Tianli Agritech Reports Third Quarter 2012 Results
Company generated $4.7 million in cash from operations YTD2012
WUHAN CITY, China, Nov. 12, 2012 /PRNewswire/ — Tianli Agritech, Inc. (NASDAQ:OINK – News), a leading producer of breeder and market hogs headquartered in Wuhan City, China, today announced its financial results for the quarter ended September 30, 2012.
Third Quarter 2012
Sales for the third quarter of 2012 fell 19% to $6.6 million primarily due to the drop in prices for market hogs and a reduction in the number of breeder hogs sold in the three months ended September 30, 2012 compared to the same period a year ago. The Company sold a combined total of 29,702 breeder and market hogs in the third quarter of 2012 compared to 25,519 hogs in the comparable period in 2011.
As a result of increased competition from exporters to China and softer demand from hog farms in China, sales of Tianli breeder hogs declined 26% in the third quarter of 2012. In terms of the number of breeders sold, Tianli sold 6,405 breeder hogs in the third quarter of 2012, down 11% from 7,169 breeder hogs sold in the same period last year. The average sales price for breeder hogs was $289, down 17% from the third quarter of 2011. Breeder hog revenues in the three months ended September 30, 2012 comprised 28% of revenues for the quarter.
Tianli sold approximately 27% more market hogs in the third quarter of 2012 than it did in the same period of 2011, though the average price per market hog decreased by 33% as a result of both lower market prices and the Company's decision to sell hogs at a younger age when they weigh less than they would at full maturity. As a result, sales revenue attributable to market hogs fell by approximately 16%. The primary reason for the reduction in the prices for market hogs in this quarter compared to 2011 was the competition from imported pork, which sell for less than domestic pork.
Sales by Products
Gross profit in the third quarter was $0.6 million, an 83% decrease from the same period last year. Gross margin was 9.5% in the third quarter of 2012 compared to 42% in the third quarter of 2011. The decline in gross margin is a result of lower sales prices and significantly higher feed costs. Gross margin for breeder and market hogs was 32% and 1%, respectively, for the third quarter of 2012.
Selling, general and administrative ("SG&A") expenses were $1.6 million in the third quarter of 2012, an increase of approximately $1.0 million from $0.6 million in the third quarter of 2011. The primary cause of the year-over-year increase in SG&A expenses was $1.1 million of non-cash stock-based compensation paid to the Company's sales and marketing agents and employees related to black hog sales.
Tianli generated an operating loss of $1.1 million in the three months ended September 30, 2012 compared to operating income of $2.9 million in the same period a year ago.
Net income from continuing operations for the three months ended September 30, 2012 was a loss of $1.1 million, down 139% from the same period last year. EPS per fully diluted share were ($0.10) compared to $0.29 for the comparable quarter last year. The weighted average number of shares outstanding was approximately 11.0 million and 10.1 million for the 2012 and 2011 periods, respectively.
"We are managing our business for the long term and are prepared to weather short term competitive forces," began Tianli's Chairwoman and CEO, Ms. Hanying Li. "Despite very challenging market conditions for breeder and market hogs in China currently, we are generating positive cash flows from operations. Our ability to quickly turn our hog inventory into cash, along with our investments in our Black Hog program, differentiates Tianli from other hog operators. We remain focused on maintaining a solid financial position in order to capitalize on the ongoing industry consolidation."
Sales for the nine months ended September 30, 2012 were $19.7 million, down 9% from $21.7 million in the same period a year ago. Tianli sold 84,831 hogs in the first nine months of 2012 compared to 76,128 hogs sold in the corresponding period in 2011, an increase of 11%. Sales of breeder hogs and market hogs were $6 million and $13.7 million in the first nine months of 2012, down 23% and 2%, respectively, from the corresponding period a year ago.
Gross profit decreased 71% to $2.7 million, representing a gross margin of 14%.
Operating expenses were $2.7 million, up $0.7 million from $2.0 million in the first nine months of 2011. The Company had operating income of approximately $0.04 million compared to operating income of $7.2 million in the same period a year ago.
Net income from continuing operations for the nine months was a loss of $0.1 million compared to net income of $7.2 million in the year to date period in 2011. EPS for the first nine months of 2012 was ($0.01) based on 10.4 million weighted average shares outstanding.
As of September 30, 2012, the Company had $7.5 million in cash, compared to $6.5 million as of December 31, 2011. Working capital was $8.9 million, down from $12.0 million as of December 31, 2011. Because the Company conducts its hog sales on cash on delivery basis, it has low levels of accounts receivable outstanding, which totaled $0.2 million at September 30, 2012. Inventories were $9.6 million, unchanged from the end of 2011.
Tianli generated approximately $4.7 million of cash from operating activities and spent $5.4 million on capital expenditures and breeding stock during the first nine months of 2012, primarily to support its Enshi Black Hog program. It is envisioned that Tianli will fund construction of up to 800 program farms by the end of this year, of which over 497 program farms have been completed and put into use as of September 30, 2012.
The Company began selling Black Hogs raised through the first 75 farms it has partnered with in Enshi during the second quarter of 2011. Through the third quarter of the year the Company has sold approximately 1,590 Black hogs to processors in the province who in turn sold Tianli's high-quality Black Hog meat at retail locations. The Company has also begun conversations with two major food retailers in northern China where its sales agents in an effort to secure retail placements. The average sales price per Black Hog is approximately 1,600 RMB, or 10% higher than the current market price for standard market hogs in China.
In March 2012, Tianli commenced construction of a 3,210 square meter feed facility located in Laifeng County, Enshi Area. Through the end of the second quarter, it has completed construction of the office building, warehouse and barns. Construction of the facility has been completed and the Company is awaiting receipt of appropriate certifications which will allow the facility to commence operations. The new feed facility can support 100,000 hogs.
About Tianli Agritech, Inc.
Tianli Agritech, Inc. is in the business of breeding, raising and selling hogs in the People's Republic of China. The company is focused on growing high quality hogs for sale for breeding and meat purposes. The company conducts genetic, breeding and nutrition research to steadily improve its production capabilities.
This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.
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SOURCE Tianli Agritech, Inc.
|Company Codes: NASDAQ-NMS:OINK|