deyu-agriculture-corp-reports-record-highs-in ... - Business News Asia

Released on April 2nd, 2012

BEIJING, April 2, 2012 /PRNewswire-Asia-FirstCall/ ? Deyu Agriculture Corp. (OTCBB: DEYU) (the ?Company?), a Beijing, 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 year ended December 31, 2011.

Fiscal Year 2011 Highlights:

??? 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

Summarized Fiscal Year (FY) 2011 Results:

FY 2011FY 2010CHANGE
Revenue$261.6 million$85.2 million+207.1%
Gross profit$43.1 million$21.9 million+96.8%
Net Income*$17.3 million$11.5 million+50.4%
EPS (Diluted)**$1.42$1.16+22.4%

*Represents net income available to common stockholders.
**Earnings per diluted share of $1.42 on 12.5 million shares. For FY 2010, the Company reported fully diluted earnings per share of $1.16 on 10.2 million shares.

?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.?

Fiscal Year 2011 Financial Results

Revenue

In FY 2011, the Company had sales of $261.6 million compared to sales of $85.2 million in FY 2010, an increase of $176.4 million or 207.1%.

Net sales from the Company?s corn division increased $108.2 million or 155.7%, from $69.5 million in FY 2010 to $177.7 million in FY 2011. This growth was attributable to the Company?s expansion of its sales network, the Company?s increase in storage capacity and turnover, as well as the Company obtaining sufficient working capital.

Revenue from the Company?s grain division increased $29.0 million or 253.0%, from $11.5 million in FY 2010 to $40.5 million in FY 2011. This increase was primarily due to growth of the Company?s market share through the expansion of its sales network and promotional activities.

The Company?s revenue from its bulk trading division, which was added in fourth quarter of 2010, increased $39 million or 936.2%, from $4.2 million in FY 2010 to $43.3 million in FY 2011. This growth was primarily due to the leverage of our broad wholesale network, which covers 15 provinces in China, as well as our sufficient working capital.

Gross Profit & Gross Margin

The Company?s gross profit increased by $21.2 million or 96.8%, from $21.9 million in FY 2010 to $43.1 million in FY 2011. This improvement was attributable to the Company?s growth in sales volume, including an increase of $14 million in its corn division, $3.6 million in its grain division and $3.6 million in its bulk trading division.

The Company?s gross margin decreased from 25.7% in FY 2010 to 16.5% in FY 2011. The Company experienced a purchase cost increase on both corn and grains caused by the inflation in the prices of raw materials in China. The Company?s sales expansion strategies that it implemented by lowering the average selling price compared with the market price reduced the Company?s profit margin. In FY 2011, the increasing percentage of bulk trading of total sales with a relatively low margin of 8.3% also negatively affected the Company?s overall profit margin.

Net Income

As a result of the above, the Company?s net income available to common stockholders and earnings per diluted share were $17.3 million and $1.42, respectively, compared to $11.5 million and $1.16, respectively, in FY 2010.

Business Outlook

?Our priority is further improving our market share in corn and grains,? remarked Mr. Hao. ?In view of this goal, we are working very hard to add more sales outlets and to enhance our promotional activities in an effort to increase brand awareness and purchases among consumers. For our emerging bulk trading business, we plan to continue to leverage our existing resources, such as our ample reserves and storage capacity, broad sales and supply networks, and modern logistic centers, to help this division achieve substantial growth again in 2012. Also, we plan to diversify the grain varieties we offer through our bulk trading business to include certain rare grain varieties in China like kidney beans, green beans and sunflower seeds. We plan to look to demand trends in the market to determine which of these varieties would be most beneficial for us to incorporate into our product offerings.?

?Due to our expanding economies of scale and the rising demand for our products, it is important that we improve our supply base of raw materials,? Mr. Hao added. ?Right now, we are strongly considering broadening our operating model to include other main producing areas of corn and grain through establishing new subsidiaries for our corn and grain businesses. In light of the increasing demand we are experiencing for our products, we are looking towards developing or introducing new products through the establishment of partnerships with other grain producers or through business acquisitions.?

?As we aim to enrich our product line and provide goods that better meet consumer diet trends, we also anticipate expanding our overseas channels and our export product portfolio,? Mr. Hao continued. ?Our subsidiary Huichun has established export channels that we want to build on in 2012, with our focus being on the sales of bean-based products, refined packaged grains and large packaged grains. While 2011 was an excellent year for us in terms of financial gains and our development as a company, we are confident that we have sound strategies that can help us build upon our progress in 2012 and increase global awareness of our brand.?

Conference Call

The Company will host a conference call on Friday, April 6, 2012 at 8:30 AM EDT to review and discuss the Company?s results for the year ended December 31, 2011.

To join the conference call, use the dial-in information below. When prompted, ask for the ?Deyu Agriculture Call? and/or be prepared to provide the conference ID.

