Bodisen Biotech, Inc.
“The First China Based Environmentally Friendly Bio
Fertilizer Company Listed on a U.S. Stock Exchange,
and Dual Listed in London ”
AMEX: BBC LSE AIM: BODI
www.bodisen.com
Safe Harbor Statement
This presentation contains "forward-looking statements" within the
meaning of the “safe-harbor” provisions of the Securities Litigation
Reform Act of 1995. Such statements involve known and unknown risks,
uncertainties and other factors that could cause the actual results of the
Company to differ materially from the results expressed or implied by such
statements, including changes from anticipated levels of sales, future
national or regional economic and competitive conditions, changes in
relationships with customers, access to capital, difficulties in developing
and marketing new products, marketing existing products, customer
acceptance of existing and new products, and other factors. Accordingly,
although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no assurance that
such expectations will prove to be correct. The Company has no
obligation to update the forward-looking information contained in this
presentation.
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Investment Highlights
Ranked the 16th fastest growing company in China (Forbes China January ’06)
One of China’s largest manufacturers of Organic Fertilizers, Liquid Fertilizers, Insecticides and
Pesticides; over 60 different organic agricultural products certified by the Chinese government
Profitable with 124% YOY revenue growth and 236% YOY net profit growth in Q1
Strong gross margin of 30%+ versus 5% gross margin industry average
Strong balance sheet with $26 million in cash and no long term debt
Highly experienced management team, extensive product distribution network in China
through more than 500 nationwide wholesale distributors
Favorable market environment
AMEX listed, ~US$200m market cap; dual listed on the London Stock Exchange AIM market
Institutional ownership 14%
Insider ownership 40%
3
Board and Management
Wang Chunsheng (43) Chief Operations Officer Wang Chunsheng joined Bodisen in
2001. Prior to this, from 1999 - - 2001, he was Vice General Manager of the Shaanxi
Bodisen Chemical Co. Ltd., with responsibility for sales and marketing. From 1997 -
1999, he was a Senior Sales Manager with Ling Kangyuan Agriculture Chemical
Company.
Bo Chen (50) President (19.7% shareholder) Chen Bo is one of Bodisen’s founders.
From 1999- 2001, he was Chief Operations Officer and Chief Technology Officer of
Shaanxi Bodisen Chemical Co., Ltd; and from 1994 to 1999, he was the Chief Executive
Officer and President of Yang Ling Shikanglu Chemurgical Technology Development
Co., Ltd.
Karen Qiong Wang (41) Chairman and Chief Executive Officer (20.6%
shareholder) Wang Qiong founded Bodisen in 2001. She has over 10 years of
experience in the fertilizer and chemical industries and from 1999 - 2001 was Chief
Executive Officer and President of Shaanxi Bodisen Chemical Co., Ltd. From 1997 -
1999, she was President of Yang Ling Kang Yuan Chemical Company, which specialized
in the research and development of agricultural products. Wang Qiong is a Deputy
within the Peoples’ Congress and in 2004 was Woman of the Year, as voted by the China
National Women’ Association. She is the only female CEO of a China based company
listed on a US stock exchange.
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Board Majority Independent Directors
David Gatton ( 52) Non-executive Director
David Gatton joined Bodisen’s Board in 2004. Since 1985, he has been Chairman and
President of Development Initiatives, Inc, a Washington, D.C. – based government
relations firm specializing in urban affairs, business development, public/private
strategies and marketing, serving a variety of public and private clients.
Patrick McManus (51) Non-executive Director
Patrick McManus joined Bodisen's Board in 2004. He was elected Mayor of Lynn,
Massachusetts in 1992, serving until 2002 when he retired to private law and
accountancy practice in 2002. Mr. McManus is a Professor of Business and Finance at
Salem State College in Massachusetts and is a Certified Public Accountant and holds a
Juris Doctorate.
Yiliang Lai (40) Chief Financial Officer
Yiliang Lai joined Bodisen in 2005 as Financial Controller, and became Chief Financial
Officer later that year. He has also worked for Xi’an Hongsheng Biotech since 2002 as
Chief Financial Officer. Prior to this, he was Head of Accounting at Shaanxi Kaida
Limited, an auditor at the CPA firm ShenZhen CaiXin, and an accountant at China
Shipping. Mr Lai is a Certified Public Accountant in China as well as a Certified Auditor.
