China Nutrifruit Group Limited Announces Record Fourth Quarter and Fiscal Year 2010 Results
- Fiscal year 2010 net sales climbs 29.2% year-over-year to $72.9 million
- Fiscal year 2010 net income reaches $19.2 million, or $0.51 per diluted share
- Affirms FY 2011 Guidance
DAQING, China, June 28 /PRNewswire-Asia-FirstCall/ -- China Nutrifruit Group Limited (NYSE Amex: CNGL) ("China Nutrifruit" or "the Company"), a leading producer of premium specialty fruit-based products in China ("PRC"), today announced its financial results for its fourth quarter and fiscal year ended March 31, 2010.
Fourth Quarter Fiscal Year 2010 Highlights
-- Record net sales increased 26.5% year-over-year to $26.4 million
-- Gross profit increased 42.6% year-over-year to $11.5 million, with
gross margin of 43.6%
-- Operating earnings was $8.9 million, with operating margin of 33.5%
-- Net income was $6.7 million, or $0.17 per diluted share
-- In March 2010, the Company ceased production of its beverage products
to focus on core high-margin products
"We are very pleased to have finished fiscal year 2010 with exceptional top line and bottom line performance, highlighted by full year operating margins of over 35% and net income and EPS that exceeded expectations. Our performance this year was driven by continued strong consumer demand for the premium fruit and fruit juice products due to stronger domestic consumption and a growing focus on healthy living," commented Mr. Changjun Yu, Chairman of China Nutrifruit. "I am very pleased to note that China Nutrifruit generated $21.7 million in cash from operations and ended the fiscal year with $35.6 million in cash and no debt, providing us with the flexibility to continue to finance significant expansion using internal resources. The new capacity we added in advance of our production season last year contributed to a strong second half, and ongoing focus on higher margin product categories should put us on track for sustainable earnings growth."
Fourth Quarter Fiscal Year 2010 Results
Net sales for the fourth quarter of fiscal year 2010 increased 26.5% to $26.4 million, as compared to $20.9 million in the same quarter of fiscal 2009. The strong growth in sales was attributable to the increase in sales volume driven by the Chinese Lunar New Year festival, strong market demand and the positive effect of the Chinese government's economic stimulus package. During the fourth quarter, net sales from concentrated juice products, which accounted for 55.2% of total net sales, were $14.6 million. Net sales from glazed fruit reached $6.4 million, contributing 24.3% of the net sales during the quarter compared to 6.3% in the prior year primarily due to increased sales of the Company's new blueberry glazed fruit product.
Gross profit for the fourth quarter of fiscal year 2010 increased 42.6% to $11.5 million, from $8.1 million for the same period a year ago. Gross margin was 43.6% for the fourth quarter of fiscal year 2010, up significantly from 38.7% in the year ago period. The increase in gross margin was mainly due to the recovery of the international apple concentrate juice price and increase in raspberry concentrate juice selling price. The gross margin of concentrate juice increased 11.8% from 36.7% in the fourth quarter of fiscal year 2009 to 43.4% in the fourth quarter of fiscal year 2010.
In the fourth quarter of fiscal year 2010, selling, general, and administrative expenses were $2.7 million, down from $12.0 million in the same period last year. Selling expenses were $1.0 million, or 3.6% of net sales, compared to $0.9 million, or 4.4% of net sales, in the fourth quarter of fiscal 2009. General and administrative ("G&A") expenses were $1.7 million, down 84.5% from $11.1 million a year ago, which included non-cash compensation of $9.5 million related to the release of 2.8 million shares from escrow in the fiscal fourth quarter of 2009 related to achieving the 2009 net income make good target associated with the Company's August 2008 private placement. The Company achieved its net income make good target in fiscal 2010, but was not required to record a similar expense in fiscal 2010 due to changes in fair value accounting under ASU No. 2010-05 issued by the FASB in January 2010.
Operating earnings in the fourth quarter of fiscal year 2010 were $8.9 million compared to operating loss of $3.9 million, in the comparable period last year. Excluding the non-cash compensation expense related to achieving the make good target associated with the August 2008 private placement, operating earnings for the quarter increased 57.6% from non-GAAP operating earnings of $5.6 million in the same period of fiscal 2009.
The Company recorded other income of $312,069 in the fourth quarter of fiscal 2010, primarily related to the gain on disposal of its beverage production line.
Provision for income taxes was $2.5 million compared to $1.3 million a year ago.
