Beijing, China
May 7, 2013
Origin Agritech Limited ("Origin", or the "Company"), a technology-focused supplier of crop seeds in China, today announced unaudited financial results for the second quarter ended March 31, 2013. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.
FINANCIAL RESULTS OVERVIEW
During the second quarter of fiscal year 2013, the Company generated revenues of RMB27.5 million (US$4.4 million) compared with RMB14.7 million for the three months ended March 31, 2012. The year-over-year increase in revenues was mainly due to corn seed toll production businesses, contract businesses where Origin produces and processes corn seeds for other seed companies. The new Xinjiang Origin facility gives us the flexibility and capacity to expand our business in different segments and markets. We toll manufactured corn seeds during the production and processing trial run in the 2012 planting season. The majority of Origin's revenues are recorded in the fiscal third and fourth quarters as a result of our revenue recognition policy.
Deferred revenues were RMB461.1 million (US$73.6 million) as of March 31, 2013 compared with RMB480.7 million on March 31, 2012. Deferred revenues on March 31, 2012 included RMB24.9 million of deferred government subsidies. Excluding such subsidies, deferred revenues from the Company's core businesses increased 1.2% year-over-year.
Deferred revenues mainly reflect the value of Origin's crop seeds after: a) sales arrangement is confirmed; b) delivery to the customer is made; and c) pre-payment from the customer is received, but before the final sales price is fixed and determined. The final sales price is primarily determined by sales incentives that Origin offers to its customers. It is expected that the majority of these deferred revenues will be recorded on the income statement in the fiscal third and fourth quarters.
Gross profit for the second quarter of fiscal 2013 was RMB6.7 million (US$1.1 million) compared with a gross loss of RMB2.9 million in the second quarter of fiscal 2012. Increase in the gross profit is mainly due to the earnings from corn seed toll production in Xinjiang Origin.
Total operating expenses for the second quarter ended March 31, 2013 decreased 14.3% year-over-year to RMB30.3 million (US$4.8 million) from RMB35.3 million for the same period in 2012. Recent corporate restructuring has led to lower operating expenses. Selling and marketing expenses were RMB8.8 million (US$1.4 million) for the second quarter of fiscal 2013, a decrease of 14.4% from RMB10.3 million for the same period last year mainly due to lower advertisement and transportation costs. General and administrative expenses were RMB13.3 million (US$2.1 million) for the second quarter ended March 31, 2013, down 26.1% from RMB18.0 million one year ago. This cost decline was mainly due to expense control measures adopted since last year. Research and development expenses increased to RMB9.3 million (US$1.5 million) in the second quarter of fiscal 2013 from RMB7.6 million one year ago, mainly due to higher compensation for research staff and the addition of research personnel during the period.
Operating loss for the second quarter of 2013 amounted to RMB23.5 million (US$3.8 million) compared with an operating loss of RMB38.2 million for the same period in fiscal 2012.
Net loss for the second quarter of fiscal 2013 was RMB27.8 million (US$4.4 million), or net loss per diluted share of RMB1.19 (US$0.19), compared to a net loss of RMB37.1 million, or net loss per diluted share of RMB1.58 in the same period one year ago. Improvements in both operating results and net results were mainly due to the contribution from corn seed toll production business in Xinjiang Origin and lower operating expenses.
BALANCE SHEET
As of March 31, 2013, cash and cash equivalents were RMB188.9 million (US$30.1 million) and shareholders' equity attributable to the Company was RMB210.6 million (US$33.6 million). The Company had short-term loans of RMB125.6 million (US$20.0 million) and long-term borrowing of RMB60.6 million (US$9.7 million). Short-term loans were mainly for working capital, while long-term borrowing was used for the Xinjiang Origin corn seed production facilities.
Advances from customers were RMB290.2 million (US$46.3 million) as of March 31, 2013. These advances represent cash receipts for orders in the upcoming selling season.
The Chinese government has recently increased its efforts to support leading crop seed companies, especially companies with national Breed-Produce-Distribute Vertically-Integrated Crop Seed Licenses (BPDVI License). As one of the first 32 companies nationwide to have been awarded the BPDVI seed license, Origin has received RMB14.1 million (US$2.2 million) in government subsidies from various levels of government during the current fiscal year. These subsidies are booked under "other payables and accrued expenses" on the balance sheets. With increasing government attention focused on crop seed technologies, further government supports are expected to help strengthen the Company's leading position in seed technology, production, and distribution.
In February 2013, the board of directors approved a share repurchase program for open market and negotiated transactions for a 12 month period in the amount of $5 million, under which 133,854 shares were bought in the NASDAQ market as of March 31, 2013, in compliance with US securities laws.
Founded in 1997 and headquartered in the Zhong-Guan-Cun (ZGC) Life Science Park in Beijing, Origin Agritech Limited is China's leading agricultural biotechnology company specializing in crop seed breeding and genetic improvement, seed production, processing, distribution, and related technical services. Leading the development of crop seed biotechnologies, Origin Agritech's phytase corn was the first transgenic corn to receive the Bio-Safety Certificate from China's Ministry of Agriculture. Over the years, Origin has established a robust biotechnology seed pipeline including products with glyphosate tolerance and pest resistance (Bt) traits. Origin operates production centers, processing centers and breeding stations nationwide with sales centers located in key crop-planting regions. Product lines are vertically integrated for corn, rice and canola seeds. For further information, please visit the Company's website at: www.originseed.com.cn
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