broccoli plantation, 18,000 mu (2,970 acres) of a moso bamboo and bamboo shoot plantation, 25,200 mu (4,158 acres) of tangerine plantations, and 9,057 mu (1,495 acres) of a waxberry plantation.
Financial Terms of Swap
The swap of assets will be a non-currency transaction executed between Yasheng Group and our sister company whereby we swap our farmlands for those managed by our sister company Gansu Yasheng Agro-Industrial and Commerce Group Co., Ltd.
SUMMARY COMPARISONS
as of DECEMBER 31, 2014
Our Existing Balance Sheet
Our Pro-Forma Balance Sheet after the Swap
Total Equity & Liabilities: $2,480,030,368
$2,454,376,988
Our Existing Statement of Operations for Year Ended December 2014
Our Pro-Forma Statement of Operation after the Swap for Year Ended December 2014
Net Income: $138,935,086
$224,992,008 Pro Forma as if swap in effect for year ended December 2014
Our Existing Net Income Per Share: $0.90 based on shares outstanding per 2014 10-K
$1.45 Pro Forma net income per share as if swap in effect for year ended December 2014, based on shares outstanding per 2014 10-K
Chairman Ye Dong commenting on the swap said, "The new crops being swapped in will enable Yasheng to conduct high-efficiency agricultural operations in Southeast China. The new crops which we will be growing are all of premium value, and as a result should position Yasheng for future profitable growth."
Comments & Business Outlook
Yasheng Group Announces Asset Swap for Premium Value Crops
REDWOOD CITY, CA (Marketwire Oct. 12, 2015) - Yasheng Group (OTCQB: HERB), A China-based agricultural growing Company with U.S. headquarters in Redwood City, California today announced that Yasheng’s principal shareholders holding 90.17% of the outstanding shares of Yasheng Group, took Action by Consent without a Meeting approving the swap between Yasheng Group, Gansu Yasheng Salt Chemical Industrial Group, Gansu Asia-America Trade Co. Ltd and Gansu Yasheng Agro-Industrial and Commerce Group Co. Ltd. pursuant to which Yasheng Group will swap out all of its agricultural properties in exchange for certain long-term lease management rights in agricultural properties held by Gansu Yasheng Agro-Industrial and Commerce Group Co Ltd., our sister company.
A Preliminary Information Statement concerning the swap transaction was filed on October 6, 2015 with the Securities and Exchange Commission, copies of which are available at https://www.sec.gov/Archives/edgar/data/11233121000119983515000456/0001199835-15-000456-index.htm .
The swap out of Yasheng’s existing agricultural assets will be effective 21 days after the final Information Statement is mailed to the Yasheng shareholders. The swap in portion of the transaction is already in effect.
The reason for the swap is that the agricultural properties of our sister company are rich in water resources and more suitable for farming than our properties. Furthermore, the mix of crops grown by our sister company are not as subject to downward price pressures as are our hop and cotton crops because they grow premium-value fruit and vegetables which can be sold at higher prices.
In the swap transaction, we received from our sister company, Gansu Yasheng Agro-Industrial and Commerce Co. Ltd, the long term lease management rights until 2039 of 76,557 mu (12,633 acres) of land in Taizhou City, Zhejiang Province, PRC, among which are: 24,300 mu (4,010 acres) of a broccoli plantation, 18,000 mu (2,970 acres) of a moso bamboo and bamboo shoot plantation, 25,200 mu (4,158 acres) of tangerine plantations, and 9,057 mu (1,495 acres) of a waxberry plantation.
Comments & Business Outlook
YASHENG GROUP
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Six Months Ended June 30,
For The Three Months Ended June 30,
2015
2014
2015
2014
Net sales
439,838,973
435,435,598
229,802,909
226,224,075
Cost of goods sold
388,806,715
386,721,302
201,799,922
200,499,036
Gross profit
51,032,258
48,714,296
28,002,987
25,725,039
Operating expenses:
Sales and marketing
754,981
751,136
359,132
360,682
General and administrative
1,738,761
1,731,227
761,679
768,252
Total operating expenses
2,493,742
2,482,363
1,120,811
1,128,934
Operating profit
48,538,516
46,231,933
26,882,176
24,596,104
Interest expense
623,804
668,068
(29,254
)
2,024
Other income (expense)
374,079
496,980
136,670
233,486
Income before income tax expense
48,288,791
46,060,845
27,048,100
24,827,566
Income tax expense
Net income
48,288,791
46,060,845
27,048,100
24,827,566
-
-
-
-
Basic earnings per share
0.31
0.30
0.17
0.16
Weighted average number of shares
155,097,355
155,097,355
155,097,355
155,097,355
Management Discussion and Analysis
Net Sales. Sales are generated primarily from our farming operations and related side line products in China. Net sales for the three months ended June 30, 2015 increased by $3.4 million, or 2% to 229.8 million as compared to $226.4 million for the three months ended June 30, 2014.
