| Contact: | |
| Yuhe International, Inc. | CCG Investor Relations Inc. |
| Mr. Vincent Hu, CFO | Mr. Crocker Coulson, President |
| Phone: +86-536-7300-667 | Phone: +1-646-213-1915 (New York) |
Email: vincent.hu@yuhepoultry.com | Email: crocker.coulson@ccgir.com |
| www.yuhepoultry.com | Mr. Graham Reed, Financial Writer |
| | Phone: +1-646-213-1915 |
| | Email: graham.reed@ccgir.com |
| | www.ccgirasia.com |
Yuhe International Inc. Reports Strong First Quarter 2009 Results
Weifang, Shandong Province, P.R.C. May 15, 2009 – Yuhe International, Inc. (OTC BB: YUII) (“Yuhe” or “the Company”), a leading supplier of day-old chickens raised for meat production, or broilers, in the People’s Republic of China (“PRC”), today announced strong financial results for the first quarter of its 2009 fiscal year.
Yuhe’s reported financial statements represent the consolidated results of Weifang Yuhe Poultry Co. Ltd. (“PRC Yuhe”) and Weifang Taihong Feed Co. Ltd. (“Taihong”), the Company’s two operating subsidiaries, from January 1, 2009 to March 31, 2009. For comparison purposes, the Company has provided a pro forma consolidated statement of operations for PRC Yuhe and Taihong for the three months ended March 31, 2008. These pro forma results are presented (in Table 4 below) and discussed because the Company considers them useful for investors as more indicative of the underlying performance of the business as currently constituted for the periods presented.
First Quarter 2009 Highlights
| · | Revenue for the quarter was $10.9 million, up 320.6% compared to pro forma revenue in the first quarter of 2008 |
| · | Gross profit for the quarter was $4.1 million, up 961.3% from pro forma gross profit in the same period last year |
| · | Operating income was $3.2 million, up from a pro forma operating loss of $78,466 a year earlier |
| · | Net income was $2.9 million, or $0.19 per basic and diluted share, up from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic and diluted share for the same period in 2008 |
“We are pleased to start out our 2009 fiscal year with such strong top and bottom line growth,” stated Mr. Zhengtao Gao, chief executive officer of Yuhe International Inc. “In the first quarter of 2009, the broiler market remained strong despite the macro economic slowdown in China. With our mature breeder stock and recently expanded operations, we were able to take full advantage of favorable market conditions and generate excellent financial results in the quarter.”
First Quarter 2009 Results
Total reported revenue for the first quarter of 2009 equaled $10.9 million, up 320.6% from $2.6 million in pro forma revenue for the three month period ended March 31, 2008. The increase in revenues was driven by the increase in sales volume to 23.1 million day-old broilers in the first quarter of 2009 from 4.8 million birds in the same period a year earlier. The increase in sales volume was partially offset by a decrease in selling price to RMB 2.99 per bird in the first quarter of 2009 from RMB 3.27 per bird one year ago. The increase in sales volume was the result of an expansion in production capacity as well as an increase in parent breeder volume at the end of 2008.
Gross profit increased 961.3% to $4.1 million in the first quarter of 2009, compared to $0.4 million in pro forma gross profit in the prior year period. Gross margin was 37.2% compared to pro forma gross margin of 14.8% during the same period in 2008. The increase in gross margin was mainly attributable to the Company reaching a normal level of productivity in 2009 versus a low level of productivity in the first quarter of 2008.
Selling, general and administrative expenses for the first quarter of 2009 were $0.8 million, up 81.5% compared to pro forma operating expenses of $0.5 million for the first quarter of 2008. Selling expenses were $93,000 compared to $78,000 in the same period of 2008. The increase in selling expenses was primarily due to an increase in sales volume. Administrative expenses were $0.7 million in the three months ended March 31, 2009, up from $0.4 million in the same period of 2008. The increase in administrative expenses was mainly attributable to expenses associated with being a public company.
Operating income for the first quarter of 2009 totaled $3.2 million, up from a pro forma operating loss of $0.1 for the same period in 2008. Operating margin was 29.6% for the first quarter of 2009.
Net income for the three months ended March 31, 2009 was $2.9 million, or $0.19 per diluted share, up from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic and diluted share, for the same period last year. For the first quarter of 2009 there were 15.7 million fully diluted weighted shares outstanding versus 10.1 million fully diluted weighted shares outstanding in the prior year period.