5
Market Opportunity
China is one of the world’s largest fertilizer markets:
9% GDP growth in the last 20 years, population 1.3 billion; 750 million are farmers that have
$400 average annual income per household.
Each farming household has less than 2 acres of planting area, spends 20% of annual household
income on fertilizer and pesticides purchases, and is therefore highly sensitive to fertilizer quality
and costs
China is responsible for approximately 35% of the world’s fertilizer consumption – more than
45m tons annually, of which 20% is imported * (Versus U.S. annual consumption of
approximately ~20m tons)
China’s fertilizer industry is a $17 billion per year business, consisting of chemical fertilizers and organic natural
fertilizers (less than 10% is organic based)
Approximately $1 billion highly fragmented annual organic fertilizer market (of which Bodisen produces about
3%)
History of intensive farming using chemical fertilizers has destroyed soil quality, depleted soil
nutrients, decreased crop yields and created large scale water pollution
Sources: Food & Agriculture Organisation of the UN, 2005 Earth Policy Institute, China Ministry of Agriculture IFA
Agriculture Conference presentation by Yande Zeng, Vice Director of Crop Production (March 2006)
6
Market Opportunity
China only has 9% of world’s arable land available to feed 21% of the world population*
Trend towards organic / ‘green’ foods grown on organic fertilizers
Sales rising 15%-30% per annum** buoyed by burgeoning middle class
Growth of supermarket chains and higher selling prices for organic foods
Government supported green initiative
Farmers’ shift towards higher income economic crops
From low value, land-intensive farming (rice, wheat etc.)
To higher value, labour intensive farming (fruit and vegetables)
Government actions**
To improve agricultural yields and output
To reduce dependence on food imports
Amendment of land ownership laws that encourage farming
Tax incentives for farmers and suppliers - elimination of agricultural tax in 2006 reduces the tax
burden to farmers by 15.5%
Bodisen enjoys two year income tax exemption through end of 2007, renewable thereafter
(regular income tax on agricultural product companies is 15%)
* Source: IFA Presentation, March 2006 by Yande Zeng, Ministry of Agriculture, China
** The China Ministry of Agriculture
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Growth Strategies
Capitalize on farmers’ demand for higher crop yields and consumers’ demand for healthy
organic foods grown from Bodisen’s certified organic fertilizers
Continue to expand Bodisen brand name
One of China’s “Most Recognized” agricultural brands*
More than 500 distributors nationwide
Sales strategy leverages power of 3rd party endorsements from farmers to build brand
power
Capitalize on fundamental shift from chemical fertilizer use to organic fertilizers
Despite raising prices twice during Q1, the company grew revenues to more than $10.5
million, from $4.7 million in 2005
Leverage China’s favorable agricultural market environment (no sales tax, no value
added tax, no income tax)
*Source: China Light Industry Product Quality Assurance Centre
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Growth Strategies Cont…
Planned acquisition and/or build out of new manufacturing facilities
in Northwest and Northeast China farm regions (where the Bodisen
brand is already well known) by end of 2006 to position company for
strong revenue growth in 2007, subject to normal conditions involved
with acquisitions and/or construction
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Bodisen products increase quality, yields, shelf-life, crop taste and resistance to disease of a wide range of crop types and
replenish nutrients to over-farmed soil – a one stop agricultural products provider that addresses complete farming needs
Organic Compound Fertilizer (~66% of sales) – wheat, tobacco, vegetables
Increases soil nutrient levels by up to 20%
Dissolves phosphorus and potash fertilizer which otherwise cannot be absorbed by soil
Sold in 50kg bags with net income margin of 16% - 25%
Organic Liquid Fertilizer (~20% of sales) – 60% to 90% net income margin, fruit and other
crops
Increases crop yield through photosynthesis
Reduces time to harvest and resistance to diseases
Pesticides (~14% of sales*) – 25% - 30% net income margin
Eliminates and guards against disease while promoting resistance to pests
A One-Stop Solutions Provider of Agricultural Products
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Efficient R&D Process
Bodisen products are manufactured based on proprietary agricultural technology
in a sophisticated manufacturing process involving strict quality control
Product patents in the Chinese market are not advisable due to lack of IP
protection
Company’s own research team works closely with agricultural universities and
research laboratories on contracted research work, which results in regular new