Comments & Business Outlook
YASHENG GROUP
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Three Months Ended March 31,
2015
2014
Net sales
210,036,064
209,211,523
Cost of goods sold
187,006,793
186,222,266
Gross profit
23,029,272
22,989,257
Operating expenses:
Sales and marketing
395,848
390,454
General and administrative
977,082
962,975
Total operating expenses
1,372,931
1,353,429
Operating profit
21,656,341
21,635,828
Interest expense
653,058
666,044
Other income (expense)
237,409
263,494
Income before income tax expense
21,240,692
21,233,279
Income tax expense
Net income
21,240,692
21,233,279
Basic earnings per share
0.14
0.14
Weighted average number of shares
155,097,355
155,097,355
Management Discussion and Analysis
Net Sales. Sales are generated primarily from our farming operations and related side line products in China. Net sales for the three months ended March 31, 2015 increased by $0.8 million, or 0.4% to $210 million as compared to $209 million for the three months ended March 31, 2014. The overall increase in net sales was primarily a result of the rising prices of agricultural products attributable to increasing demand in China. We also benefited from our expanded marketing network which covers more provinces, with more distributors and direct clients.
Comments & Business Outlook
YASHENG GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2014
2013
2012
Net sales
1,012,135,672
1,011,323,630
993,102,745
Cost of goods sold
868,280,442
867,845,745
859,918,076
Gross profit
143,855,230
143,477,886
133,184,669
Operating expenses:
Sales and marketing
1,792,470
2,009,990
1,944,354
General and administrative
4,147,497
4,725,345
4,598,557
Total operating expenses
5,939,968
6,735,335
6,542,911
Operating profit
137,915,263
136,742,550
126,641,758
Interest expense
666,613
937,163
1,110,340
Other income (expense )
1,686,436
688,106
885,804
Income before income tax expense
138,935,086
136,493,493
126,417,222
Income tax expense
Net income
138,935,086
136,493,493
126,417,222
Basic earnings per share
0.90
0.88
0.82
Weighted average number of shares
155,097,355
155,097,355
155,097,355
Management Discussion and Analysis
Net Sales. We generate sales from our farm and side line products. Net sales for the year ended December 31, 2014 increased $0.8 million or 0.08% to $1,012 million as compared to $1,011 million for the year ended December 31, 2013. The devaluation of the Renminbi compared to the US Dollar negatively impacted net sales and gross profit.
Comments & Business Outlook
REDWOOD CITY, CA--(Marketwired - Dec 26, 2014) - Yasheng Group (OTCQB : HERB ), a high-growth diversified China-based agricultural conglomerate with U.S. headquarters in Redwood City, California, today announced that the Angel Star Nutrition dairy packaging facility located in West Valley City, Utah (of which Yasheng is a 50% partner) has been approved as a "low risk dairy facility" by the Certification and Accreditation Administration of the People's Republic of China (CNCA). The approval covers "skimmed milk powder, partially skimmed milk powder, and other milk powders". Angel Star has been assigned CNCA Plant # 3010724335.
With this approval Angel Star Nutrition is now in compliance with AQSIQ Order No. 152, requiring registration and approval of all foreign manufacturers of dairy products sold in China. At the present time only 133 dairy producers in the United States hold this certification. With this certification in hand, the path is now cleared for Angel Star to begin shipments of Milk Powder and Nutrition Drinks to mainland China.
Comments & Business Outlook
YASHENG GROUP
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Three Months Ended September 30,
2014
2013
Net sales
305,143,594
290,002,731
Cost of goods sold
258,335,659
243,934,138
Gross profit
46,807,935
46,068,593
Operating expenses:
Sales and marketing
544,282
561,457
General and administrative
1,353,764
1,370,639
Total operating expenses
1,898,046
1,932,097
Operating profit
44,909,889
44,136,496
Interest expense
-517,671
108,156
Other income (expense)
1,321,294
1,776
Income before income tax expense
46,748,854
44,030,116
Income tax expense
Net income
46,748,854
44,030,116
Basic earnings per share
0.30
0.28
Weighted average number of shares
155,097,355
155,097,355
Management Discussion and Analysis
Net Sales. Sales are generated primarily from our farming operations and related side line products in China. Net sales for the nine months ended September 30, 2014 increased by $21 million, or 3% to $708 million as compared to $687 million for the nine months ended September 30, 2013. The overall increase in net sales was primarily a result of the rising prices of agricultural products attributable to increasing demand in China. We also benefited from our expanded marketing network which covers more provinces, with more distributors and direct clients.
