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TMCNet:  Deyu Agriculture Posts First Quarter 2014 Results [Professional Services Close - Up]

[May 24, 2014]

Deyu Agriculture Posts First Quarter 2014 Results [Professional Services Close - Up]

(Professional Services Close - Up Via Acquire Media NewsEdge) Deyu Agriculture Corp., a Shanxi Province, China-based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, announced its financial results for the three months ended March 31.


In a release on May 6, the Company noted first quarter 2014 Results: -Net revenue was $15.6 million, as compared to $77.2 million in Q1 of 2013; -Gross loss was $5.3 million, as compared to gross profit $8.8 million in Q1 of 2013; -Gross margin was (34.1) percent, as compared to 11.4 percent in Q1 of 2013; -Net loss available to common stockholders was $9.4 million, as compared to net income of $3.1 million in Q1 of 2013; -Loss per diluted share was $0.87 on 10.8 million shares, as compared to income per diluted share of $0.25 on 12.7 million shares in Q1 of 2013.

"Corn is mainly used as raw material for livestock feeds and deep processed products such as corn starch and ethanol. The demand for corn declined dramatically in 2013. The corn market experienced a downturn, a result of weak demand from the downstream industries with consecutive increases in output in the past few years in China," commented Hong Wang, Acting Chief Executive Officer. "The on- going downturn continued to impact our business in 2014. In the first quarter of 2014, the trend continued. Pork prices continued to decline and the demand of livestock feeds made of corn remained very weak. In addition, the deep processed corn industry has been depressed for a few years. Many deep processed corn companies have been running under production capacity and have not been profitable. Demand for corn in the deep processed corn industry continues to remain very low. The Company is now undertaking a conservative strategy in sales development as a temporary measure to cope with the weak demand in the market." Financial Results for the Three Months Ended March 31, The Company's net revenue for 2014Q1 was $15.6 million, a decrease of $61.6 million, or 79.8 percent, compared to $77.2 million for2013Q1. This decrease was the combined result of a decrease of $27.1 million in corn sales, a decrease of $5.7 million in grain sales and a decrease of $28.8 million in bulk trading sales. Net revenue from our Corn Division for 2014Q1 was approximately $8.3 million, a decrease of $27.1 million, or approximately 76.5 percent, as compared to $35.4 million for 2013Q1. The decrease was mainly the combined result of a decrease of 42.8 percent in sales volume and a decrease of 58.9 percent in the average annual selling price of corn. The decrease was primarily due to a conservative strategy temporarily taken by the Company to cope with the weak demand in the corn market. Net revenue from our Grain Division for 2014Q1 was approximately $6.7 million, a decrease of $5.7 million, or 46.2 percent, as compared to $12.4 million for 2013Q1. The decrease was mainly attributable to the reduction in retail sales caused by the deteriorating efficiency of traditional retail sales. Net revenue from our Bulk Trading Division for 2014Q1 was approximately $0.6 million, a decrease of $28.8 million, or 98.0 percent as compared to $29.4 million for 2013Q1. This decrease was mainly attributable to a conservative strategy temporarily taken by the Company with its bulk trading business.

Gross loss for 2014Q1 was $5.3 million, as compared to gross profit of $8.8 million for 2013Q1. The decrease was a combined result of a decrease in gross profits of $10.5 million in the Corn Division, a decrease of $2.0 million in the Grain Division and a decrease of $1.6 million in the Bulk Trading Division. Our gross margin decreased from 11.4 percent for 2013Q1 to (34.1) percent for 2014Q1. The decrease in gross margin was mainly attributable to the gross loss resulting from the sales of mildewed corn inventory to third parties at prices lower than the cost for 2014Q1. Gross margin for our Corn Division was (68.4) percent for 2014Q1, compared with 13.5 percent for 2013Q1. The Company incurred gross loss of $5.9 million from the sales of the mildewed corn inventory to third parties at prices lower than the cost for 2014Q1. Taking out the impact of disposal of mildewed corn, gross profit and gross margin from the sales of normal corn was $0.2 million and 4.3 percent, respectively. Gross margin from the sales of normal corn decreased 938 basis points, which was primarily due to the weak demand from corn downstream industries. Gross margin for the Grain Division was 9.1 percent for 2014Q1, which decreased by 1190 basis points from 21.0 percent for 2013Q1. This decrease in gross margin was primarily due to the increasing cost of raw materials in addition to the reduction in grain retail sales with higher gross margin. Gross margin for the Bulk Trading Division was (33.9) percent for 2014Q1, compared to 4.9 percent for 2013Q1. This decrease was mainly attributable to the market fluctuation in the first quarter of 2014.

Selling expenses for 2014Q1 were $1.1 million, decreased for $2.1 million, or 65.7 percent from the $3.2 million for 2013Q1. The decrease was mainly attributable to the decline of freight costs caused by the reduction in sales volume. General and administrative expenses for 2014Q1 were $2.7 million, an increase of $0.8 million or 42.2 percent compared to 2013Q1. This increase was primarily due to the increase of allowance for bad debts of account receivables.

As a result of the above, we had net loss available to common stockholders of $9.4 million for 2014Q1 compared to a net income of $3.1 million for 2013Q1.Loss per diluted share was $0.87 on 10.8 million shares, as compared to income per diluted share of $0.25 on 12.7 million shares in Q1 of 2013.

Business Outlook "Given that the decrease in demand of corn from downstream industries, another good corn harvest in 2013 and anticipated increases in corn imports with low prices, we expect the oversupply in the corn market will continue to impact our business in the coming months," said Wang. "The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. At the same time, the Company is continuing its business development initiatives. We expect these measures, together with new business development, will help us get through this difficult period and restore the growth in the future." More information: www.deyuagri.com ((Comments on this story may be sent to newsdesk@closeupmedia.com)) (c) 2014 ProQuest Information and Learning Company; All Rights Reserved.

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