-- Second quarter net revenue rises 57% to $21 million -- Second
quarter net income climbs 91.2% to $5.6 million, or $0.22 per share
-- Teleconference to Begin at 9:00 a.m. EDT Today BEIJING, Aug. 17
/PRNewswire-Asia-FirstCall/ -- China Agritech, Inc. (OTC Bulletin
Board: CAGC) ("China Agritech", or the "Company"), a leading
national organic fertilizer manufacturer and distributor in China,
today announced its unaudited financial results for the second
quarter and six months ended June 30, 2009. Second Quarter
Highlights -- Net revenue increased 56.9% year-over-year to $21
million; -- Gross profit increased 37.3% year-over-year to $8.9
million; -- Net income increased 91.2% year-over-year to $5.6
million; -- Fully diluted earnings per share were $0.22 compared
with $0.12 in the 2008 second quarter; -- Cash and equivalents were
$16.5 million with a current ratio of 5.4 to 1 and no long-term
debt; and -- 2009 guidance of $60 million in net revenues and $9.5
million in net income confirmed. Mr. Yu Chang, Chief Executive
Officer of China Agritech, commented, "We are reaping the benefits
of our strategic actions to expand into the much larger market for
organic granular fertilizers and extend our geographic reach into
new Chinese provinces. We are excited with the growth this quarter,
especially with the contribution from two of our three planned new
production facilities for organic granular fertilizers. We expect
the third facility will be completed by the end of 2009. We also
anticipate additional sales from our major distribution
relationships in the domestic and foreign markets in the second
half of 2009." Revenue for the second quarter of 2009 grew by
56.9%, or by $7.6 million, to $21 million, the highest sales for
any quarter, from $13.4 million in the second quarter of 2008.
Sales of the Company's new organic granular fertilizers represented
almost $7.4 million of the sales gain in the second quarter of
2009. During the second quarter of 2009, commercial production of
organic fertilizers was initiated at the Company's new facilities
at Anhui province in eastern China and Harbin in the Heilongjiang
Province in northern China, representing a combined 150,000 metric
tons of production capacity. Gross profit for the second quarter of
2009 increased 37.3%, or by $2.4 million, to approximately $9.0
million from $6.5 million in the second quarter of 2008. Gross
margin for the quarter was 42.7% compared with 48.8% in the second
quarter of 2008. The decline in the gross margin was primarily due
to the sales of relatively lower-margin organic granular
fertilizers in this year's second quarter compared with the
Company's organic all-liquid fertilizers sales in the second
quarter a year ago. In the second quarter of 2009, organic liquid
fertilizer sales generated a gross margin of approximately 53%
compared with a gross margin of approximately 21% for organic
granular fertilizers. Selling expenses during the second quarter of
2009 were $0.63 million, or 3.0% of revenue, down from $0.51
million, or 3.8% of revenue in the second quarter of 2008. The
decline of the selling expenses over revenue was mainly due to our
effective cost control measures including a more targeted
advertisement and promotion, lower travel accommodation standard
and other sales related fix-cost reduction. Operating and
administrative expenses during the quarter were $0.87 million, or
4.1% of revenue, representing a 17% reduction compared with $1.05
million, or 7.8% of revenue, for the same period in 2008. The
decrease was primarily due to senior management's voluntary salary
cut, lower travel accommodation standard, and the reduction in
non-recurring legal and professional consulting fees in connection
with compliance for U.S. securities laws. Income from operations
was approximately $7.5 million, a 50.2% increase from almost $5.0
million in the second quarter of 2008. Operating margin for the
second quarter of 2009 was 35.5% compared to 37.1% in the second
quarter last year. The increase in income from operations was
generated by the success of the organic granular fertilizer sales
and higher gross margin on organic liquid fertilizer sales during
the second quarter of 2009, combined with lower operating and
administrative expenses. Income taxes for the three month ended
June 30, 2009 rose to $1.6 million from $1.4 million in the similar
quarter in 2008. However, the tax rate in the second quarter of
2009 was 21.5% and was lower than the 29.9% tax rate in the year
ago period. The reduced tax rate is due mainly to a subsidiary that
generated net income this quarter, but was exempt from Chinese
income taxes. Net income attributable to China Agritech's common
shareholders for the second quarter of 2009 was $5.6 million, up
91.2% and was the highest net income for any quarter. Net income in
the second quarter of 2008 was $2.9 million. Diluted net earnings
per share were $0.22 versus $0.12 for the same period in 2008.