Comments & Business Outlook
YASHENG GROUP
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Six Months Ended June 30,
For The Three Months Ended June 30,
2014
2013
2014
2013
Net sales
435,435,598
397,900,234
226,224,075
192,744,625
Cost of goods sold
386,721,302
353,397,672
200,499,036
170,735,500
Gross profit
48,714,296
44,502,562
25,725,039
22,009,125
Operating expenses:
Sales and marketing
751,136
724,615
360,682
354,523
General and administrative
1,731,227
1,692,701
768,252
752,967
Total operating expenses
2,482,363
2,417,316
1,128,934
1,107,490
Operating profit
46,231,933
42,085,246
24,596,104
20,901,635
Interest expense
668,068
639,259
2,024
-19,567
Other income (expense)
496,980
665,239
233,486
406,838
Income before income tax expense
46,060,845
42,111,227
24,827,566
21,328,040
Income tax expense
Net income
46,060,845
42,111,227
24,827,566
21,328,040
Basic earnings per share
0.30
0.27
0.16
0.13
Weighted average number of shares
155,097,355
155,097,355
155,097,355
155,097,355
The accompanying notes are an integral part of these consolidated financial statements.
Management Discussion and Analysis
Net Sales. Sales are generated primarily from our farming operations and related side line products in China. Net sales for the three months ended June 30, 2014 increased by $33.48 million, or 17.4% to $226 million as compared to $193 million for the three months ended June 30, 2013. The overall increase in net sales was primarily a result of the rising prices of agricultural products attributable to increasing demand in China. We also benefited from our expanded marketing network which covers more provinces, with more distributors and direct clients.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2013
2012
2011
Net sales
1,011,323,630
993,102,745
949,131,434
Cost of goods sold
867,845,745
859,918,076
827,526,283
Gross profit
143,477,885
133,184,669
121,605,152
Operating expenses:
Sales and marketing
2,009,990
1,944,354
1,773,217
General and administrative
4,725,345
4,598,557
4,211,653
Total operating expenses
6,735,335
6,542,911
5,984,869
Operating profit
136,742,550
126,641,758
115,620,282
Interest expense
937,163
1,110,340
2,171,004
Other income (expense)
688,106
885,804
687,854
Income before income tax expense
136,493,493
126,417,222
114,137,133
Income tax expense
Net income
136,493,493
126,417,222
114,137,133
Basic earnings per share
0.88
0.82
0.74
Weighted average number of shares
155,097,355
155,097,355
155,097,355
Management Discussion and Analysis
The functional currency of our operations is the Chinese RMB which is being reported in US Dollars for financial statement reporting purposes. The results of operations reported in the table above are based on an average exchange rate of 6.1633 RMB to $1 US for the year ended December 31, 2013 and an average exchange rate of 6.31 RMB to $1 US for the year ended December 31, 2012.
Net Sales.
In the beginning of 2013, the global economy continued to recover. The company expanded seed, vegetable and organic agricultural product lines, with strengthened internal control system implementation. We generate sales from our farm and side line products. Net sales for the year ended December 31, 2013 increased $18 million or 1.8% to $1,011 million as compared to $993 million for the year ended December 31, 2012. The increase in net sales was attributable to higher yields and a better product mix. We also continued to benefit from expanded distribution channels. However, at the beginning and the end of 2013, most of the northern regions experienced cold weather with snow and wind, negatively affecting fruit tree harvests.
Comments & Business Outlook
REDWOOD CITY, CA--(Marketwired - Feb 26, 2014) - Yasheng Group (OTCQB : HERB), a high-growth diversified China-based agricultural conglomerate with U.S. headquarters in Redwood City, California, today announced that it has successfully completed its first shipment of hulled hemp seeds to the United States.
The delivery marks an important step in an agreement made last year between Hemp Inc. of Las Vegas, Nevada and Yasheng to contract farm approximately 600 mu of hemp in China for import to the U.S. Yasheng is currently preparing to ship the remaining output of the crop in the form of fiber, chaff and hulled seeds. The two companies are currently negotiating a new contract for the 2014 planting season.