Financial Condition
As of March 31, 2009, the Company had $18.1 million in cash and cash equivalents, up from $13.4 million at December 31, 2008. Working capital was $18.7 million and the Company had a current ratio of 2.7 to 1. Shareholders equity stood at $44.8 million compared to $41.6 million at the end of 2008. Cash flows from operating activities in the first quarter of 2009 were $4.4 million.
The company plans to utilize its increase in cash for upcoming capital construction projects.
Business Outlook
For the remainder of 2009, Yuhe will remain focused on its capital construction plan, adding a third hatchery and two additional breeder farms with 100,000 sets of parent breeders each. In addition, the Company expects a new feed plant, currently under construction by Nongbiao Purina, will be finished during the second quarter of 2009. Once operational, Yuhe will perform quality analysis tests on Nongbiao Purina’s feed. If Nongbiao Purina’s feed meets Yuhe’s quality requirements, the production facility will become Yuhe’s sole feed supplier while its current in house feed production facility will cease operations.
For the fiscal year 2009 Yuhe International Inc. is forecasting $50 million in revenues and $13 million in net income with an anticipated sales volume of 110 million day old breeders. This exceeds the Company to meet its make good provision of $41.0 million in revenues and $12.3 million in net income.
“With a positive start to the new year, we look forward to continued growth throughout the remainder of 2009. In 2008, we saw uneven growth throughout the year due to a variety of one time factors. During the third quarter, many of our downstream customers lowered demand as they were forced to shut down due to electricity conservation measures and pollution restrictions put in place by the government due to the Olympics. What’s more, our production was uneven as we ramped up capacity throughout the year. In 2009 we expect to exhibit more consistent results from quarter to quarter now that many of our expansion projects have been completed and are operational,” stated Mr. Gao.
“While the recent outbreak of swine flu in North America has heightened concerns over livestock-borne illness, we foresee no imminent threats to our operations or the poultry industry in general in China. On the contrary, after the last outbreak of bird flu several years ago, the government implemented stringent safety and hygiene measures in the broiler industry. Yuhe not only meets, but exceeds these standards as we view product quality and safety as our top priority. As a result, we remain confident about trends in our operations and in the industry as a whole,” Mr. Gao concluded.
Upcoming Events
Yuhe International, Inc. will present at the upcoming China Rising Investment Conference to be held on May 18, 2009 at the Yale Club in New York. During the conference, Yuhe’s management will be available for one-on-one meetings.
Conference Call
The Company will host a conference call at 10:00 a.m. eastern time on Monday, May 18, 2009 to discuss results for the first quarter of fiscal year 2009. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-888-419-5570. International callers should dial +1-617-896-9871. When prompted by the operator, mention conference pass code 208 590 72. The call will be available to replay beginning at 12:00 p.m. eastern time for fourteen days after it occurs. If you would like to listen to the replay, please dial 1-888-286-8010 or +1-617-801-6888 from outside the US and enter pass code 21975169.
About Yuhe International, Inc.
Founded in 1996, Yuhe is the second largest day-old broiler breeder in China. The Company’s main operations involve breeding, as all broilers are sold within a day of hatching. With headquarters in Weifang, Shandong Province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd. which largely supplies the Company’s internal demand for chicken feed. Currently, 85% of the Company’s sales are in Shandong province with a customer base of 27 local agents. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com.