Diluted weighted average shares outstanding for the second quarter
of 2009 were 25.3 million compared with diluted weighted average
shares outstanding of 24.7 million in the second quarter of 2008.
Six Month Results For the first-half year ended June 30, 2009, net
revenue increased by 36.9% to $28.3 million from $20.7 million in
the corresponding period of 2008. Gross profit increased 21.3% in
the first six months of 2009 to $12.3 million from approximately
$10.2 million in the comparable period one year ago. Gross margin
was 43.5% in the first two quarters of 2009 compared with 49.1% in
the same period of 2008. The decline in gross margin is mainly due
to the sales of lower-margin organic granular fertilizers in the
2009 period compared with the organic liquid fertilizers that
comprised all the sales in the year ago corresponding period.
Organic liquid fertilizers generated a gross margin of
approximately 53% for the first six months of 2009. Income from
operations grew by $2.4 million, or 34.4%, to $9.4 million from
$7.0 million in the same period one year ago. Net income for the
first six months of 2009, rose by 61.4% or $2.5 million to $6.6
million, with diluted net earnings per share of $0.27, from $4.1
million, or diluted net earnings per share of $0.17 in the first
half of 2008. Financial Condition As of June 30, 2009, China
Agritech had $16.5 million in cash and cash equivalents, no
long-term debt, and $66.5 million in net working capital. Accounts
receivable grew to $43.7 million as net revenue increased by 36.9%
in the six months ended June 30, 2009, due primarily to the
introduction of the Company's organic granular fertilizers. Days
sales outstanding at June 30, 2009 was 187 days, compared to 196
days in the second quarter of 2008. Shareholders' equity was $73.7
million, or $2.62 per share at June 30, 2009. Recent Events On June
15, 2009, the Company announced the following: -- The Chinese
government reported that raw materials prices are gradually
declining and the Company anticipates that will generate higher
profits on its anticipated revenues. -- To further enhance profits,
China Agritech plans to launch higher- margined products into the
domestic markets in the near future. By utilizing the Company's
breakthrough and proprietary nano-honeycomb embedding and
microelement deep complexing technologies, new products will be
more environmentally friendly and effective than traditional
organic fertilizers. -- China Agritech continues to focus on
improving its cash flow and it anticipates significant improvement
in the collection of accounts receivable in the second half of
2009. -- Two organic granular fertilizer manufacturing production
facilities are now in commercial production with a total annual
capacity of 150,000 metric tons. -- The new marketing and
distribution agreement with Odyssey International is expected to
also add to revenues during 2009. During the quarter, holders of a
majority of the voting securities of the Company and the Board of
Directors, approved an amendment to the Company's Amended and
Restated Certificate of Incorporation to effect a reverse split of
the Company's common stock, on the basis of one share for every
four outstanding shares. On May 5, 2009, the Company announced it
had appointed Ms. Lingxiao Dai as VP of Finance. Ms. Dai was most
recently the CFO of the American Yellowstone Power Co., Ltd.'s
branch in China. Business Outlook The Company has full confidence
that the projected net revenue of approximately $60 million and net
income attributable to the common stockholders of $9.5 million for
the fiscal 2009 year will definitely be exceeded. The company is
projecting the production of 20,000 tons of granular organic
fertilizers in the third quarter of 2009. These targets are based
on the Company's current views on the operating and market
conditions, which are estimates and subject to change. "With our
sales growth, our account receivable increased accordingly.