Yasheng is expanding its industrial hemp production in response to growing worldwide demand for the crop based on the high nutritional value of the seeds and the antimicrobial properties of the plant's fiber. Hemp production is also increasingly attractive due to the lack of need for pesticides or herbicides, and the relatively small amount of water and fertilizer required for cultivation.
According to The Hemp Industries Association, 2012 retail sales for hemp products in the US exceeded $500 million. It is estimated that there are more than 25,000 products on the global market today made from hemp materials.
In February of 2014, Yasheng established Hemp Route Limited, a subsidiary created to manage the international distribution of its hemp products.
Comments & Business Outlook
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Three Months Ended
September 30,
For The Nine Months Ended
September 30,
2013
2012
2013
2012
Net sales
290,002,731
299,716,420
687,902,965
692,251,867
Cost of goods sold
243,934,138
254,672,361
597,331,810
603,018,952
Gross profit
46,068,593
45,044,059
90,571,155
89,232,915
Operating expenses:
Sales and marketing
561,457
522,638
1,286,072
1,236,785
General and administrative
1,370,639
1,236,931
3,063,340
2,957,753
Total operating expenses
1,932,097
1,759,569
4,349,413
4,194,538
Operating profit
44,136,496
43,284,490
86,221,742
85,038,377
Interest expense
108,156
39,817
747,415
1,084,519
Other income (expense)
1,776
23,501
667,015
862,419
Income before income tax expense
44,030,116
43,268,174
86,141,343
84,816,277
Income tax expense
Net income
44,030,116
43,268,174
86,141,343
84,816,277
Basic earnings per share
0.28
0.28
0.56
0.55
Weighted average number of shares
155,097,355
155,097,355
155,097,355
155,097,355
The accompanying notes are an integral part of these consolidated financial statements.
Comments & Business Outlook
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Three Months Ended June 30,
For The Six Months Ended June 30,
2013
2012
2013
2012
Net sales
192,744,625
188,380,334
397,900,234
392,535,447
Cost of goods sold
170,735,500
166,574,017
353,397,672
348,346,591
Gross profit
22,009,125
21,806,317
44,502,562
44,188,856
Operating expenses:
Sales and marketing
354,523
345,711
724,615
714,147
General and administrative
752,967
785,051
1,692,701
1,720,822
Total operating expenses
1,107,490
1,130,762
2,417,316
2,434,969
Operating profit
20,901,635
20,675,555
42,085,246
41,753,886
Interest expense
-19,567
387,662
639,259
1,044,702
Other income (expense)
406,838
578,580
665,239
838,918
Income before income tax expense
21,328,040
20,866,473
42,111,227
41,548,102
Income tax expense
Net income
21,328,040
20,866,473
42,111,227
41,548,102
Basic earnings per share
0.14
0.13
0.27
0.27
Weighted average number of shares
155,097,355
155,097,355
155,097,355
155,097,355
Comments & Business Outlook
REDWOOD CITY, CA--(Marketwire - Jul 11, 2012 ) - Yasheng Group (OTCQB : YHGG) (XETRA : YSF), a high-growth diversified China-based agricultural conglomerate with US headquarters in California, today announced the expansion of its mining project area in the United States.
Yasheng Group has staked an additional 48 placer mining claims covering 960 acres in La Paz County, Arizona near the Plomosa Mountain load and placer claims the company optioned in 2011. The Plomosa Mining District is characterized by linear mountain ranges separated by alluvium-filled basins. In southern Arizona, a belt of Precambrian metamorphic rock ranges forms a transition zone between the younger, predominantly volcanic desert mountains of the south and the folded and faulted highlands of central Arizona.
Chairman Zhou Changsheng commented, "The acquisition of the claims in Arizona has solidified our position and we feel confident moving forward to the next stage of operations." A mineral reserve exploration program is scheduled to begin later this year.
Comments & Business Outlook
Full year 2011 results
Sales increased 11.7 percent to $949.1 million
Gross profit increased 14.9 percent to $121.6 million
Net income was $114.1 million or EPS $.74, compared to $97.4 or EPS $.63 for the same period last year
Fourth quarter EPS of $0.25 vs $0.19 in prior year quarter
The increase in net sales was attributable to higher yields and a better product mix coupled with better pricing on agricultural products, particularly potatoes, vegetables, garlic, beans, and fruits. The price increases were driven by greater demand for our products in the domestic market. We also benefitted from expanded distribution channels serving this market.
Comments & Business Outlook
Second Quarter 2011 Results
For the three months ending June 30th , 2011, our net sales and gross profit were $180.4 million and $19.9 million respectively with EPS of $.12 .