Net income in the fourth quarter of fiscal year 2010 was $6.7 million, or $0.17 per diluted share compared to net loss of $5.4 million, or a loss of 0.16 per diluted share, a year ago. Excluding the non-cash compensation expenses, net income for the quarter rose 62.3% from non-GAAP net income of $4.1 million in the same quarter of fiscal year 2009. The calculation of diluted earnings per share for the fourth quarter of fiscal 2010 is based on 40.0 million weighted average shares outstanding compared to 33.5 million in the same quarter of fiscal 2009.
Full Year Financial Results
For fiscal year ended March 31, 2010, net sales were $72.9 million, up 29.2% from $56.4 million in fiscal 2009, primarily due to the increased sales volume of the Company's glazed fruit, concentrated juice and concentrated pulp products. Net sales from glazed fruit, which accounted for 22.8% of fiscal 2010 total net sales, increased to $16.6 million, up 169.5% from $6.2 million the prior year. Net sales from concentrated juice, which accounted for 47.5% of fiscal 2010 total net sales, were $34.7 million, up 19.9% from $28.9 million in fiscal 2009 while sales from concentrate pulp grew to $9.4 million, up 36.8% from $6.9 million in fiscal 2009. Among the Company's concentrated juice products, sales of golden berry and blueberry surged 26.7% and 31.3% to $9.3 million and $10.9 million, respectively. Net sales from nectar, which accounted for 9.5% of net sales, was $7.0 million, down 6.3% from $7.4 million in fiscal 2009. Net sales of fresh fruits accounted for 3.0% of net sales and totaled $2.2 million, down 9.0% from $2.4 million in the last fiscal year. Sales from beverages accounted for 4.2% and 8.2% of total revenue in fiscal year 2010 and 2009, respectively. In March 2010, the Company ceased the production of beverages and focus on its core high-margin products.
Gross profit increased 35.0% to $33.3 million from $24.6 million a year ago. Gross margin was 45.6% in fiscal year 2010 compared to gross margin of 43.7% in 2009. The increase was mainly because the Company recorded increased sales volume of high-margin glazed fruit products relative to fiscal 2009. Net income for the fiscal year ended March 31, 2010 was $19.2 million, or $0.51 per diluted share, compared to $4.5 million, or $0.14 per diluted share in fiscal 2009. Excluding the impact of the non-cash compensation expenses, non-GAAP net income for fiscal 2009 was $14.0 million, or $0.42 per diluted share. The calculation of diluted earnings per share for fiscal 2010 is based on 38.0 million weighted average shares outstanding compared to 33.5 million in fiscal 2009.
Financial Condition
As of March 31, 2010, China Nutrifruit had $36.0 million in cash and cash equivalents, $4.8 million in total liabilities with no long-term debt and working capital of $47.5 million. Shareholders' equity was $65.8 million as of March 31, 2010, compared to $26.8 million as of March 31, 2009. For the year ended March 31, 2010, the Company generated $21.7 million in cash flow from operating activities.
Business Outlook
China Nutrifruit plans to begin trial production by September of 2010 at its new fruit and vegetable powder production facility in Daqing, with an annual capacity of 10,000 tons. The Company expects to ramp up to large-scale production in October 2010 based on a large number of anticipated customer orders.
China Nutrifruit is currently upgrading all of its fruit concentrate production lines at the Company's facilities in Daqing and Mu Dan Jiang, which have a total fruit concentrate annual production capacity of 9,960 tons. The upgrade will include purchase of additional equipment and implementation of advanced production techniques, resulting in more efficient use of raw materials that is expected to have a favorable impact on gross margins. The upgrades are scheduled to be completed before the production season begins in July 2010 and any improvements will be reflected in financial results for fiscal 2011.
The Company affirms previously issued fiscal 2011 guidance. For fiscal year 2011, the Company expects approximately $90-$95 million in revenue and net income of approximately $22-$23 million.
"The Chinese economy, standards of living and disposable income continue to improve, leading to greater health awareness among the population. As a result, we expect strong consumer spending to drive demand for specialty fruit products in the year ahead," said Mr. Yu. "In addition, we are very excited about our entry into the new, high growth segment for fruit and vegetable powders, as these are experiencing rising demand from a variety of downstream processed food companies who are currently largely served by more expensive foreign suppliers. This expansion leverages our installed equipment base, expertise and distribution channels and has the potential to moderate the seasonality of our business over time. Based on the market feedback from distributors and end customers, we are confident that our new fruit and vegetable powder business will make a major contribution to our financial results in the year ahead and provide an attractive return on investment."