product launches and low R&D spending
University labs have significant research capabilities and are not-for-profit, making
collaboration with agricultural universities both effective and cost efficient
ISO 9001 certified modern manufacturing process and facilities
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New Product Launch
Entry into highly profitable agricultural raw materials business
(announced in Feb 2006)
The expected Fall 2006 completion of a new 100,000 square foot
manufacturing facility will initiate production of Mancozeb – an essential
ingredient used in plant fungicide production for pesticides
Facility will increase Mancozeb production density by more than 15% to 20%
compared to competitors’ production
Completion of the facility is expected to make Bodisen one of the largest
manufacturers of Mancozeb in China
Historically net profit margins of 30% - 40%
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Sales and Marketing
Highly efficient distribution channels through direct sales and marketing to rural
communities throughout China – Bodisen has one of the largest agricultural product
distribution networks in China
Sales via nationwide wholesale distribution network, enabling deep penetration into
wholesalers and end-user farmers
Bodisen brands are marketed through print media, TV weather channels, agricultural
trade fairs and conventions, including the most important trade shows that take place
in November each year. The Company books a majority of next year product sales
at these two events:
Agriculture Hi-Tech Exhibition (1,000 exhibitors, 1.1-1.5 million visitors)
Plant Protection Exhibition (2,000 exhibitors, 0.5 million visitors )
Direct education to farming communities in collaboration with agricultural
universities and government sponsored laboratories
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China
* Source: Food & Agriculture Organisation of the UN
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Favorable Environment
Highly fragmented organic compound fertilizer industry: most are small-scale
manure processors that cannot label products as certified “organic”
Bodisen believes that it is the only agricultural product company that
addresses complete planting needs of farmers: compound fertilizers for
improving soil nutrient levels; liquid fertilizers for stronger leaves and flowers;
pesticides for plant protection and healthy plant growth – certified as
“organic” by the Chinese government and are sold year round, resulting in
less seasonal volatility
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Favorable Environment Cont…
Limited foreign competition: global fertilizer companies do not have organic
product lines for the Chinese market, they also lack cultural understanding of the
Chinese agricultural industry (DuPont exited local fertilizers market, Mosaic and
Agrium are experiencing sales declines to China, and Bunge has no presence in
China). As a result, Bodisen has enjoyed nearly 100% annual sales growth in
recent years
Presently, no operator in China has national recognition (other than Bodisen)
across organic biology compounds, liquid fertilizers and pesticides
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Fundamentally Changing China’s Fertilizer Industry
Compared to chemical fertilizers, Bodisen has significant
advantages:
Environmentally friendly vs. chemical fertilizers that harm soil
conditions
Bodisen products are dissolved in soil within 48 hours of application. Phosphate
chemical fertilizers may not dissolve in soil for years and, like other fertilizers, can
destroy healthy soil conditions, including hardening of the soil
Significantly higher crop yields and higher farm efficiency
Bodisen products generate up to 15%-35% higher crop yields compared to
chemical fertilizers (depending on the area)
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Fundamentally Changing China’s Fertilizer Industry
Ease of use
Bodisen’s products contain more than 20 ingredients and bioactive agents that only require
one application versus chemical fertilizers, where individual chemical components must be
applied separately. This results in loosened soil, replenished soil nutrients, higher crop yield
and higher crop quality
Bodisen compound fertilizers are sold at similar prices to chemical fertilizers
Government supports organic fertilizers, allowing Bodisen to grab increasing market
share away from chemical fertilizer companies
Higher crop selling prices for “organically grown” produce, generating greater income
for farmers
Crops grown with Bodisen products can be labelled as “organic” and “green” foods, which
command up to 50%-150% higher price points, depending on crop type
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High Barriers to Entry
Established proprietary product lines and proven effectiveness of products
High level of brand recognition by farmers: Bodisen brands are regarded as quality