Chairman Zhou Changsheng commented, "Our financial performance for the second quarter was in line with expectations. A higher-than-normal share of this year's inventory was sold in the first quarter due to favorable pricing at the time. We have achieved steady overall revenue and earnings growth so far this year and expect a strong second half of 2011 as the harvest season begins."
Acquisition Activity
YaSheng Group, Inc. (the Company or "Grantee") and Plomosa Placers, L.L.C. (“Grantor”) have entered into an
Option Agreement dated May 6, 2011whereby Grantor has agreed to grant to Grantee the right to conduct exploration on the following mentioned unpatented mining claims in La Paz County, Arizona and an option to purchase the same in accordance with the terms and provisions of the Option Agreement. The Option Agreement covers 34 lode mining claims and 5 association placer mining claims (the "Mining Claims") and their purchase price is $15,000,000 cash or common stock of Grantee equal to $15,000,000 or, at the option of Grantee, payment to Grantor of a production royalty in the amount of 10% of net profits from sale of minerals from the Mining Claims (the "Purchase Price"), as further explained below. There are no material relationships between YaSheng/Grantee and the Grantor other than as set forth in the Option Agreement.
Comments & Business Outlook
First Quarter Results :
Our sales are generated primarily from our farming operations and related side line products in China. Net sales for the three months ended March 31, 2011 increased $27 million or 16.05% to $195.3 million as compared to $168.3 million for the three months ended March 31, 2010.
Our net income for the period grew to $19.8 million or $.13 per basic share from $17.1 million or $.11 per basic share for the prior-year period.
Chairman Zhou Changsheng commented, "Our solid financial performance for the first quarter was mostly the result of price increases in the agricultural sector, which were a result of the continued expansion of the Chinese economy. The Chinese Spring Festival offered a welcome marketing and sales opportunity for our premium products during the quarter. In addition, we believe that our continued strong execution, expanding distribution network, our high-quality products, which increasingly carry our Yasheng brand, and the dedicated work of our management and employees contributed greatly to our company's success. I am confident that we are operating a sustainable business that will be able to capture more of the economic growth in China in coming quarters ."
Comments & Business Outlook
Condensed Consolidated Statements of Operations (unaudited)
(In US Dollars)
For The Three Months Ended March 31,
2011
2010
Net sales
195,328,043
168,319,589
Cost of goods sold
173,900,159
149,876,123
Gross profit
21,427,884
18,443,467
Operating expenses:
Sales and marketing
353,565
325,243
General and administrative
897,992
773,825
Total operating expenses
1,251,557
1,099,068
Operating profit
20,176,326
17,344,399
Interest expense
640,665
623,012
Other income (expense)
251,496
416,594
Income before income tax expnse
19,787,157
17,137,981
Income tax expense
Net income
19,787,157
17,137,981
Basic earnings per share
0.13
0.11
Weighted average number of shares
155,097,355
155,097,355
Sales are generated primarily from our farming operations and related side line products in China. Net sales for the three months ended March 31, 2011 increased marginally by $27 million, or 16.05% to $195.3 million as compared to $168.3 million for the three months ended March 31, 2010. These comparisons show that our sales in the first quarter have grown more significantly than the same period in 2010. The overall increases in net sales are primarily a result of the soaring price of agricultural products attributable to the general economics in China. We also benefited from our expanded marketing network which covers more provinces with more distributors and direct clients. In addition, our traditional holiday season-the Chinese Spring Festival (“CSF”) contributed much to the increase in net sales although the first quarter for the Company is an offseason quarter in total.
Liquidity Requirements
We believe that our cash on hand and cash flows from operations
will meet our expected capital expenditure and working capital for the next 12 months. In addition, we may, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our production capacity or other investments or acquisitions we may decide to pursue.
Comments & Business Outlook
Full Year 2010 Highlights
Sales increased 14.9 percent to $849.5 million
Gross profit increased 25.6 percent to $105.9 million
Net income was $99.2 million or EPS $.64 , compared to $79.1 or EPS $.51 for the same period last year
Operating cash flow increased 29 percent to $51.1 million
For fiscal year 2011, the Company reiterates its expectation of annual revenues of approximately $976 million and annual earnings per share range of $.72-$.74 , representing an average annual growth rate of approximately 15% .
Chairman Zhou Chang Sheng summarized, "Chiefly, our 2010 revenue results completed in line with our previous expectations. Based on current positive economics and our successful management and operations, we anticipate continued growth and a strong 2011 ."
