Beijing, China
January 19, 2012
- Internally developed seeds accounted for 41.7% of total FY2011 seed revenues
- Invested US$7.05 million, equivalent of 7.89% of Total FY2011 Revenues to R&D
Origin Agritech Limited ("Origin" or the "Company"), a technology-focused supplier of crop seeds in China, today announced unaudited financial results for the year ended September 30, 2011. These unaudited year end results reflect the Company's financial statements during the period from October 1, 2010 to September 30, 2011. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.
FY 2011 Major Corporate Events
- Reached a licensing agreement with a multinational partner to develop high-yield corn varieties incorporating the Origin Agritech glyphosate-resistant and Bt-traits
- Established an exclusive subsidiary in Xinjiang province with a prominent local partner for hybrid seed production and distribution to the northwest region in China
- Liquidation of our stake in Jilin Changrong High-tech Seed Limited ("Jilin Changrong")
- Completed the strategic leadership transition: Dr. Gengchen Han is now the Chairman, President and CEO of Origin; Dr. James Chen joins Origin as the new CFO; Mr. Larry K. Cordell joined Origin as the Chair of the Audit committee and an independent Director.
Dr. Gengchen Han, Chairman, President and Chief Executive Officer of Origin Agritech, commented, "The Chinese seed industry is entering the next growth phase, in which we believe the prospective demand for high quality products will continue to rise. Fundamentals such as the rising food consumption and stabilizing planting area continue to bode very positive for the seed industry in general while individual crop segments also demonstrate promising growth prospects. Diversifying use for corns such as manufacturing animal feed continues to provide robust support in driving up corn price. Rising exports is expected to further boost the growth of rice seed industry."
"In addition, recently implemented key industry policies will raise the barrier of entry and considerably favor industry leaders with established, high-yielding seed product portfolio and vertically integrated research and development capabilities. In response, we have proactively started strategic initiatives such as expanding our hybrid seed conditioning and production capabilities, establishing new marketing channels in the Northwest, proceeding with our GMO applications, and most recently have completed our strategic leadership transition. We are confident that our recent initiatives would pay off in capturing new growth opportunities in the short run and further strengthening our competitive position."
UNAUDITED FINANCIAL RESULTS OVERVIEW
During the fiscal year 2011, we generated revenues of RMB567.43 million (US$89.29 million), a slight decrease of 2.98% from September 30, 2010 with RMB584.86 million (US$87.28 million). This slight decrease was mainly due to lower production at our corn seeds production base in southern China, where a severe drought presented extreme difficulty for farming.
The decline in sales quantity in corn seeds was somewhat offset by a 17.25% price increase, netting a 2.92% year-over-year decrease in total hybrid corn seed revenues in fiscal 2011. Constrained capacity also limited economies of scales, hence impacting the gross margin for corn seeds.
Our gross profit for the fiscal year ended September 30, 2011 were RMB195.84 million (US$30.82 million), compared with RMB231.27 million (US$34.51 million) during the previous fiscal year. The gross profit decline is mainly due to the decrease in the production of corn because of adverse weather in seed production area, the increase in the rental fee of farmer's land, and the intense industry competition. Lack of economies of scale in turn negatively impacted our profitability.
Total net operating expenses for the year ended September 30, 2011 were RMB183.23 million (US$28.83 million), up 9.75% from the same period one year ago with RMB166.95 million (US$24.91 million). Selling and marketing expenses were RMB56.83 million (US$8.94 million) for the fiscal year ended September 30, 2011, compared with RMB52.23 million (US$7.79 million) for the fiscal year ended September 30, 2010. General and administrative ("G&A") expenses were RMB86.75 million (US$13.65 million) for the year ended September 30, 2011, compared with RMB78.71 million (US$11.75 million) for the same period last year. Research and development ("R&D") expenses were RMB44.77 million (US$7.05 million) for the year ended September 30, 2011, up 16.72% from September 30, 2010 with RMB38.36 million (US$5.72 million). The increase was due in part to increase in salary expenses, staff benefits and grant of stock options as related to our performance equity plans of RMB 14.32 million (US$2.14 million). Other income, net were RMB5.12 million (US$0.81 million) for the fiscal year ended September 30, 2011, compared with RMB2.34 million (US$0.35 million) for the fiscal year ended September 30, 2010.
Income from operations for the year ended September 30, 2011 were RMB12.61 million (US$1.99 million), compared with the income from operations from September 30, 2010 of RMB64.32 million (US$9.60 million).
Net loss attributable to Origin for the fiscal year of 2011 was RMB 23.08 million (US$3.63 million) compared with a net profit attributable to Origin of RMB49.05 million (US$7.32 million) in the year ended September 30, 2010. Of note, this amount included the net loss from the liquidation of our investment of Jilin Changrong of RMB13.58 million (US$2.14 million).
Balance Sheet
As of September 30, 2011, we had approximately RMB129.94 million (US$20.45 million) in cash and cash equivalents. The liquidation of a Jilin Changrong negatively affected the cash position. As part of the liquidation, we have RMB 45 million of receivable from liquidation of Changrong in other current asset. Inventory was RMB 210.83 million for the fiscal year end, down from RMB 434.11 million on June 30, 2011. Plant and equipment was increased to RMB 190.09 million from RMB 166.60 million on June 30, 2011.
Statement of Cash Flow
Net cash provided by operating activities was RMB37.46 million (US$5.89 million) for the fiscal year ended September 30, 2011 compared to net cash of RMB298.61 million (US$44.56 million) for the fiscal year ended September 30, 2010. This decrease was primarily due to a net loss of RMB12.78 million (US$2.01 million) in fiscal year 2011, and the increase in the advances to growers and suppliers. Net cash used by investing activities was RMB154.39 million (US$24.30 million) for the year ended September 30, 2011. The increase in net cash used was in part due to the liquidation of a subsidiary-Changrong of RMB 67.98 million (US$10.70 million) and purchase of plant and equipment, intangible assets, respectively to RMB56.33 million (US$8.86 million) and RMB19.20 million (US$3.02 million). Net cash used in financing activities was RMB55.74 million (US$8.77 million) for the year ended September 30, 2011.
The goods already sold and delivered to customers can be seen as Deferred Revenue line on the balance sheet and the Advances from Customers records the advance cash receipts from customers this selling season.
Long Term R&D Catalysts
Glyphosate resistance and Bt corn, as highly successful products elsewhere in the world, remain "industry changers" in China. Origin Agritech retains the exclusive license rights to these specific traits, and expects to be the first company to commercialize these crops in China.
We have roughly 100 total hybrid products in the market, and have successfully developed our own proprietary hybrid seed varieties since 1998. As of September 2011, we have 25 proprietary corn seed products, 19 proprietary rice seed products, 7 proprietary cotton seed products and 1 proprietary canola seed products that are in commercial production and distribution. Currently, we have 10 breeding stations and employ 125 full time research personnel. Origin's longstanding, education-based distribution platform enables us to introduce higher quality products into the marketplace, as Origin's associated infrastructure affords us the ability to successfully launch genetically modified products.
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