products that generate higher crop yields. Crop yields can be labelled as “organic” or
“green” foods which command premium prices from end user consumers
Depth of market penetration – to farmers level
Establishment of effective and loyal wholesale market distribution networks that
exclusively distribute Bodisen products
Understanding of unique aspects of marketing to Chinese farmers who are largely
illiterate
Farmers develop strong Bodisen brand loyalty, making it difficult for competitors to
convince farmers to switch to other brands
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Highly Profitable
0.48
0.33
0.13
EPS
7.4
5.0
1.9
Profit before taxation
(1.7)
(0.02)
0.41
Total non - operating cost / income
29.3%
31.1%
18.5%
Net margin
9.1
5.0
1.8
Operating profit
2.4
1.5
1.2
Total operating expenses
37.1%
40.5%
31.8%
Gross margin
11.5
6.6
3.1
Gross profit
31.0
16.2
9.8
Revenue
Year-end
Dec ‘05
US $m
Year-end
Dec ‘04
US $m
Year-end
Dec ‘03
US $m
20
Strong Start to 2006
0.15
0.05
EPS
2.7
.8
Profit before taxation
(0.78)
(0.43)
Total non - operating cost / income
32%
26%
Operating margin
3.5
1.2
Operating profit
.8
.4
Total operating expenses
40%
35%
Gross margin
4.2
1.7
Gross profit
10.5
4.7
Revenue
Quarter-end
March ‘06
US $m
Quarter-end
March ‘05
US $m
21
Strong Balance Sheet - $26 Million in Cash as of
March 2006, Debt Free
31.4
6.3
8.5
13.6
2.1
31 Dec ’05
US $m
13.4
None
1.3
2.1
6.7
12.6
2.2
31 Dec ‘04
US $m
57.1
Net assets
Creditors: greater than 1 year
Creditors: less than 1 year
26.1
Cash
12.9
Receivables
16.2
Tangible assets
2.1
Intangible assets
(land use rights)
31 Mar ’06
US $m
22
Cash Flow
Quarter-end Quarter-end
March ‘05 March ’06
US $m US $m
Cash Flows from Operating Activities (2.4) 1.4
Cash Flows from Investing Activities (0.9) (0.4)
Cash Flows from Financing Activities 4.0 19.1
Cash & Equivalents Beginning Balance 2.1 6.3
Cash & Equivalents Ending Balance 2.8 26.1
Net Increase in Cash & Equivalents 0.7 19.8
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Highlights
Financial results for the three months ended March 2006
124% increase in revenues from Q1 ‘05
236% increase in net income from Q1 ‘05
Continued success of increased marketing and distribution efforts
Acquisition of 8.6% (2,063,768 shares) of China Natural Gas, Inc. for $2.85m (Stock
symbol: CHNG, price on May 18, ’06: $3.13), reducing costs on key raw materials
which requires natural gas to manufacture
Announced $43m in new contracts signed in November ’05 from two national
agricultural product trade shows for ‘06 product delivery, representing 70% - 80% of
next year (’06) sales
Dual listing in London in Feb 2006 added $19 million in net proceeds to balance sheet,
debt free, $26 million in cash
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Strong Share Liquidity
Dual Listing on LSE and Amex
Listed on Amex: August 2005; Dual listed on the London Stock
Exchange AIM market February 2006
12m British Pounds (US$21.36 million) completed through IPO on London AIM:
1,643,836 new shares placed with a small number of large UK institutional investors:
IPO was 3.5 times over-subscribed by institutions
The largest China-based company listed on the London AIM market
Use of proceeds: Two new facility expansion projects, each has capacity and revenue
potential similar to existing facility of 200,000 tons of compound fertilizers annually;
and further development of marketing campaigns; sufficient cash based on current
business plan.
Dual listing and capital raise advised by London investment bank Charles Stanley,
reporting accountant Deloitte & Touch, law firms Reed Smith and Jones Day, and
Bodisen’s US and China advisors, New York Global Group and its Beijing-based
China subsidiary
Total fully-diluted shares outstanding: 17,374,691
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Bodisen Biotech, Inc.
A fast growing, highly profitable business
Favorable market environment: government promotes sector and offers tax incentives
A market leader in China’s organic fertilizer industry, large customer base, serves China’s
largest population group – 750 million farmers
Proven, scaleable, and high margin business model with a nationally recognized brand name
High barriers to entry for competitors, end user consumers demand organic foods and are
willing to pay higher prices which substantially improve farmers’ profit margins
Net profit margin approximately 30%, compared to chemical fertilizer companies which
typically have net profit margins of approximately 5%
Rapid growth in revenue and net income, strong balance sheet and cash position
Strong earnings potential in 2006 and 2007 in continued favorable environment
Strong share liquidity with broad institutional and insider ownership of shares
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Contact Bodisen
Investor Relations:
The Piacente Group, Inc.
E.E. Wang/Debra Chen
212-481-2050
WWW.BODISEN.COM
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