Conference Call Information
Management will conduct a conference call at 10:00 a.m. Eastern Time on Monday, June 28, 2010 to discuss its fourth fiscal quarter and fiscal 2010 results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-380-4607. International callers should dial +1-702-928-6995. The conference ID number for the call is 83092426. If you are unable to participate in the call at this time, a replay will be available on Monday, June 28, 2010 at 11:00 a.m. Eastern Time, through Monday, July 12, 2010. To access the replay, dial 800-642-1687. International callers should dial +1-706-645-9291. The conference ID number for the replay is 83092426.
Use of Non GAAP Financial Information
During the quarter ended March 31, 2009, the Company recorded $9.5 million in non-cash compensation expense related the Company's August 2008 private placement. The Company has presented non-GAAP operating income, net income and diluted earnings per share excluding the impact of this expense on its financial results for the three months and fiscal year ended December 31, 2009. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results related to the Company's historical performance. The additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies. Management believes that these non-GAAP financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these non-GAAP measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Moreover, management believes that these non-GAAP measures reflect the essential operating activities of the Company. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of each non-GAAP measure to the nearest GAAP measure appears in a financial table at the end of this press release.
About China Nutrifruit Group Limited
Through its subsidiary Daqing Longheda Food Company Limited, China Nutrifruit, is engaged in developing, processing, marketing and distributing a variety of food products processed primarily from premium specialty fruits grown in Northeast China, including golden berry, crab apple, blueberry and raspberry. The Company's processing facility possesses ISO9001 and HACCP series qualifications. Currently, the Company has established an extensive nationwide sales and distribution network throughout 20 Provinces in China. For more information, please visit http://www.chinanutrifruit.com .
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements include, among others, those concerning our projections for the new fruit and vegetable powder manufacturing facility, expected financial performance in FY2011 and strategic and operational plans, our expectations regarding the market for our products, our expectations regarding the continued growth of the specialty fruit market, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended March 31, 2009, and other risks and uncertainties mentioned in our other reports filed with the Securities and Exchange Commission. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.
- Financial Tables Follow -
CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED MARCH 31,
Three months
FY 2010 FY 2009 ended March 31,
2010 2009
Net sales $72,916,955 $56,418,837 $26,416,955 $20,885,771
Cost of sales (39,655,534) (31,777,733) (14,896,453)(12,807,967)
Gross profit 33,261,421 24,641,104 11,520513 8,077,804
Selling expenses (3,547,236) (2,929,881) (946,617) (924,981)
General and
administrative
expenses (3,976,627) (12,408,747) (1,716,089)(11,052,993)
Operating earnings 25,737,558 9,302,476 8,857,807 (3,900,170)
Other income
(expenses)
Interest expense -- (480,201) -- (174,241)
Other income 70,233 31,730 $21,662 $19,135
Gain on disposal of
property and
equipment 290,407 -- 290,407 --
Total other income
(expenses) 360,640 (448,471) 312,609 (193,376)
Earnings before
noncontrolling
interests and income
taxes 26,098,198 8,854,005 9,169,876 (4,055,276)
Provision for income
taxes (6,849,438) (4,127,577) (2,470,513) (1,336,797)
Earnings before
noncontrolling
interests 19,248,760 4,726,428 6,699,363 (5,392,073)
Noncontrolling
interests -- (209,308) -- --
Net earnings 19,248,760 4,517,120 6,699,363 (5,392,073)
Earnings per share
Basic $0.55 $0.14 $0.18 ($0.16)
Diluted $0.51 $0.14 $0.17 ($0.16)
Weighted average
number of common
stock outstanding
Basic 36,153,554 33,431,434 36,239,451 33,431,433
Diluted 38,050,549 33,451,676 40,027,823 33,451,676
CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31,
2010 2009
ASSETS
Current assets:
Cash and cash equivalents $35,994,443 $4,768,542
Proceeds from private placement held
in escrow account 931,630 --
Trade receivables, net of allowance 11,047,846 11,423,996
Inventory, net 4,179,910 3,692,892
Other current assets 116,196 481,679
Total current assets 52,270,025 20,367,109
Property and equipment, net 17,066,907 16,614,930
Deferred tax assets 1,068,878 1,406,814
