-- Net Sales increased 42.8% to $14.1 million -- Net income
increased 11% to $2.9 million BEIJING, Aug. 13
/Xinhua-PRNewswire-FirstCall/ -- China Agritech, Inc. (OTC:CAGC)
(BULLETIN BOARD: CAGC) ("China Agritech" or "the Company"), a
leading manufacturer of liquid organic fertilizer and other
fertilizer products in China, today announced its financial results
for the second quarter ended June 30, 2008. Second Quarter
Highlights -- Revenue increased 42.8% year-over-year to $14.1
million -- Gross profit increased 25.9% year-over-year to $7.2
million -- Net income increased 11.0% year-over-year to $2.9
million -- Fully diluted earnings per share was $0.12 "Following a
slow start to the year of 2008, we are pleased to report strong top
line growth in the second quarter driven by expansion of our
customer base into the central and southern regions of China. This
increase is in spite of the floods in central and southern region
affecting our overall sales growth in the region. The delayed
delivery of orders from the first quarter 2008 and sales from new
regions have brought our revenue growth back on track," commented
Mr. Yu Chang, Chief Executive Officer of China Agritech. "We have
begun construction of our new organic granular compound fertilizer
facility in Harbin and are designing the floor plan for Xinjiang.
We expect the Harbin and Xinjiang facilities to be completed
towards the end of September and October, respectively." Revenue
for the second quarter of 2008 demonstrated growth of 42.8% to
$14.1 million from $9.9 million in the second quarter of 2007. The
increase is mainly attributable to expansion of the Company's
customer base in the newly established sales areas in the central
and southern regions of China, which accounted for 10% of the total
revenues. The remaining 90% were from northern China. The increase
in sales for the second quarter of 2008 is also attributable to the
delayed delivery of certain orders from the first quarter of 2008.
Due to the extended cold weather in the northern region of China in
the first quarter of 2008, the frequency of fertilizer application
was affected, leading to increased delivery in the second quarter
of 2008. Gross profit for the second quarter of 2008 increased
25.9% to $7.2 million from $5.8 million in the second quarter of
2007. Gross margin for the quarter was 51.4%, compared to 58.3% in
the second quarter of 2007. The deterioration in gross margin was
primarily due to the increase in prices of raw materials, which
affected the entire industry and the increase in prices of
packaging materials which were driven by surging oil prices. On a
sequential basis gross margin improved from 49.7% in the first
quarter of 2008 to 51.4% in the second quarter. Selling expenses
during the quarter were $1.2 million, or 8.7% of revenue, up from
$0.8 million, or 8.0% of revenue in the second quarter of 2007. The
increase in selling expenses was primarily due to higher
compensation costs from incremental salary expenses and adjustment
on commission basis. As a result of higher sales during the
quarter, commissions paid to sales representatives also increased
proportionately. The Company also incurred higher selling and
marketing expenses in the newly established sales markets in
central and southern China. The surging oil prices during the first
half of the year 2008, resulted in increased freight charges in
comparison to the same period of 2007. Operating and administrative
expenses during the quarter were $1.1 million, or 7.5% of revenue,
compared to $0.5 million, or 4.7% of revenue, for the same period
in 2007. The increase was primarily due to legal and professional
consulting fees in connection with compliance with U.S. securities
laws and general legal advice for long term company planning. In
addition, the Company incurred additional costs related to its
newly established organic liquid compound fertilizer plant in
Xinjiang and overhead expenses related to the newly constructed
organic granular compound fertilizer plant in Beijing, no similar
costs were incurred in the second quarter of 2007. Income from
operations was $5.0 million, up 10.4% from $4.5 million in the same
period of 2007. Operating margin for the quarter was 35.2% compared
to 45.6% in the second quarter of 2007. On a quarter over quarter
basis operating margin improved significantly from 28.1% in the
first quarter of 2008. Income taxes for the three month ended June
30, 2008 were lower than the three month ended June 30, 2007 due to
the new corporate income tax law in the People's Republic of China,
which revised the corporate tax rate applicable to China Agritech
from 33% to 25%. Net income for the second quarter of 2008 was $2.9
million, up 11% from $2.6 million in the second quarter of 2007.