However, our account receivable risk management has been
strengthened. We have implemented the following measures to
expedite collections: more stringent credit check on new customers,
contraction of new account receivables down to 6 months, and
assignment to sales staff with collection responsibility tied to
penalty policy. These measures have improved our outstanding
account quality and reduced actual bad debt occurrence by 0.5%. Our
new account receivable management program was prepared in the 1st
quarter, implemented in the second quarter, and expected to produce
good results in the fourth quarter of 2009 and full year 2010,"
commented Mr. Yu Chang. "Also, we pay special attention to
operating cash-flow. As we are accelerating collections, we also
continue to honor credit terms to maintain relationships with good
customers. In the first half of 2009, we have generated over 8
million dollars in operating cash-flow, as compared to negative
figure in the corresponding period in 2008," Mr. Chang concluded.
Conference Call The Company will host a conference call today, to
be simultaneously web cast, at 9:00 a.m. Eastern Daylight Time, or
9:00 p.m. Beijing Time. To participate, please call the following
phone numbers: United States 1-866-519-4004 China, Domestic
800-819-0121-Landline Hong Kong 800-933-053 Canada 1-800-407-1908
International Toll Dial-In Number 656-735-7955 Conference ID #
25520700 A live web cast of the conference call will be available
on China Agritech's website at http://www.chinaagritechinc.com/ .
Please visit the website at least 15 minutes early to register for
the web cast and download any necessary audio software. A web cast
replay will be available on the Company's website, and the call
replay will be available through Monday, August 24, 2009 at 11:59
p.m. EDT. To access the replay, please call the following phone
numbers: United States Dial-In: 1-866-214-5335 Canada Dial-In:
1-800-301-5423 China North Dial-In: 10-800-714-0386 China South
Dial-In: 10-800-140-0386 Hong Kong Dial-In: 800-901-596
International Dial-In: +61-2-8235-5000 Conference ID # 25520700
About China Agritech, Inc. China Agritech, Inc. is engaged in the
development, manufacture and distribution of liquid and granular
organic compound fertilizers and related products in 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 located in 26 provinces of China. For more information
about the Company, please visit http://www.chinaagritechinc.com/ .
Safe Harbor Statement This release may contain 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," "anticipates," "estimates" 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,
ability to produce and sell organic granular products in targeted
markets, 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 update or alter
its forward-looking statements whether as a result of new
information, future events or otherwise. For more information,
please contact: In China: Mr. Gareth Tang Chief Financial Officer
China Agritech, Inc. Tel: +86-10-5962-1220 Email: In the U.S.: Mr.
Kevin Theiss / Mr. Valentine Ding Investor Relations Grayling Tel:
+1-646-284-9409 Email: UNAUDITED CONSOLIDATED INCOME STATEMENTS FOR
THE THREE MONTHS ENDED JUNE 30, 2009 and 2008 AND FOR THE SIX
MONTHS ENDED JUNE 30, 2009 and 2008 THREE MONTHS ENDED JUNE 30, SIX
MONTHS ENDED JUNE 30, 2009 2008 2009 2008 Net revenue $20,988,611
$13,376,091 $28,335,987 $20,693,174 Cost of revenue (12,033,792)
(6,851,668)(16,012,477) (10,532,674) Gross profit 8,954,819
6,524,423 12,323,510 10,160,500 Operating expenses Selling expenses
(624,993) (509,136) (1,030,712) (1,215,725) General and
administrative expenses (871,838) (1,050,336) (1,855,513)
(1,923,891) Total operating expenses (1,496,831) (1,559,472)
(2,886,225) (3,139,616) Income from operations 7,457,988 4,964,951
9,437,285 7,020,884 Other income (expense) Interest income 3,451
2,223 6,024 63,896 Exchange gain (loss) (2,609) (180,066) (3,056)
(174,839) Total other income (expense) 842 (177,843) 2,968
(110,943) Income before income taxes 7,458,830 4,787,108 9,440,253