Cautionary Statement
This press release contains forward-looking statements concerning the Company’s business, products and financial results. The Company’s actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company’s control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
- FINANCIAL TABLES FOLLOW-
Table 1 YUHE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Stated in US Dollars)
| | | For The Three Months Ended | |
| | | March 31 | |
| | | 2009 | | | 2008 | |
| | | | | | | |
| Net revenue | | $ | 10,914,390 | | | $ | 1,103,551 | |
| Cost of revenue | | | (6,852,353 | ) | | | (874,707 | ) |
| Gross profit | | | 4,062,037 | | | | 228,844 | |
| | | | | | | | | |
| Operating Expenses | | | | | | | | |
| Selling expenses | | | (92,940 | ) | | | (48,540 | ) |
| General and administrative expenses | | | (743,990 | ) | | | (260,969 | ) |
| | | | | | | | | |
| Total operating expenses | | | (836,930 | ) | | | (309,509 | ) |
| | | | | | | | | |
| Income (loss) from operations | | | 3,225,107 | | | | (80,665 | ) |
| | | | | | | | | |
| Non-operating income (expenses) | | | | | | | | |
| Bad debts recovery | | | - | | | | 13,145 | |
| Interest income | | | 96 | | | | 158 | |
| Other income | | | 15,509 | | | | 5,900 | |
| Interest expenses | | | (325,427 | ) | | | (180,474 | ) |
| Other expenses | | | (465 | ) | | | (30,545 | ) |
| Total other income (expenses) | | | (310,287 | ) | | | (191,816 | ) |
| | | | | | | | | |
| Net income (loss) before income taxes | | | 2,914,820 | | | | (272,481 | ) |
| Income taxes | | | - | | | | - | |
| | | | | | | | | |
| Net income (loss) | | $ | 2,914,820 | | | $ | (272,481 | ) |
| | | | | | | | | |
| Other comprehensive income | | | | | | | | |
| Foreign currency translation | | | 48,272 | | | | 417,921 | |
| Comprehensive income | | $ | 2,963,092 | | | $ | 145,440 | |
| | | | | | | | | |
| Earnings (Loss) per share | | | | | | | | |
| Basic | | $ | 0.19 | | | $ | (0.03 | ) |
| Diluted | | $ | 0.19 | | | $ | (0.03 | ) |
| | | | | | | | | |
| Weighted average shares outstanding | | | | | | | | |
| Basic | | | 15,722,178 | | | | 10,146,353 | |
| Diluted | | | 15,722,178 | | | | 10,146,353 | |
Table 2 YUHE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
| | | March 31, | | | December 31, | |
| | | 2009 | | | 2008 | |
| | | (unaudited) | | | | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 18,091,979 | | | $ | 13,412,205 | |
| Accounts receivable, net of allowances of $18,845 and $18,845 | | | 904 | | | | 902 | |
| Inventories | | | 7,076,604 | | | | 6,644,961 | |
| Advances to suppliers | | | 4,521,030 | | | | 4,472,509 | |
| | | | | | | |
| Total current assets | | | 29,690,517 | | | | 24,530,577 | |
| | | | | | | | | |
| Plant and equipment, net | | | 26,751,684 | | | | 27,112,276 | |
| Deposits paid for acquisition of long term assets | | | 2,219,243 | | | | 2,280,988 | |
| Notes receivable, net and other receivable, net | | | 103,228 | | | | 74,720 | |
| Unlisted investments held for sale | | | 299,804 | | | | 299,427 | |
| Intangible assets, net | | | 2,897,034 | | | | 2,909,752 | |
| Due from related companies | | | 3,669,798 | | | | 3,706,589 | |
| Deferred expenses | | | 596,287 | | | | 604,973 | |
| | | | | | | |
| Total assets | | $ | 66,227,595 | | | $ | 61,519,302 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| Current liabilities: | | | | | | |
| Accounts payable | | $ | 5,661,377 | | | $ | 4,606,055 | |
| Current portion of long term loans | | | 292,158 | | | | 1,356,832 | |
| Other payables | | | 1,225,619 | | | | 937,535 | |
| Accrued expenses and payroll related liabilities | | | 2,000,062 | | | | 2,125,587 | |
| Advances from customers | | | 725,807 | | | | 673,528 | |
| Loan from director | | | 292,158 | | | | 291,792 | |
| Other liabilities | | | 286,107 | | | | 285,132 | |
| Due to related companies | | | 491,095 | | | | 210,633 | |
| | | | | | | |
| Total current liabilities | | | 10,974,383 | | | | 10,487,094 | |
| | | | | | | | | |
| Non-current liabilities | | | | | | | | |
| Long-term loans | | | 10,488,489 | | | | 9,410,289 | |
| | | | | | | | | |
| Total liabilities | | | 21,462,872 | | | | 19,897,383 | |
| | | | | | | | | |
| Commitments and contingencies | | | - | | | | - | |
| | | | | | | | | |
| Stockholders' Equity | | | | | | | | |
| Common stock at $.001 par value; authorized 500,000,000 shares authorized, 15,722,178 equivalent shares issued and outstanding | | | 15,722 | | | | 15,722 | |