Comments & Business Outlook
REDWOOD CITY, CA--(Marketwire - March 15, 2011 ) - Yasheng Group today reported that revenue for the fourth quarter ended December 31, 2010, rose 27 percent to $254 million compared to $199.8 million for the same period ended December 31, 2009.
The increase in revenue is primarily the result of the increase in fruit and vegetable prices as well as the strong growth of the Chinese economy. The price of potatoes has increased approximately 80 percent month-on-month since October 2009. As to vegetables, prices have surged approximately 60 percent year-on-year since November 2010 on the average. In addition, the company benefited from increased market share as a result of its expanded distribution channels. The company also benefitted from the year-end holiday selling seasons in China.
In commenting on the results, Chairman Zhou Chang Sheng stated, "Besides price increases in agricultural products, our strong fourth quarter financial performance is mainly due to our focus on meeting market needs and our employees' solid execution. I am proud of our employees and thank them for the outstanding job they have done throughout the whole year ."
Additionally, the company expects earnings per share for fiscal 2011 to fall in the range of $.72 to $.74 , with sales expected to reach $976 million .
Concluding, Mr. Zhou Chang Sheng said, "We anticipate delivering another strong year this year with increases in both revenues and earnings growing in the range of 15%. We will remain focused on meeting the demands of the Chinese marketplace while expanding our footprint throughout the world. Finally, we owe our continued success to our employees whose commitment to excellence will enable Yasheng to continue generating increases in sales and earnings ."
Comments & Business Outlook
REDWOOD CITY, CA--(Marketwire - January 25, 2011 ) - Yasheng Group today announced the strategy for the recently-established Gansu Yasheng America Trade Corporation, a wholly owned subsidiary of Yasheng Group that focuses on domestic and international trade. The Company will focus on the development of product lines marketed to premium markets, which will provide better margins. The unit's marketing focus will be high-end organic, specialty, processed, and luxury foods. In addition, the unit will continue the promotion of Yasheng Group's many brands for consistent quality and food safety assurances.
In making the announcement, the Company noted that China's consumers want more choices for their food consumption and are demanding quality and food safety assurances. The average income of the middle class has risen every year and with it the demand for luxury products. According to a USDA Gain Report on market developments in China, the average consumer is willing to pay three times as much for products with high quality, green, and safe characteristics. The rural population has been migrating to the major cities over 10 million a year, putting more demand on institutions, food processing companies, and catering services.
The Company's business strategy is to establish long-term direct customer channels and to develop more direct sales with higher margins. To achieve this, it will expand the current bulk and retail packaged product lines to meet the varying needs of institutional and big chain supermarket buyers. Special packaging will extend the shelf life of the products; quality assurance will be enhanced with sound logistics planning for timely delivery. Fresh & Fresh Flash Frozen IQF products will be available for volume customers. The company will also expand the processed food offerings with dried fruits and vegetables as well as purees and concentrates. For institutional buyers the Company will offer bulk packaging choices to meet the needs of large catering services, hospitals, schools, and other municipalities that require a consistent supply of quality products. On average these product lines are expected to generate 18% profit margin.
Comments & Business Outlook
3Q10
3Q09
9M10
9M09
FY09
Revenues
$235.6
$181.6
$595.2
$539.8
$739.6
Net Income
$31.7
$24.0
$68.6
$60.8
$79.0
EPS
$.20
$.15
$.44
$.39
$.51
In millions except EPS.
Chairman Zhou Changsheng summarized, "Our solid financial performance for the third quarter was primarily the result of increased pricing attributable to the positive growth economics in China, our successful price renegotiations, and contributions from key projects we implemented during the past year to optimize our operations and control cost. Given the positive economics and our successful harvest during the second and third quarters, we anticipate continued growth and a strong fourth quarter."
"The overall increases in Net sales are primarily a result of price soaring attributable to the general economics in China. These comparisons show that our sales in the third quarter have grown more significantly than the previous quarter. This is due primarily to the renewal of our fixed price contracts that we had in place for the first half of 2010. We are able to enjoy this increased market price of our products with the renewed the contracts. What’s more, most of our products are harvested in the third quarter, and a large part of them are sold out in this quarter, and we can benefit from the price soaring."