6,909,941 Provision for income taxes (1,601,958) (1,432,715)
(2,316,236) (2,149,994) Net income 5,856,872 3,354,393 7,124,017
4,759,947 Net income attributable to non-controlling interest in a
subsidiary (267,169) (429,814) (481,452) (644,998) Net income
attributable to China Agritech's common stockholders 5,589,703
2,924,579 6,642,565 4,114,949 Other comprehensive income Foreign
currency translation adjustment (22,528) 1,796,515 (124,341)
3,115,178 Comprehensive income 5,567,175 4,721,094 6,518,224
7,230,127 Comprehensive income attributable to non-controlling
interest in a subsidiary (8,814) (220,242) 8,403 (422,123)
Comprehensive income $5,558,361 $4,500,852 $6,526,627 $6,808,004
Basic and diluted weighted average shares outstanding 25,313,241
24,699,615 25,008,123 24,699,615 Basic and diluted net earnings per
share $0.22 $0.12 $0.27 $0.17 UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND DECEMBER 31, 2008 JUNE 30, 2009 DECEMBER
31, 2008 ASSETS (Audited) Current Assets Cash and cash equivalents
$16,515,404 $11,952,235 Accounts receivable, net 43,657,689
34,773,115 Inventories 11,407,386 6,452,618 Advances to suppliers
7,932,329 10,795,357 2,217,631 Prepayments and other receivables
2,484,346 Total Current Assets 81,730,439 66,457,671 Property and
equipment, net 6,357,024 4,496,045 Deposit for equipment -- 749,799
Construction in progress 829,257 961,551 Total Assets $88,916,720
$72,665,066 LIABILITIES AND STOCKHOLDERS'S EQUITY Current
Liabilities Accounts payable $10,719,321 $3,327,281 Accrued
expenses and other payables 2,042,611 221,954 Taxes payable
2,425,039 1,388,897 Total Current Liabilities 15,186,971 4,938,132
Stockholders' Equity China Agritech's stockholders' equity Common
stocks; $0.001 par value, 28,189,615 shares issued and 28,190
24,700 Additional paid in capital 30,558,413 26,148,879 Statutory
reserves 6,072,132 5,425,407 Accumulated other comprehensive
5,713,576 5,837,917 Retained earnings 31,357,438 25,361,597 Total
China Agritech's stockholders' 73,729,749 62,798,500
Non-controlling interest in a -- 4,928,434 Total shareholders'
equity 73,729,749 67,726,934 Total Liabilities and Stockholders'
$88,916,720 $72,665,066 UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR SIX MONTHS ENDED JUNE 30, 2009 AND 2008 JUNE 30, 2009
2008 Cash flows from operating activities: Net income $7,124,017
$4,759,947 Adjustments to reconcile net income to net cash provided
(used) in operating activities: Stock based compensation 2,703 --
Depreciation 320,109 325,033 (Increase) decrease in current assets:
Accounts receivable (8,937,538) (6,937,145) Inventories (4,967,706)
(4.489,150) Advances to suppliers 3,601,066 5,855,985 Prepayments
and other receivables 276,024 (368,677) Increase (decrease) in
current liabilities: Accounts payable 7,467,145 223,689 Taxes
payable 1,038,862 148,219 Accrued expenses and other payable
2,114,634 (241,714) Net cash provided (used) in operating
activities 8,039,316 (723,813) Cash flows from investing
activities: Acquisition of 10% interest in Pacific Dragon
(1,000,000) -- Acquisition of property & equipment (2,200,669)
(363,305) Construction in progress 163,161 (1,794,062) Net cash
used in investing activities (3,037,508) (2,157,367) Cash flows
from financing activities: Net cash provided by financing
activities -- -- Net increase (decrease) in cash and cash
equivalents 5,001,808 (2,881,180) Effect of exchange rate change on
cash and cash equivalents (438,639) (1,583,098) Cash and cash
equivalents, beginning of period 11,952,235 11,852,636 Cash and
cash equivalents, end of period $16,515,404 $7,388,358 Supplement
disclosure of cash flow information: Income taxes paid $1,280,094
$1,837,906 Non-cash Investment and Financing Activity: Offset of
amounts due to/from stockholders $-- $330,032 DATASOURCE: China
Agritech, Inc. CONTACT: In China: Mr. Gareth Tang, Chief Financial
Officer of China Agritech, Inc., +86-10-5962-1220, or ; Or In the
U.S.: Mr. Kevin Theiss / Mr. Valentine Ding, Investor Relations,
Grayling, +1-646- 284-9409, or / Web site:
http://www.chinaagritechinc.com/
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