Land use rights, net 185,686 189,303
TOTAL ASSETS $70,591,496 $38,578,156
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Other payables and accrued expenses $2,379,246 $2,675,983
Trade payables 87,954 260,322
Income taxes payable 2,296,513 1,416,835
Total current liabilities 4,763,713 4,353,140
Non-current liabilities:
Due to shareholders -- 7,407,748
TOTAL LIABILITIES 4,763,713 11,760,888
Commitments and Contingencies
Shareholders' equity
Preferred stock
Authorized: 5,000,000 shares, par
value $0.001 -- --
Issued and outstanding: 365,109 shares at
March 31, 2010 (Nil at March 31, 2009) 365 --
Common stock
Authorized: 120,000,000 shares, par
value $0.001 -- --
Issued and outstanding: 36,573,272
shares at March 31, 2010;
(36,125,754 shares at March 31, 2009) 36,573 36,126
Additional paid-in-capital 36,492,875 16,746,971
Statutory reserves - restricted 4,564,345 2,873,880
Accumulated other comprehensive income 440,714 425,675
Retained earnings 24,292,911 6,734,616
TOTAL SHAREHOLDERS' EQUITY 65,827,783 26,817,268
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $70,591,496 $38,578,156
CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31,
2010 2009
Cash flows from operating activities:
Net earnings $19,248,760 $4,517,120
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Noncontrolling interests -- 209,308
Depreciation and amortization 1,593,811 1,049,739
(Gain)/loss on disposal of property and
equipment (290,407) 289
Deferred income taxes 337,936 (531,259)
Share-based payments 117,000 --
Stock compensation cost -- 9,519,317
Changes in operating assets and
liabilities:
Trade receivables 391,901 (9,404,994)
Inventories (481,732) (1,678,154)
Other current assets 365,509 (364,374)
Trade payables (172,675) 94,590
Amount due to an affiliate -- (59,169)
Other payables and accrued expenses (319,909) 2,159,113
Income taxes payable 877,429 789,452
Net cash provided by operating activities 21,667,623 6,300,978
Cash flows from investing activities:
Cash outflow from acquisition of
subsidiaries -- (6,836,284)
Purchases of property and equipment (2,738,855) (13,123,980)
Proceeds from disposal of property and
equipment 1,038,273 3,924
Net cash used in investing activities
(1,700,582) (19,956,340)
Cash flows from financing activities:
Proceeds from private placement held in
escrow account (931,630) --
Proceeds from borrowings -- 7,266,893
Repayment of borrowings
-- (10,173,650)
Amounts due to shareholders -- 7,370,153
Proceeds from private placement 13,309,000 8,578,706
Cost of raising capital (1,094,279) (1,294,421)
Net cash provided by (used in) financing
activities 11,283,091 11,747,681
Effect of exchange rate on cash and cash
equivalents (24,231) (428,626)
(Decrease) increase in cash and cash
equivalents 31,225,901 (2,336,307)
Cash and cash equivalents at beginning of
year 4,768,542 7,104,849
Cash and cash equivalents at end of year $35,994,443 $4,768,542
Supplemental disclosure of cash flows
information:
Cash paid for:
Interest $-- $450,236
Income taxes $5,634,883 $3,893,159
Supplemental disclosure of non-cash
information:
Issuance of common stock $117,000 $--
Issuance of warrant $326,705 $331,357
Capital contribution $7,414,995 $--
Stock compensation $-- $9,519,317
CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
Reconciliation of non-GAAP Operating Income, Net Income and Diluted
Earnings per Share
(in thousands except per share data)
For the For the Fiscal
quarter ended Year ended
March 31, 2009
Net income as reported under GAAP (5,392,073) 4,517,120
Add: Non-cash stock compensation
expense (1) 9,519,317 9,519,317
Adjusted Net Income 4,127,244 14,036,437
Diluted Earnings Per Share reported
under GAAP ($0.16) $0.14
Add: Non-cash stock compensation
expense per share (1) $0.28 $0.28
Adjusted Diluted Earnings Per Share $0.12 $0.42
Diluted weighted average number of
common stock outstanding 33,451,676 33,451,676
Operating Income (Loss) as reported
under GAAP (3,900,170) 9,302,476
Add: Non-cash stock compensation
expense (1) 9,519,317 9,519,317
Adjusted Operating Income 5,619,147 18,821,793
(1) Non-cash stock compensation expense recorded in the fourth quarter of
2009 related to the release of 2,799,799 shares from escrow to the
Company's majority shareholder, Mr. Kung.
For more information, please contact:
Company Contact:
Mr. Colman Cheng, Chief Financial Officer
China Nutrifruit Group Limited
Phone: +852-9039-8111
Email: [email protected]
Web: http://www.chinanutrifruit.com
Investor Relations Contact:
Mr. Crocker Coulson, President
CCG Investor Relations
Phone: +1-646-213-1915 (NY office)
Email: [email protected]
Web: http://www.ccgirasia.com
Elaine Ketchmere, Partner
Email: [email protected]
Phone: +1-310-954-1345 (LA office)
SOURCE China Nutrifruit Group Limited
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