Comments & Business Outlook
To Our Employees, Shareholders, and Business Partners: It is with tremendous pride that I write this letter to you to update you on the important activities and developments at our company. Now in its 40th year, the Yasheng Group is poised to enter a new phase of growth and expansion. We are excited about our future and hope that you share our enthusiasm. Over the past five years, Yasheng Group has made great strides by executing our strategic plan that focuses on corporate expansion and innovation, enabling us to deliver superior results and profitable growth. We will build on our solid foundation to fuel future growth as we strive to achieve the highest international standards in corporate practices and governance. Our company has continued to expand its access to land resources and use of modern agricultural technologies. We have implemented key projects that will generate significant rewards over the next five years. Within our product R&D departments, we are implementing projects such as the production of deep processed potato, fruit and vegetable concentrate products for food processors and retail consumers, to expand our high-tech processing abilities to deliver products that efficiently meet the demands of an emerging Chinese consumer in a challenging global economy. Yasheng has fed China and the world for four decades and we will continue to do so by playing an increasingly important role in the global food industry. Given our company's access to land and natural resources in China, we will continue to expand industrial farms in an environmentally-responsible manner. We continually upgrade our operations to insure that we are using the most modern cultivation technologies available and that our infrastructure is both efficient and sustainable in meeting demands of our consumers for "Green Food and Organic Policies." Our growing regions, situated in the northwest region of China, provide us with a key advantage in the cultivation of high-end products in a clean environment, without the need for artificial elements or unnatural ingredients typically used in the cultivation process. We will continue to meet any and all standards or certifications required for food safety, quality, and global sustainability. Yasheng Group has established itself as a company that strives for the highest standards in technology, management, corporate governance, and financial performance, insisting on Total Quality Management and excellence in everything we do. I continue to demand strict adherence to these values as the company's founder, Chairman, and CEO and welcome your input on our company's progress. Our company's foundation has been built upon Agriculture, Biotechnology, and Chemicals and we will continue to develop those segments that relate to our core cultivating and producing commodities. During the next five years, GanSu Yasheng Group will continue to focus on developing the Agriculture, Biotechnology, and Chemicals Industries while our U.S.-listed "YHGG" will focus on Agriculture within the food, agribusiness, and eco-friendly by-products markets. We intend to focus our energies on building the "Yasheng" name as a global leader in quality, consistency, safety, and value. In addition, we intend to list our common shares on a more senior exchange as soon as we meet the necessary requirements. Such a listing would serve to increase investor awareness and interest in our company. Yasheng Group has undertaken major public relations and branding programs to generate awareness of our company as well as to build awareness of our status as a publicly-traded company. We have retained the New York-based Makovsky + Company, a public relations and investor relations firm, to assist us with these efforts as part of the company's larger plan to bring more public awareness to Yasheng Group .
Research
After months of anticipation, Yasheng Group has finally filed its 2009 10K . The fourth quarter and year end break out is as follows:
4th Quarter 2009 vs. 2008 Financial Snapshot Ended December
4th Quarter 2009
4th Quarter 2008
GAAP Revenue
$199.8 million
$201.2 million
GAAP EPS
$0.12
$0.10
Tax Rate
00.0%
00.0%
Fully Tax-Adjusted EPS (using 25% rate)
$0.09
$0.075
Fully Diluted Shares
155 million
155 million
Full Year 2009 vs. 2008 Financial Snapshot Ended December
Full Year 2009
Full Year 2008
GAAP Revenue
$739.6 million
$736.2 million
GAAP EPS
$0.51
$0.49
Tax Rate
00.0%
00.0%
Fully Tax-Adjusted EPS (using 25% rate)
$0.38
$0.37
Fully Diluted Shares
155 million
155 million
While the company has not provided specific details on its 2010 outlook, it did provide some insight into industry dynamics:
Growth of China's agriculture industry . China is currently the world’s largest agricultural economy and a leading importer and exporter of agricultural products. China’s agricultural sector continues to change as it responds to the rising and increasingly sophisticated demands of domestic and foreign consumers, adapts small-scale farm structure to global food markets, and competes with other sectors for labor, investment capital, and scarce land and water resources. We believe agriculture product consumption in China will continue to grow due to increased affordability of agriculture processed products in concert with China’s economic growth and increased health and wellness consciousness. We expect these factors to continue to drive industry growth, especially in our primary markets. Such growth will not only increase the overall market size for processed products, but will also greatly benefit companies such as ours that are well positioned to sell into these markets .
PRC Government Policy Promoting the Development of the Agriculture Industry . In the PRC central government’s eleventh five-year guideline, the central government emphasized its determination to solve the problems of farmers, boost modern agriculture and increase rural affluence. After the onset of the economic crisis in late 2008, the PRC Ministry of Agriculture, or MOA, also stated its objective to promote agriculture commercialization. We believe that our business model is structured within the framework of these MOA initiatives and that government policies will continue to have a positive impact on the sale of our products.
