Beijing, China
March 25, 2008
• Revenues of RMB 26.36
million increased 37% from RMB 19.24 million
• Net Loss of RMB 15.37 million decreased from RMB 30.67
million
• Reiterates Revenue and Net Income Guidance for FY2008
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, 2007.
Origin prepares its financial statements in accordance with
generally accepted accounting principles (GAAP) of the United
States.
RECENT COMPANY HIGHLIGHTS INCLUDE:
- Introduction of the
world’s first genetically modified phytase corn, expected to
be the first approved genetically modified corn product in
China.
- Provincial approval of 6
hybrid corn seeds throughout China, helping to accumulate
local germplasm to facilitate GMO products.
- Nationwide approval of 2
hybrid corn seeds with ability to be sold across China,
bringing corn seed product count to 55 total seeds.
- Provincial approval of 6
hybrid rice seeds throughout China, bringing the total rice
seed product count to 67 total seeds.
- Completed one of the
largest hybrid seed production facility in SW China
(Chengdu), including a hybrid rice and corn seed
conditioning plant with a capacity of 10,000 kilograms per
hour, a seed testing laboratory and 4,000 square meters of
administrative offices.
FINANCIAL RESULTS OVERVIEW
During the first quarter of fiscal
2008, the Company generated revenues of RMB 26.36 million
(US$3.61 million), an increase of 37.03% from RMB 19.24 million
(US$2.47 million) generated in the three months ended December
31, 2006. The revenues were mainly from the sales of canola
seeds, which increased from RMB 18.19 million (US$2.33 million)
for the three months ended December 31, 2006 to RMB 24.06
million (US$3.30 million) for the three months ended December
31, 2007.
Gross profit for the three-months ended December 31, 2007 was
RMB3.34 million (US$457,284) compared to RMB 8.17 (US$1.05
million) in the same period of the prior year. Scrap sales for
the quarter amounted to about RMB 2.74 million (US$375,406),
mainly from the liquidation of seed products from Origin’s
subsidiary, Jilin Changrong. These scrap sales amounted to about
10.4% of our total revenue and materially impacted our gross
margin by 35.7%. Excluding these scrap sales; gross margins for
the quarter were 48.3%, a 5.9% increase from the gross margin of
42.5%for the three months ended December 31, 2006.
Total operating expenses for the three-months ended December 31,
2007 were RMB47.01 million (US$6.44 million) compared with RMB
36.90 million (US$4.73 million) reported for the same period in
2006.
- Selling and marketing
expenses were RMB14.01 million (US$1.92 million) for the
first quarter of 2007, representing an increase of 17.4%
from RMB 11.93 million (US$1.53 million) for the same
period of the last year. This increase was mainly due to
the inclusion of Changrong’s selling and marketing
expenses.
- General and
administrative expenses of RMB23.38 million (US$3.21
million) for the first quarter ended December 31, 2007,
increased 12.5% from RMB20.79 million (US$2.66 million)
for the three months ended December 31, 2006.
- The major increase in
operating expenses was caused by the increase in
research and development expenses, which increased to
RMB9.62 million (US$1.32 million) for the three-months
ended December 31, 2007 from RMB4.19 million
(US$536,281) for the same quarter last year, with an
increase of 129.9%.
Operating loss for the first
quarter of 2007 amounted to RMB43.67 million (US$5.99 million)
compared with an operating loss of RMB28.73 million (US$3.68
million) for the same period in 2006. Exclusive of the operating
loss of Jilin Changrong of RM 16.19 million (US$2.22 million),
the loss from operations was RMB27.48 million (US$3.77million).
Net loss for the first quarter of 2007 was RMB15.37 million
(US$2.11 million), or RMB 0.67 (US$0.09) per diluted share, as
compared to a net loss of RMB30.67 million (US$3.93 million), or
RMB 1.31 (US$0.17) per diluted share in the same period one year
ago. Exclusive of the net loss of Jilin Changrong of RMB 16.1
million (US$2.21 million), the net gain was RMB 0.72 million
(US$98,657). This increase was in part due to the RMB18.99
million (US$2.6 million) in the changes in the fair value of the
embedded derivatives.
BALANCE SHEET
Origin's balance sheet at December 31, 2007 included cash and
cash equivalents of RMB118.53 million (US$16.25 million),
investments in US Government Agency bonds amounting to RMB
131.27 million (US$18 million), working capital of RMB241.40
million (US$33.1million), and shareholders' equity of RMB285.95
million (US$39.2 million).
Deferred revenue was RMB112.05 million (US$ 15.36 million) for
the three-months ended December 31, 2007 as compared to RMB
163.14 million (US$20.9 million) for the same period last year.
Advances from customers increased on a sequential basis by
RMB97.53 million (US$13.37 million) for the three-months ended
December 31, 2007. On a year-over-year basis, advances from
customers increased by RMB76.10 million (US$10.43 million) for
the three-months ended December 31, 2007.
COMPANY UPDATE
We recently updated our GMO product pipeline
timelines. The glyphosate-resistance and Bt traits in our
pipeline are the same traits that have historically dominated
the seed industry globally.
Additionally, these particular herbicide resistance and pest
resistant genes have grown at over a 50% compounded annual
growth rate since being introduced in the United States. The
rapid and pervasive adoption shows the high value added to
farmers. We retain exclusive rights to these traits in China,
have the ability to stack them, and expect to be the first
company to commercialize these products in China.
The fact that GMO approval process is restricted solely for
Chinese domestic companies places Origin Agritech in a strategic
position that is second to none. Healthy downstream industry
economics continue to surround the agriculture industry as a
whole. China’s cropland estimates by the Ministry of Agriculture
are consistent with overall market size growth.
Liang Yuan, President and Co-CEO of Origin concluded, “While we
continue to expand our hybrid seed portfolio, we believe that
biotechnology will play an increasingly important role in China.
We are heavily engaged in developing GM hybrids because we
believe China will eventually approve GM seeds for commercial
cultivation. We are the only Chinese crop seed company with an
in-house biotech center and a 34% owner of Biocentury Transgene
(China) Co., Ltd. Our relationships with numerous academic
institutions and state run research programs also give us to
opportunity to participate in various government-sponsored
research, especially for genetically modified crops. We are
pleased by our success in this area thus far. We have exclusive
rights to five genetic traits which are in various stages of
developments. We are confident that once the GM marketplace
opens in China, we will be one of the strongest domestic players
to compete in the marketplace.”
FISCAL 2008 GUIDANCE
Based on its current outlook, and existing and anticipated
business conditions, Origin reiterates the revenue guidance for
FY 2008 in the range of US$75 million to US$80 million and net
income range of US$0.5 million to US$2 million, for the fiscal
year ending September 30, 2008. This net income figure is
inclusive of roughly US$2.7 million dollars in expected non-cash
interest expense from our convertible debt offering. Exclusive
of this non-cash expense, we expect a net income range of US$3.0
to US$4.5 million.
Founded in 1997 and headquartered in Beijing, Origin Agritech
Limited (NASDAQ: SEED) is one of China’s leading,
vertically-integrated agricultural technology company
specializing in agri-biotech 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 6,500
second-level distributors. The hybrid seed industry is estimated
at US$2 billion and that is expected to double by 2010. The
Company currently operates facilities in 30 of China’s 32
provinces as well as Beijing. Since Origin launched its first
entirely internally developed seed in 2003, the Company has
developed and commercialized an internally developed proprietary
seed portfolio of twelve corn hybrids, twelve rice hybrids and
two canola hybrids as of 2007. |
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