China New Borun Announces First Quarter 2011 Financial Results

BEIJING, May 11, 2011 /PRNewswire-Asia/ – China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced unaudited financial results for the first quarter of 2011.

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented, "It is our pleasure to share with you another quarter of strong financial performance.  We solidly executed on all aspects of our business plans, as we flawlessly ramped up production of our new Daqing Phase III facility while maintaining full utilization of our other facilities.  During the quarter we experienced solid revenue growth resulting from both strong demand and price increases for edible alcohol, coupled with expanded capacity."

Mr. Wang added, "The quarter also saw us complete purchases at locked-in prices of adequate supplies of corn for production during the non-harvest season. This means that we can operate more efficiently, as with assured supplies we can have better capacity utilization. And locked-in prices on our corn supplies provide us assured input costs on our production.  We believe our superior operating scale and brand recognition will continue to be key winning criteria to China's large baijiu producers, which will continue to provide us with greater pricing power and business visibility.  We are confident that our advantages in operating efficiencies and sourcing and our leading market position will continue to enable us to perform well throughout the remainder of 2011."

First Quarter 2011 Financial Highlights

• Total revenue increased 47.1% to RMB571.8 million ($87.2 million(1)) from RMB388.8 million in the first quarter of 2010.

• Gross profit increased 46.0% to RMB127.1 million ($19.4 million) from RMB87.1 million in the first quarter of 2010.

• Net income increased 32.8% to RMB77.6 million ($11.8 million) from RMB58.5 million in the first quarter of 2010.

• Diluted earnings per American Depositary Share ("ADS") were RMB3.02 ($0.46) for the quarter ended March 31, 2011. Each ADS represents one of the Company's ordinary shares.

(1) This press release contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars for the quarter ended March 31, 2011, were made at a rate of RMB6.5564 to USD1.00 as published by the People’s Bank of China on March 31, 2011. China New Borun Corporation makes no representation that the Renminbi or US dollar amounts referred to in this press release could have been or could be converted into US dollars or Renminbi, at any particular rate or at all.

First Quarter 2011 Financial Performance

First quarter 2011 revenue increased by 47.1% year-over-year to RMB571.8 million ($87.2 million) from RMB388.8 million in the same period of 2010.  The increase was primarily due to the following:

• Revenue from edible alcohol increased by 49.6% to RMB411.5 million ($62.8 million) in the first quarter of 2011 compared to RMB275.1 million in the first quarter of 2010 as a result of increases in volume and the increase in price of edible alcohol during this period, driven by the strong demand of the edible alcohol market and deployment of our Daqing Phase III facilities. Sales volume increased by 22.4% to 74,252 tons in the first quarter of 2011 and sales price increased by 22.3% to RMB5,542 per ton.

• Revenue from DDGS Feed increased by 30.5% to RMB91.1 million ($13.9 million) in the first quarter of 2011, compared to RMB69.8 million in the prior year period, due to increases in volume. Sales volume increased by 44.8% to 56,547 tons due to deployment of our Daqing Phase III facilities and improved production yield. After we deep-process corn germ into crude corn oil, we can collect the residuals from corn germ to produce more DDGS.  Sales price decreased by 9.9% to RMB1,612 per ton in the first quarter of 2011.

• Revenue from Corn Germ increased by 11.0% to RMB47.5 million ($7.2 million) in the first quarter of 2011 compared to RMB42.8 million in the first quarter of 2010, primarily driven by the increase in sales per ton during this period. Sales price increased by 10.1% to RMB3,579 per ton in the first quarter of 2011.  The sales volume was 13,268 tons during this quarter.  After installation of our crude corn oil equipment in our Daqing facilities in the first quarter of 2011, we began to deep-process corn germ into crude corn oil in our Daqing facilities from March 2011.

• Liquid carbon dioxide, a new by-product, began contributing revenue in July 2010. Revenue from liquid carbon dioxide was RMB13.1 million ($2.0 million) in the first quarter and the sales volume was 27,139 tons at a price per ton of RMB482.

• Crude corn oil, a new by-product of our Daqing facilities, began contributing revenue in March 2011. Revenue from crude corn oil was RMB8.6 million ($1.3 million) in the first quarter and the sales volume was 1,060 tons at a price per ton of RMB8,142.

During the first quarter of 2011, gross profit increased by 46.0% to RMB127.1 million ($19.4 million) from RMB87.1 million in the prior year period.  Gross margin for the first quarter of 2011 decreased slightly to 22.24% from 22.40% due to the ramping up of Daqing Phase III facilities.

Operating income increased by 38.8% to RMB111.7 million ($17.0 million) in the first quarter of 2011, from RMB80.5 million in the same period of 2010, reflecting the Company's strong revenue growth.

Selling expenses increased by 89.1% to RMB1.2 million ($0.2 million) in the first quarter of 2011 compared to RMB0.6 million in the same period in 2010. The higher expenses in the first quarter of 2011 were primarily due to additional sales activities to support our expanded capacity.

General and administrative expenses increased by 137.5% to RMB14.3 million ($2.2 million) in the first quarter of 2011 compared to RMB6.0 million in the same period of 2010, reflecting an increase in administrative staff costs, professional fees and other expenses in connection with maintaining the Company's status as a publicly-traded company.

Income tax expenses in the first quarter of 2011 were RMB26.3 million ($4.0 million), representing an effective tax rate of 25.3%, increasing from RMB20.3 million in the same period of 2010. As the effective tax rate remained relatively stable, the increase was consistent with the increase of income before income tax expenses.

Net income increased 32.8% to RMB77.6 million ($11.8 million) in the first quarter of 2011, compared to RMB58.5 million in the same quarter of 2010.  Diluted earnings per share and per ADS were RMB3.02 ($0.46) in the first quarter of 2011.  The Company had 25.725 million weighted average diluted shares outstanding during the quarter ended March 31, 2011.

As of March 31, 2011, the Company had cash and bank deposits of RMB254.8 million ($38.9 million), compared to RMB341.0 million as of December 31, 2010.  Cash flows provided by operating activities for the year ended March 31, 2011 were approximately an outflow of RMB48.7 million ($7.4 million) due to increased cash payment for corn storage for 2011 non-harvest season.

Financial Outlook

The Company estimates that its revenue for the second quarter of 2011 will be in the range of RMB690 million ($105.2 million) to RMB710 million ($108.3 million), an increase of approximately 59.5% to 64.2% over the same quarter of 2010.

This forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call

The Company will hold an earnings conference call at 8:00 am ET on May 12, 2011 to discuss the results and highlights from the first quarter 2011 and answer questions from investors.  The dial-in number and passcode for the conference call are as follows:

A telephone replay will become available beginning two hours after the conclusion of the call and will be available through May 19, 2011. The dial-in number and conference ID to access the replay are as follows:

Additionally, a live and archived webcast of the conference call will be available in the Investor Relations section of Borun's website at http://ir.chinanewborun.com.

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol in China.  Borun's edible alcohol products are primarily sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage that is sold throughout China in retail stores, restaurants and bars. The Company also produces DDGS Feed, Corn Germ, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production.  China New Borun is based in Shouguang, Shandong Province.  Additional information about the company can be found at http://www.chinanewborun.com and in documents filed with the U.S. Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

Contact Information

Three Part Advisors, LLC
John Palizza
Phone: +1 281 727 6775
Email: [email protected]

SOURCE China New Borun Corporation

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