High-tech Agriculture . We own the land use rights to over 100,000 acres of farmland that are cultivated using the latest scientific technologies to produce a wide variety of agricultural products. Our farms produce beer barley, 2,500 acres of hops, 5,300 acres of fruit orchards producing 50 million kg of apple pears, apples of several varieties, grapes, apricots, and dates, 6,000 tons of potatoes, 2,500 acres of vegetables including tomatoes, carrots, peppers, cabbages, and onions, and melon seeds. The Company also operates 63 acres of automated, climate controlled greenhouses and a 2,500-acre medical herb facility that produces licorice, ephedrine and other herbs while also conducting research on Chinese medicine.
Investors may assume that YHGG may need to tap the financial markets for funding purposes:
"Expansion of our capacity is needed to satisfy increased demand for our products. In order to increase production in a meaningful way capital investment will be needed to build additional capacity to satisfy the projected demand of our products."
Although, current verbiage clearly indicates that the company has enough internal funds to accomplish this task:
"We believe that our cash on hand and cash flows from operations, together with the net proceeds from the private offering referenced above and anticipated additional cash resources, will meet our expected capital expenditure and working capital for the next 12 months."
YHGG still must file its 2010 first and second quarter 10Qs to become current with the SEC.
The questions on many investors' minds are:
Can YHGG approach is book value per share?
How can a nearly $1.0 billion company experience meaningful growth?
Will the company reduce its share count?
Liquidity Requirements
Expansion of our capacity is needed to satisfy increased demand for our products. In order to increase production in a meaningful way capital investment will be needed to build additional capacity to satisfy the projected demand of our products.
Research
Back from a 10 day vacation, I noticed that Yasheng Group shares have been on a tear over the past few trading sessions. (Shares were $0.65 on April 1st). Many investors have been waiting for this move for some time now, including the GeoTeam. It will be interesting to see if YHGG can finally deliver consistent above-average gains for its shareholders.
We think excitement over the YHGG story is building due to the following :
1. The company appears to be in the final stages of becoming a fully reporting company, which could be a precursor to an uplisting. 2. The company issued some preliminary revenue figures in an NT-10K fling on April 1 2010 .
Full Year 2009 Guidance
Full Year 2008 Reported
Period Change
GAAP Revenue
$750.0 milliona
$736.0 million
1.9%
GAAP EPS
$0.57a
$0.49
16.4%
Tax Rate
0.00%
0.00%
0.00%
Fully Tax-Adjusted EPS
$0.43a
$0.37a
1.6%
Fully Diluted Shares
155 million
155 million
0.00%
Breaking down the fourth quarter and using pre-tax margins of 13.3% from the 2009 third quarter it looks like we get get following:
4th Quarter 2009 Guidance a
4th Quarter 2008 Reported
Period Change
Revenue
$210.2 milliona
$201.0 million
4.5%
EPS
$0.18a
$0.10
80.0%
Fully Tax-Adjusted EPS
$.14a
$0.08a
75.0%
a GeoTeam calculations.
So... If our fourth quarter calculation is correct investors may see a reason to continue to take note of YHGG shares.
3. Using the 2009 third quarter as a guide it appears that book value per share is over $10.00 (~4 excluding good will). If the company can convince investors that it can grow EPS rapidly it seems fair to assume that YHGG may fill the book value per share gap or at the very least attain a P/E multiple of 10.
4. An adjustment to YHGG's risk premium as uncertainty has been reduced.
Caveats:
YHGG outstanding share count is well above our preferred 50 million minimum. We believe it would be prudent for YHGG to reduce its share count via a combination of:
Retiring some stock
A Stock buy back
A Reverse Split
We had suggested a similar strategy to CHGI's management when it was trading around $0.70. They eventually took our advice and struck a deal with investors to reduce warrant overhang.
YHGG still trades on the pinks
Still need more information on the existence of dilutive securities
Short-Term Debt= $29.5 million; Long-Term Debt= $3.2 million. Although the debt to equity ratio is only about 2.0%
We would like more information on the accounts payable figure of $51.5 million.
YHGG did not provide net income figures in its NT10K filing.
And most importantly, one quarter does not indicate a trend. YHGG has had flashes of brilliance in the past. YHGG will have to convince investors that it can continue to grow EPS at a respectable pace in order to approach book value. The shares selling at $0.65 were like just too low for a company that is profitable and eliminating uncertainty.
by Maj President GeoTeam