Fully diluted earnings per share were $0.12 for the second quarter
of 2008 compared to fully diluted earnings per share of $0.14 for
the same period a year earlier. Weighted average fully-diluted
shares for the second quarter of 2008 increased to 24,699,615
compared to weighted average fully-diluted shares of 19,143,615 in
the second quarter of 2007, as the result of an additional
5,556,000 shares of common stock issued in a private placement in
July 2007. Six Month Results For the first half of 2008, revenue
increased to $21.4 million, up 15.9% from $18.5 million in the
corresponding period of 2007. Gross profit increased 6.0% in the
first six months of 2008 to $10.9 million from $10.3 million in the
comparable period one year ago. Gross margin was 50.8% in the first
two quarters of 2008 compared to 55.5% in the same period of 2007.
Income from operations slid 10.5% to $7.0 million compared to $7.8
million in the same period one year ago. Net income for the first
six months of 2008 was $4.1 million, or $0.17 per fully diluted
share, down 8.9% from $4.5 million, or $0.24 per fully diluted
share, in the first half of 2007. Financial Condition As of June
30, 2008, China Agritech had $7.4 million in cash and cash
equivalents, no long-term debt or other interest bearing borrowings
and $56.8 million in working capital. Days sales outstanding for
the second quarter 2008 was 196 days, compared to 182 days in the
second quarter of 2007. Inventory turnover days were 85 days as of
June 30, 2008, compared to 106 days as of June 30, 2007.
Shareholders' equity stood at $58.1 million up from $50.9 million
as of December 31, 2007. Recent Event On July 9, 2008, China
Agritech announced that it had entered into a contract with AL-WAHA
KHDRAA CO., a subsidiary of AL Ezz Group, a distributor of
agricultural and fertilizer products to the Middle East and Africa.
The initial contract obtained by the Company is for 10,000 liters
of Green Vitality liquid fertilizer worth $75,000. Orders are
expected to increase once Green Vitality liquid fertilizer is
certified by Egypt's Ministry of Agriculture, expected by the end
of 2008, and large scale sales are permitted. This shipment was
successfully shipped to Egypt on July 18, 2008 and should arrive at
the Alexander port in Egypt in 60 days. Business Outlook China
Agritech is actively pursuing acquisition of an established organic
granular compound fertilizer facility in Anhui Province and has
completed the due diligence process. If the facility is acquired
and successfully integrated into our business, the acquisition will
add 50,000 metric tons of annual production capacity. The Company
has completed its construction of the organic granular compound
fertilizer plant in Harbin and currently is in the stage of
installing the production equipments. The Company has also
commenced the construction of the Xinjiang plant for organic
granular compound fertilizer production, which is expected to be
completed in the fourth quarter of 2008. The Company's annual
organic granular compound fertilizer capacity is estimated to be at
least 200,000 metric tons by the end of 2008. China Agritech
initiated its first international transaction with Egypt in July
2008. Following successful product testing conducted by a third
party, Green Vitality demonstrated superior quality in comparison
to local brands and is substantial compliance with the local
industry standards. The Company plans to further tap into
international markets by virtue of high quality products. China
Agritech reaffirms its year-end guidance for 2008 to be in the
range of approximately $54.0 to $56.0 million in revenues and net
income in the range of approximately $8.5 to $9.0 million, or
earnings per share of approximately $0.35 to $0.37. "We completed a
successful trial run at our first granular fertilizer facility in
Beijing. The facility has a 100,000 metric tons annual capacity. We
expect to receive certification from the government in August and
will begin production at the plant thereafter," commented Mr. Yu
Chang. Conference Call Information Management will conduct a