Date: 04/06/2012
Time: 8:30 AM Eastern
Conference Line Dial-In (US): 877-407-9205
International Dial-In: 201-689-8054
Conference ID#: 391617
Webcast Link: http://www.investorcalendar.com/IC/CEPage.asp?ID=166702

Dial in at least 10 minutes before the call to ensure timely participation. A playback will be available until 11:59 PM April 20, 2012. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally.

Utilize the pass code below for replay (both required)

Account#: 286
Conference ID#: 391617

About Deyu Agriculture Corp.

Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province of the People?s Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. Deyu has an extensive wholesale network in over 15 provinces and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. Deyu?s facilities include advanced production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company?s website is located at www.deyuagri.com.

Safe Harbor Statements

This press release contains forward-looking statements made under the ?safe harbor? provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Deyu?s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company?s ability to maintain its competitive position. Additional Information regarding risks can be found in the Company?s quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov.

Investor Contact:

Mr. Kevin Fickle, President
NUWA Group LLC.
Tel: +1-925-330-8315
Email: kevin@nuwagroup.com

Company Contact:

Ms. Amy He, Acting Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-5224-1802 X389
Email: amy@china-deyu.com

Ms. Cynthia Yang, Assistant to Acting CFO
Tel: +1-646-820-8060
Email: deyuintl@gmail.com

DEYU AGRICULTURE CORP AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

Assets
December 31,
2011

December 31,
2010

Current Assets

Cash and cash equivalents
$8,741,703

$5,665,858

Restricted cash

1,850,999

125,560

Accounts receivable, net

36,167,136

11,160,959

Due from related parties

587,108

-

Inventory

20,314,090

16,541,999

Advance to supplier

7,233,371

1,178,532

Prepaid expenses

391,537

1,324,251

Assets held for sale

1,634,274

-

Other current assets

2,204,934

669,134

Current assets of discontinued operations

-

5,806,884

Total Current Assets

79,125,152

42,473,177

Property, plant, and equipment, net

12,355,946

4,287,372

Construction-in-progress

-

6,732,189

Other assets

727,535

10,394,246

Intangible assets, net

10,651,844

-

Non-current assets of discontinued operations

-

2,042,168

Total Assets
$102,860,477

$65,929,152

Liabilities and Equity

Current Liabilities

Short-term loan
$14,413,480

$2,631,364

Accounts payable

1,833,190

197,012

Note payables

1,588,840

-

Advance from customers

8,488,272

6,451,782

Accrued expenses

1,149,205

1,291,227

Preferred stock dividends payable

219,721

238,620

Due to related parties

5,445,115

-

Other current liabilities

583,196

23,779

Current liabilities of discontinued operations

-

11,654,915

Total Current Liabilities

33,721,019

22,488,699

Equity

Series A convertible preferred stock, $.001 par value, 10,000,000 shares authorized, 1,997,467 and 2,106,088 shares outstanding, respectively

1,997

2,106

Common stock, $.001 par value; 75,000,000 shares authorized, 10,564,774 and 10,349,774 shares issued and outstanding, respectively

10,565

10,350

Additional paid-in capital

20,367,138

18,770,230

Other comprehensive income

4,831,353

2,272,633

Retained earnings

43,491,465

22,385,134

Total Stockholders? Equity

68,702,518

43,440,453

Noncontrolling Interests

436,940

-

Total Equity

69,139,458

43,440,453

Total Liabilities and Equity
$102,860,477

$65,929,152

DEYU AGRICULTURE CORP AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

For The Years Ended

December 31,

2011

2010

Net revenue
$261,576,666

$85,174,884

Cost of goods sold

(218,480,009)

(63,250,363)

Gross Profit

43,096,657

21,924,521

Selling expenses

(13,231,094)

(6,281,768)

General and administrative expenses

(8,222,182)

(3,627,860)

Total Operating Expense

(21,453,276)

(9,909,628)

Operating income

21,643,381

12,014,893

Interest income

42,159

17,505

Interest expense

(805,601)

(341,555)

Non-operating income

(180,294)

(18,174)

Total Other Expense

(943,736)

(342,224)

Income from continuing operations before income taxes

20,699,645

11,672,669

Income taxes

(184,384)

913,785

Income from continuing operations

20,515,261

12,586,454

Loss from discontinued operations, net of income taxes

(3,891,830)

(756,480)

Net income

16,623,431

11,829,974

Net loss attributable to noncontrolling interests:

Net loss from continuing operations

38,673

-

Net loss from discontinued operations

1,101,255

-

Total net loss attributable to noncontrolling interests

1,139,928

-

Net income attributable to Deyu Agriculture Corp.

