Beijing, China ?C April 2, 2009 ?C Origin Agritech Limited (NASDAQ: SEED) (“Origin” or the “Company”), a technology-focused supplier of crop seeds in China today announced unaudited financial results for the first quarter ended December 31, 2008. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.
FINANCIAL RESULTS OVERVIEW
During the first quarter of fiscal 2009, the Company generated revenues of RMB 56.33 million (US.24 million), an increase of 113.69% from RMB 26.36 million (US.61 million) generated in the three months ended December 31, 2007. The revenues were mainly from the sales of canola seeds, which increased from RMB 24.06 million (US.30 million) for the three months ended December 31, 2007 to RMB 42.74 million (US.25 million) for the three months ended December 31, 2008. Gross margins for canola seed sales were 47.9%, a 0.4% decrease from the gross margin for canola seed sales 48.3%for the three months ended December 31, 2007.
Gross profit for the three-months ended December 31, 2008 was RMB15.40 million (US.25million) compared to RMB 3.34 (US.46 million) in the same period of the prior year.
Total operating expenses for the three-months ended December 31, 2008 were RMB39.96 million (US.85 million) decreased 15.0% as compared with RMB 47.01 million (US.44 million) reported for the same period in 2007. Selling and marketing expenses were RMB13.24 million (US.94 million) for the first quarter of 2008, representing a decrease of 5.5% from RMB 14.01 million (US.92 million) for the same period of the last year. This decrease was mainly due to a change in the salary structure, lower rental fees, and lower advertising expenses though expenses were lower across a variety of categories. General and administrative expenses of RMB17.91 million (US.62 million) for the first quarter ended December 31, 2008, decreased 23.4% from RMB23.38 million (US.21 million) for the three months ended December 31, 2007 mainly due to the lower property depreciation charges and lower consulting fees though again expenses were lower across a variety of categories. Research and development expenses decreased slightly by 8.36% to RMB8.82 million (US.29 million) for the three-months ended December 31, 2008 from RMB9.62 million (US.32 million).
Operating loss for the first quarter of 2008 amounted to RMB24.56million (US.59 million) compared with an operating loss of RMB43.67 million (US.99 million) for the same period in 2007.
Net loss for the first quarter of 2008 was RMB19.48 million (US.85 million), or RMB 0.85 (US.12) per diluted share, as compared to a net loss of RMB15.37 million (US.11 million), or RMB 0.67 (US.09) per diluted share in the same period one year ago.
Origin’s balance sheet at December 31, 2008 included cash and cash equivalents of RMB119.78 million (US.53 million), working capital of RMB57.56 million (US.42million), and shareholders’ equity of RMB246.21 million (US.03 million).
Deferred revenue was RMB176.63 million (US$ 25.84 million) increased 57.63% for the three-months ended December 31, 2008 as compared to RMB112.05 million (US$ 15.36 million) for the same period last year.
The Company received fewer advances from customers of RMB138.53 million (US.27 million) for the three-months ended December 31, 2008 period as compared to RMB179.72 million (US.64 million) for the quarter ended December 31, 2007. This is in part due to a slower receiving timeline in Northwest China.
FISCAL 2009 GUIDANCE
Based on its current outlook, and existing and anticipated business conditions, Origin reiterates the revenue guidance for FY 2009 in the range of RMB 560 million to RMB 580 million and operating cash flow range of RMB 80 million for the fiscal year ending September 30, 2009.
Founded in 1997 and headquartered in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is China??s leading, vertically-integrated agricultural technology company specializing in agricultural biotechnology research, development and production to supply the growing populations of China. Origin develops, grows, processes, and markets crop seeds to farmers throughout China and parts of Southeast Asia via a network of approximately 3,800 first-level distributors and 65,000 second-level distributors and retailers. The hybrid seed industry is estimated at US .5 billion and that is expected to double within the next five years. The Company currently operates facilities in 30 of 32 provinces in China. Since Origin launched its first entirely internally developed seed in 2003, the Company has developed 26 proprietary corn seed products, 19 proprietary rice seed products, 5 proprietary cotton seed products and 4 proprietary canola seed products that are in commercial production and distribution as of December 2008. For further information, please log on www.originagritech.com.
Forward Looking Statement
This release contains forward-looking statements. All forward-looking statements included in this release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “targets,” “goals,” “projects,” “continue,” or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those risk factors discussed in Origin’s filings with the SEC including its annual report on Form 20-F filed with the SEC on March 23, 2009. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Vice President, Finance
Origin Agritech Limited
Tel: 949.726.8101 or 011.86.136.8108.0243
1. The “Deferred Revenues” (line item on the balance sheet) represents an increase in the anticipated revenues to be recognized in 3Q09, and this signifies a nice increase in those revenues, correct?
Yes, the “Deferred Revenues” represent the sales by Origin in Q109 that will be deferred to be recognized in Q309. We believe this 36.56% represents a nice increase in our deferred revenues.
2. What does “Advances from Customers” (line item on the balance sheet) signify?
The “Advances from Customers” (line item on the balance sheet) represents our cash receipts collecting cycle for our revenues this year. This varies from year to year as this year as we are receiving cash payments later this year in the Northeast part of the country, especially for our Changrong company. As a matter of measurement, it may most accurate to consider the aggregate revenue, deferred revenue, and advances from customers of 371.49 million RMB for Q109 increase of 16.8% over 318.112 million RMB from last year Q108.
3. How do you expect your cash receipts will trend into Q2 then?
If anything year over year cash receipts should accelerate given that we are collecting later into the season and revenues should assume the same growth patterns we have seen before. Especially with Changrong in the Northeast, they expect cash receipts to accelerate in 2Q09.
4. Why do you have such few accounts receivable?
Our receivable policy is a strict 100% cash payment before shipment policy, which is why we have very limited accounts receivable. We believe this provides very conservative policy and estimates to our company numbers.
5. Are your operating expenses down for quarter one 2008 versus quarter one 2007?
Our operating expenses are lower year over year by 7.05 million RMB, a decrease of 15.0%. This is a result of lower spending across the board from salaries to administrative expenses to lower depreciation expenses.
6. Are your inventory levels normal and is the stock viable at this point?
Yes, they are at very normal levels for December and our inventory is stocked with market oriented products. All inventories are viable for the marketplace. At December 06, inventory was at 86.75 million USD versus 92.67 million USD for December 07. Considering the anticipated increased sales for fiscal year 2009, the 86.34 million USD inventory figure for December 08 is much more streamlined.
7. What was the composition and gross margin for the revenue recognized in Q109?
The revenue recognized in Q109 was mainly canola seed revenue from the previous selling season which was deferred until Q109. The margins on this seed were 47.94%.
8. What was the composition of the deferred revenue on the balance sheet in Q109?
The deferred revenue for Q109 was composed of 70.25% corn, 26.27% rice, and 3.49% cotton.