conference call at 9:00 am EDT on Wednesday, August 13, 2008, to
discuss results for the second quarter 2008. Hosting the call will
be Mr. Kelviz Lim Kok Siak, Vice President of Finance, joined by
Mr. Yu Chang, Chief Executive Officer of China Agritech. To
participate in the conference call, please dial the following
number five to ten minutes prior to the scheduled conference call
time: (888) 339-2688. International callers should dial
617-847-3007. The pass code for the call is 979 753 26. If you are
unable to participate in the call at this time, a replay will be
available on Wednesday, August 13, 2008 at 11:00 a.m. EDT, through
Wednesday, August 27, 2008. To access the replay from the United
States dial 888-286-8010, or 617-801-6888 if calling
internationally. Enter the Pass code 68775735. This conference call
will be broadcast live over the Internet and can be accessed by all
interested parties on the China Agritech website at
http://www.chinaagritechinc.com/ . To listen to the live webcast,
please go to the China Agritech website at least fifteen minutes
prior to the start of the call to register, download, and install
any necessary audio software. For those unable to participate
during the live broadcast, a replay will be available shortly after
the call on China Agritech's website for 90 days. About China
Agritech Inc. China Agritech is engaged in the development,
manufacture and distribution of organic liquid and granular
compound fertilizers and related products in the People's Republic
of China. The company has developed proprietary formulas that
provide a continuous supply of high-quality agricultural products
while maintaining soil fertility. The company sells its products to
farmers via sales distributors across 26 provinces in China. For
more information visit http://www.chinaagritechinc.com/ . This
release contains certain "forward-looking statements" relating to
the business of China Agritech and its subsidiary companies, which
can be identified by the use of forward-looking terminology such as
"believes, expects" or similar expressions, including but not
limited to, statements regarding the continued demand for China
Agritech's products, China Agritech's ability to sustain growth for
the balance of the year and China Agritech's ability to generally
meet all of its objectives. Such forward looking statements involve
known and unknown risks and uncertainties, including all business
uncertainties relating to product development, marketing,
concentration in a single customer, raw material costs, market
acceptance, future capital requirements, and competition in general
and other factors that may cause actual results to be materially
different from those described herein as anticipated, believed,
estimated or expected. Certain of these risks and uncertainties are
or will be described in greater detail in our filings with the SEC.
Except as required by law, China Agritech is under no obligation to
(and expressly disclaims any such obligation to) update or alter
its forward-looking statements whether as a result of new
information, future events or otherwise. --Financial Tables
Follow-- CHINA AGRITECH, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS June 30, 2008 December 31, 2007 (UNAUDITED) ASSETS Current
Assets Cash and cash equivalents $ 7,388,358 $ 11,852,636
Restricted cash 2,000,000 2,000,000 Accounts receivable, net
32,825,266 22,695,039 Inventories 8,597,711 3,508,741 Advances to
suppliers 7,945,152 12,343,255 Prepayments and other receivables
1,861,898 1,242,694 Total Current Assets 60,618,385 53,642,365
Construction In Process 1,794,062 -- Property, Plant, And
Equipment, Net 3,837,229 3,798,958 Total Assets $ 66,249,676 $
57,441,323 Current Liabilities Accounts payable $ 278,782 $ 41,146
Accrued liabilities and other payables 1,473,042 1,047,721 Amount
due to related parties -- 352,505 Taxes payable 2,020,356 1,650,243
Total Current Liabilities 3,772,180 3,091,615 Minority Interests
4,363,384 3,465,724 Commitments Stockholders' Equity Common stocks;
$0.001 par value, 100,000,000 shares authorized, 24,699,615 shares