17,763,359

11,829,974

Preferred stock dividends

(427,917)

(327,721)

Net income available to common stockholders

17,335,442

11,502,253

Foreign currency translation gain

2,751,687

1,363,322

Comprehensive income

20,087,129

12,865,575

Less: Other comprehensive income attributable to noncontrolling interests

(130,653)

-

Comprehensive income attributable to Deyu Agriculture Corp.
$19,956,475

$12,865,575

Amounts attributable to common stockholders:

Net income from continuing operations, net of income taxes
$20,126,017

$12,258,733

Discontinued operations, net of income taxes

(2,790,575)

(756,480)

Net income attributable to common stockholders
$17,335,442

$11,502,253

Net income attributable to common stockholders per share ? basic:

Income from continuing operations
$1.91

$1.45

Loss from discontinuing operations

(0.27)

(0.09)

Net income attributable to common stockholders
$1.64

$1.36

Net income attributable to common stockholders per share ? diluted:

Income from continuing operations
$1.64

$1.23

Loss from discontinuing operations

(0.22)

(0.07)

Net income attributable to common stockholders
$1.42

$1.16

Weighted average number of common shares outstanding ? basic

10,522,432

8,445,880

Weighted average number of common shares outstanding ? diluted

12,497,164

10,249,041

DEYU AGRICULTURE CORP AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended

December 31,

2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES

Net income available to common stockholders
$17,335,442

$11,502,253

Loss from discontinued operations attributable to Deyu Agriculture Corp.

2,790,575

756,480

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation & amortization

979,297

489,379

Share-based compensation

428,702

549,106

Preferred stock dividends accrued

219,721

232,642

Dividends paid with Series A preferred stock

212,420

-

Common stocks issued for services

78,000

-

Deferred income tax expense (benefit)

184,384

(913,785)

Noncontrolling interests

(38,673)

-

Loss on disposal of fixed assets

-

7,573

Decrease (increase) in current assets:

Accounts receivable

(23,824,017)

(6,645,744)

Related-parties trade receivable

(494,752)

-

Inventories

(2,873,705)

(7,816,702)

Advance to suppliers

(5,840,601)

(947,913)

Prepaid expense and other current assets

(539,339)

(853,455)

Increase (decrease) in liabilities:

Accounts payable

1,584,038

192,077

Advance from customers

1,677,638

6,284,419

Accrued expense and other liabilities

346,492

1,097,413

Net cash (used in) provided by operating activities of continuing operations

(7,774,378)

3,933,743

Net cash used in operating activities of discontinued operations

(3,858,325)

(3,727,140)

Net cash (used in) provided by operating activities

(11,632,703)

206,603

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of machinery and equipment

(3,759,859)

(1,987,716)

Construction and remodeling of factory and warehouses

(109,856)

(3,281,762)

Purchase of software and other assets

(8,902)

(960,175)

Advances to related parties

(76,995)

-

Prepayments for acquisition of land use rights

(76,715)

(6,889,032)

Proceeds from disposal of fixed assets

-

274,727

Net cash used in investing activities of continuing operations

(4,032,327)

(12,843,958)

Net cash used in investing activities of discontinued operations

(2,476,523)

(117,583)

Net cash used in investing activities

(6,508,850)

(12,961,541)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from capital contributions

464,180

1,831,718

Net proceeds from short-term loans from related parties

3,101,839

3,101,989

Cash restricted for credit line of bank acceptance notes

(1,802,568)

-

Release of cash restricted held at a trust account

125,560

-

Payment of preferred dividends

(243,678)

-

Net proceeds from short-term loans from bank

11,349,219

-

Net proceeds from short-term bank acceptance notes

1,547,269

-

Net proceeds from short-term loan from others

952

(1,079,701)

Net repayments of short-term loans from related parties

-

(1,113,632)

Proceeds from private placement, net of restricted cash held in escrow

-

8,827,123

Release of restricted cash related to private placement

-

298,848

Net cash provided by financing activities of continuing operations

14,542,773

11,866,345

Net cash used in financing activities of discontinued operations

5,918,988

4,277,243

Net cash used in financing activities

20,461,761

16,143,588

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS

352,429

204,593

NET INCREASE IN CASH & CASH EQUIVALENTS

2,672,637

3,593,243

NET INCREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS

(403,208)

489,886

NET INCREASE IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS

3,075,845

3,103,357

CASH & CASH EQUIVALENTS, BEGINNING BALANCE

5,665,858

2,562,501

CASH & CASH EQUIVALENTS, ENDING BALANCE
$8,741,703

$5,665,858

SUPPLEMENTAL DISCLOSURES:

Income tax paid
$62

$-

Interest paid
$809,448

$323,829

NONCASH INVESTING AND FINANCING ACTIVITIES:

Construction completed and transferred to property, plant, and equipment
$5,914,602

$-

Construction completed and transferred to land use rights
$2,320,904

$-

Obtained certificates of farmland use rights
$ 8,221,569

$-

Note: Please refer to the Company?s annual report on Form 10-K for the year ended December 31, 2011 for additional notes, which are an integral part of these consolidated financial statements

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