| Additional paid-in capital | | | 30,123,728 | | | | 29,944,016 | |
| Retained earnings | | | 13,437,493 | | | | 10,522,673 | |
| Accumulated other comprehensive income | | | 1,187,780 | | | | 1,139,508 | |
| | | | | | | |
| Total stockholders’ equity | | | 44,764,723 | | | | 41,621,919 | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 66,227,595 | | | $ | 61,519,302 | |
Table 3 YUHE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
| | | For The Three Months Ended | |
| | | March 31 | |
| | | 2009 | | | 2008 | |
| | | | | | | |
| Net cash provided by (used in) operating activities | | $ | 4,386,943 | | | $ | (2,544,215 | ) |
| | | | | | | | | |
| Cash flows from investing activities | | | | | | | | |
| Deposit paid and acquisition of property, plant and equipment | | | (41,133 | ) | | | (248,616 | ) |
| Advance to notes receivable | | | (335 | ) | | | (11,036,697 | ) |
| Acquisition of subsidiaries | | | - | | | | (10,567,946 | ) |
| Proceeds received from related parties receivables | | | 41,442 | | | | - | |
| Advance to related companies | | | - | | | | (208,458 | ) |
| | | | | | | | | |
| Net cash used in investing activities | | | (26 | ) | | | (22,061,717 | ) |
| | | | | | | | | |
| | | | | | | | |
| Proceeds from loan payable | | | - | | | | 778,870 | |
| Proceeds from related party payable | | | 275,336 | | | | 1,285,168 | |
| Capital contribution by shareholder | | | - | | | | 12,149,750 | |
| Proceeds from common stock sale - net of offering costs | | | - | | | | 12,205,586 | |
| | | | | | | | | |
| Net cash flows provided by financing activities: | | | 275,336 | | | | 26,419,374 | |
| | | | | | | | | |
| Effect of foreign currency translation on cash | | | 17,521 | | | | 124,985 | |
| | | | | | | | | |
| Net increase in cash | | | 4,679,774 | | | | 1,938,427 | |
| | | | | | | | | |
| Cash- beginning of period | | | 13,412,205 | | | | 1,050,168 | |
| | | | | | | | | |
| Cash- end of period | | $ | 18,091,979 | | | $ | 2,988,595 | |
| | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest paid | | $ | 357,632 | | | $ | 181,474 | |
| Income taxes paid | | $ | - | | | $ | - | |
| | | | | | | | | |
| Non-cash investing activities: | | | | | | | | |
| Transfer of construction in progress to fixed assets | | $ | 1,831,131 | | | $ | - | |
Table 4 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
| | | All amounts, | | | All amounts, | | | All amounts, | |
| | | other than | | | other than | | | other than | |
| | | percentage, in | | | percentage, in | | | percentage, in | |
| | | U.S. dollars | | | U.S. dollars | | | U.S. dollars | |
| | | For the three | | | For the three | | | For the three | |
| | | months | | | months | | | months | |
| | | ended | | | ended | | | ended | |
| | | 31-Mar | | | 31-Mar | | | 31-Mar | |
| | | 2009 | | | 2008 | | | 2008 | |
| | | | | | (Pro forma) | | | (As reported) | |
| Sales revenue | | | 10,914,390 | | | | 2,594,880 | | | | 1,103,551 | |
| Costs of goods sold | | | 6,852,353 | | | | 2,212,145 | | | | 874,707 | |
| Gross profit | | | 4,062,037 | | | | 382,735 | | | | 228,844 | |
| Selling expenses | | | 92,940 | | | | 77,537 | | | | 48,540 | |
| General and administrative expenses | | | 743,990 | | | | 383,664 | | | | 260,969 | |
| Operating (loss) income | | | 3,225,107 | | | | -78,466 | | | | -80,665 | |
| Bad debts recovery | | | - | | | | 233,038 | | | | 13,145 | |
| Interest income | | | 96 | | | | 163 | | | | 158 | |
| Other income | | | 15,509 | | | | 11,504 | | | | 5,900 | |
| Interest expenses | | | 325,427 | | | | 266,641 | | | | 180,474 | |
| Other expenses | | | 465 | | | | 30,545 | | | | 30,545 | |
| Income taxes | | | - | | | | - | | | | - | |
| Net income (loss) | | | 2,914,820 | | | | -130,947 | | | | -272,481 | |
The pro forma financial information above was prepared based on the unaudited financial results for the Company’s Weifang and Taihong subsidiaries for the three months ended March 31, 2008.
The pro forma financial information has been prepared based upon available information and assumptions that the Company believes are reasonable. However, the pro forma financial information is presented for illustrative and informational purposes only and does not purport to represent the Company’s actual results during the corresponding reporting periods nor is it necessarily indicative of the Company’s future performance.
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