issued and outstanding 24,700 24,700 Additional paid in capital
26,135,914 26,135,914 Statutory reserve 5,182,787 4,299,653
Accumulated other comprehensive income 5,693,285 2,578,107 Retained
earnings 21,077,426 17,845,610 Total Stockholders' Equity
58,114,112 50,883,984 Total Liabilities and Stockholders' Equity $
66,249,676 $ 57,441,323 CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME FOR THE
THREE MONTHS ENDED JUNE 30, 2008 AND 2007 AND FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 2008 AND 2007 (UNAUDITED) THREE MONTHS ENDED
JUNE 30, SIX MONTHS ENDED JUNE 30, 2008 2007 2008 2007 Net sales
14,092,569 $9,866,891 21,409,652 $18,478,632 Cost of sales
(6,851,668) (4,115,279) (10,532,674) (8,216,104) Gross profit
7,240,901 5,751,612 10,876,978 10,262,528 Operating expenses
Selling expenses (1,225,614) (790,784) (1,932,203) (1,404,785)
General and administrative expenses (1,050,336) (464,090)
(1,923,891) (1,012,157) Total operating expenses (2,275,950)
(1,254,874) (3,856,094) (2,416,942) Income from operations
4,964,951 4,496,738 7,020,884 7,845,586 Other income (expense)
Interest income 2,223 3,986 63,896 31,881 Exchange gain (loss)
(180,066) (1,718) (174,839) (1,927) Total other income (expense)
(177,843) 2,268 (110,943) 29,954 Income before income taxes and
minority interest 4,787,108 4,499,006 6,909,941 7,875,540 Provision
for income taxes (1,432,715) (1,544,137) (2,149,994) (2,804,192)
Income before minority interests 3,354,393 2,954,869 4,759,947
5,071,348 Minority interests (429,814) (320,726) (644,998)
(552,077) Net income 2,924,579 2,634,143 4,114,949 4,519,271 Other
comprehensive income Foreign currency translation adjustment
1,796,515 327,124 3,115,178 831,773 Comprehensive income 4,721,094
$2,961,267 7,230,127 $5,351,044 Basic and diluted weighted average
shares outstanding 24,699,615 19,143,615 24,699,615 19,143,615
Basic and diluted net earnings per share 0.12 $0.14 0.17 $0.24
CHINA AGRITECH, INC. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF
CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(UNAUDITED) 2008 2007 Cash flows from operating activities: Net
income $ 4,114,949 $ 4,519,271 Adjustments to reconcile net income
to net cash used in operating activities: Stock based compensation
-- 2,398 Minority Interest 644,998 552,077 Depreciation and
amortization 325,033 166,992 (Increase) decrease in current assets:
Accounts receivable (10,130,226) (8,415,620) Inventories
(5,088,970) (5,137,954) Advances to suppliers 4,398,103 5,827,972
Prepayments and other receivable (619,205) (217,408) Due from
shareholders -- 1,246 Increase (decrease) in current liabilities:
Accounts payable 237,635 370,903 Taxes payable 370,113 840,414
Accrued expenses and other payable 72,817 663,037 Net cash used in
operating activities (5,674,753) (826,672) Cash flows from
investing activities: Acquisition of property & equipment
(363,305) (82,499) Construction in progress (1,794,062) (1,070,974)
Restricted cash -- 81,546 Net cash used in investing activities
(2,157,367) (1,071,927) Cash flows from financing activities:
Advance from shareholders -- -- Net cash provided by financing
activities -- -- Net decrease in cash and cash equivalents
(7,832,120) (1,898,599) Effect of exchange rate change on cash and
cash equivalents 3,367,842 236,601 Cash and cash equivalents,
beginning of year 11,852,636 6,430,009 Cash and cash equivalents,
end of year $ 7,388,358 $ 4,768,011 Supplement disclosure of cash
flow information: Income taxes paid $ 1,837,906 $ 3,760,570
Non-cash Investment and Financing Activity: Offset of amounts due
to/from stockholders $ 330,032 $ -- For more information, please
contact: CCG Investor Relations Crocker Coulson, President Tel:
+1-646-213-1915 Email: Web: http://www.ccgir.com/ China Agritech,
Inc. Kelviz Lim Tel: +86-10-5962-1220 DATASOURCE: China Agritech,
Inc. CONTACT: Crocker Coulson, President of CCG Investor Relations,
+1-646- 213-1915, or ; Or Kelviz Lim of China Agritech, Inc.,
+86-10-5962-1220 Web site: http://www.chinaagritechinc.com/
http://www.ccgir.com/
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