Origin Agritech Limited Reports Third Quarter Financial Results for Three Months Ended June 30, 2010

BEIJING–(BUSINESS WIRE)–August 30, 2010–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 third quarter ended June 30, 2010. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.


During the third quarter of fiscal 2010, the Company generated revenues of RMB 462.23 million (US.07 million), a decrease of 3.13% from RMB 477.17 million (US.84 million) generated in the three months ended June 30, 2009.

Gross profit for the three-months ended June 30, 2010 was RMB190.90 million (US.11 million) compared to RMB151.56 million (US.18 million) in the same period of the prior year. Gross margin for the quarter increased from 31.76% in the same period of prior year to 41.30% for the three months ended June 30, 2010. This is an increase of 9.54% over the three months ended June 30, 2009 as a result of increased pricing in corn seed this quarter. Corn comprises the vast majority of our recognized revenues in this current quarter and a significant portion of the rice seed sales will be recognized later this year.

Total operating expenses for the three-months ended June 30, 2010 were RMB37.54 million (US.53 million) compared with RMB32.61 million (US.77 million) reported for the same period in 2009. Selling and marketing expenses were RMB9.40 million (US.38 million) for the third quarter of 2010, representing a decrease of 22.23% from RMB 12.08 million (US.77 million) for the same period of the last year, as a result of lower spending this quarter in large part due to lower transportation costs. General and administrative expenses of RMB17.56 million (US.59 million) for the third quarter ended June 30, 2010, increased 23.22% from RMB14.25 million (US.09million) for the three months ended June 30, 2009 as a result of higher seasonal salary expense along with Origin’s charitable donations. Research and development expenses increased to RMB10.59 million (US.60million) for the three-months ended June 30, 2010 from RMB6.28 million (US.92million) for the same quarter last year, with an increase of 68.73% due to higher salary, generic scientific research expenses, and variant transfer fees for the quarter. This is part of our plan to continue ramp up of research and development spend.

Operating profit for the third quarter of 2010 amounted to RMB153.36million (US.58 million) compared with an operating profit of RMB118.95 million (US.41 million) for the same period in 2009.

Net income attributable to Origin Agritech Limited for the third quarter of 2010 was RMB105.16 million (US.49million), or RMB 4.52 (US.67) per diluted share, as compared to a net income attributable to Origin Agritech Limited of RMB74.97 million (US.98million), or RMB3.26 (US.48)per diluted share in the same period one year ago.


Origin’s balance sheet at June 30, 2010 included cash and cash equivalents of RMB307.21 million (US.24 million), and total equity of RMB347.92 million (US.23 million).

Deferred revenue was RMB42.12million (US.20 million) at June 30, 2010 as compared to RMB53.69million (US$ 7.86 million) at the same period end last year.

The Company received advances from customers of RMB275.40 million (US.55 million) at June 30, 2010 as compared to RMB163.48 million (US.93 million) at June 30, 2009.


Based on its current outlook, and existing and anticipated business conditions, Origin believes the revenue guidance for FY 2010 to be in the range of RMB 580 million to RMB 600 million.


The Company will host a teleconference on August 31, 2010, at 8:00 AM EDT / 8:00 PM Beijing time to discuss the quarter end results. To participate in the call, please dial +1-877-407-9210 in North America, or +1-201-689-8049 internationally, approximately 15 minutes prior to the scheduled start time. A replay of the teleconference will be available at +1-877-660-6853 or internationally at +1-201-612-7415 with pass code number 286 with conference ID #: 355580.

About Origin

Founded in 1997 and headquartered in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is China’s leading, vertically-integrated agricultural biotechnology company specializing in research, development and production to supply the growing populations of China. Origin develops, grows, processes, and markets high quality, hybrid 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, and possesses a pipeline of genetically modified seed products including glyphosate resistant corn and Bt Corn. The first genetically modified corn seed product for China, Phytase corn, was approved in November 2009 of which Origin possesses exclusive rights. 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,” “intends,” “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 to be filed. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.


(In thousands, except share data)

  Three months ended June 30,
2009 2009 2010 2010
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues 477,169 69,844 462,230 68,066
Cost of revenues (325,611) (47,660) (271,328) (39,955)
Gross profit 151,558 22,184 190,902 28,111
Operating expenses:
Selling and marketing (12,080) (1,768) (9,395) (1,383)
General and administrative (14,251) (2,086) (17,560) (2,586)
Research and development (6,275) (918) (10,588) (1,559)
Total operating expenses (32,606) (4,772) (37,543) (5,528)
Profit from operations 118,952 17,412 153,359 22,583
Interest expense (3,146) (460) (2,444) (360)
Share of earnings/(loss) in
equity investee companies 4,266 624 (2,449) (361)
Interest income 810 119 1,212 178
Other income (299) (44) 1,097 162
Gain from disposal of equity
investment 15,559 2,291
Profit before income taxes and
non-controlling interests 120,583 17,651 166,334 24,493
Income tax expense
Current (6,232) (912) (15,181) (2,235)
Deferred (21,331) (3,122) (19,996) (2,945)
Income tax expense (27,563) (4,034) (35,177) (5,180)
Net income 93,020 13,617 131,157 19,313
Less: Net income attributable to &nbs
the non-controlling interest (18,047) (2,642) (25,997) (3,828)
Net income attributable to
Origin Agritech Limited 74,973 10,975 105,160 15,485
Net income per share – basic 3.26 0.48 4.57 0.67
Net income per share – diluted 3.26 0.48 4.52 0.67
Shares used in calculating basic
net income per share 23,013,692 23,013,692 23,013,692 23,013,692
Shares used in calculating
diluted net income per share 23,013,692 23,013,692 23,256,539 23,256,539


(In thousands, except share data)

September 30, 2009 June 30, 2010
(unaudited) (unaudited) (unaudited)
Current assets:
Cash and cash equivalents 121,255 17,756 307,208 45,238
Restricted bank deposits 500 73
Accounts receivable, net 5,692 834 9,797 1,443
Due from related parties 7,004 1,026 8,284 1,220
Advances to suppliers 1,937 284 10,274 1,513
Advances to growers 24,681 3,614 32,261 4,751
Inventories 341,770 50,047 260,020 38,289
Income tax recoverable 1,725 253 1,725 254
Prepaid expenses and other current
assets 8,725 1,277 38,391 5,652
Total current assets 513,289 75,164 667,960 98,360
Land use rights, net 20,496 3,001 20,873 3,074
Plant and equipment, net 152,962 22,399 153,569 22,614
Equity investments 65,453 9,585 18,266 2,690
Goodwill 16,665 2,440 17,304 2,548
Acquired intangible assets, net 36,648 5,367 36,848
Origin Agritech
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