Deyu Agriculture Corp. Announces Fiscal Year 2013 Results and Changes of Officers

BEIJING, April 8, 2014 /PRNewswire/ -- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Shanxi Province, China-based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, today announced its financial results for the fiscal year ended December 31, 2013.

Fiscal Year 2013 Results:

• Net revenue was $246.4 million, a decrease of $7.7 million or 3.0%, compared to $254.0 million in 2012;
• Gross profit was $14.6 million, a decrease of $30.1 million or 67.3%, compared to $44.7 million in 2012;   
• Gross margin was 6.0%, as compared to 17.6% in 2012;
• Net loss available to common stockholders was $26.8 million, as compared to net income of $16.0 million in 2012;
• Loss per diluted share was $2.52 on 10.6 million shares, as compared to income per diluted share of $1.30 on 12.6 million shares in 2012.

The Company also announced that Mr. Greg Chen resigned from his positions as Chief Executive Officer and Director effective as of March 31, 2014 and April 1, 2014, respectively, and effective as of March 31, 2014, Mr. Jan Poulsen resigned from his position as President of the Company. Effective as of April 1, 2014, the Board appointed Mr. Hong Wang, Chairman of the Board of Directors to serve as Acting Chief Executive Officer. The Company intends to replace the vacancy created by the resignation of Mr. Jan Poulsen, in the near future. Effective as of March 31, 2014, the Company closed its New York office.

"2013 was a very difficult year for the Company. Since the beginning of 2013, the corn market has been experiencing weak demand from downstream industries, while the output of the corn harvest continued to increase. China's on-going economic slowdown also impacted the grain and bulk trading businesses," said Mr. Hong Wang, the Acting Chief Executive Officer. "We saw a substantial decrease in gross margins, especially in corn sales, and an increase in the cost of raw materials for grain products, operating expenses, as well as nonrecurring losses including impairment losses of certain assets and corn inventory damages due to weather-related conditions."

"The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. In December 2013, Management conducted a cost-savings, internal control and efficiency assessment review of all of the Company's subsidiaries and divisions, with a particular focus on reducing administrative costs. After the reviews, improved policies were introduced and implemented forthwith," added Mr. Wang.

Financial Results for the Fiscal Year Ended December 31, 2013

The Company's net revenue for Fiscal Year 2013 was $246.4 million as compared to $254.0 million for 2012, representing a decrease of $7.7 million, or 3.0%. This decrease was the combined result of a decrease of $8.5 million in corn sales and a decrease of $32.2 million in grain sales, off-set by an increase of $33.0 million in bulk trading sales. Net revenue from our Corn Division for 2013 was $142.6 million, a decrease of $8.5 million, or 5.6%, as compared to $151.0 million for 2012, which such decrease was primarily due to the weak demand with an oversupply in the corn market. Net revenue from our Grain Division for 2013 was $41.6 million, a decrease of $32.2 million, or 43.6%, as compared to $73.8 million for 2012, which such decrease was mainly attributable to the decline in commercial sales to institutional clients and the decline in retail sales in supermarket and convenience stores. Net revenue from our Bulk Trading Division for 2013 was $62.2 million, an increase of $33.0 million, or 112.9% as compared to $29.2 million for 2012. This increase was mainly attributable to our strategic shift from grain retail sales to wholesale or bulk trading in 2013.

The gross profit for 2013 was $14.6 million, a decrease of $30.1 million, or 67.3%, as compared to $44.7 million for 2012. This decrease was a combined result of an increase in loss on inventory valuation reserves of $4.5 million, a decrease in gross profits of $11.8 million in the Corn Division and a decrease of $14.2 million in the Grain Division, offset by an increase of $0.4 million in the Bulk Trading Division. Our gross margin decreased from 17.6% for 2012 to 5.9% for 2013, which was mainly the combined result of the increase of loss in inventory valuation reserves, the simultaneous decline of gross margin in each division, and the increased sales percentage of our bulk trading business, which had a relatively lower gross margin. Gross margin for our Corn Division was 8.1% for 2013, down from 15.4% for 2012, which was mainly attributable to the weak demand from corn downstream industries coupled with an oversupply of corn from the two good harvests in 2012 and 2013. Gross margin for the Grain Division was 13.2% for 2013, down from 26.7% for 2012, which was primarily due to the increasing cost of raw materials in addition to the strategic shift from grain retail sales to wholesales, which yielded relatively lower gross margins. Gross margin for the Bulk Trading Division was 3.4% for 2013, down from 6.0% for 2012, which was mainly attributable to market fluctuations in 2013 during the current economy slowdown. Loss on inventory valuation reserves increased by $4.5 million for 2013 compared to 2012, which was mainly attributable to the quality deterioration of some of the corn inventories caused by extreme weather conditions and obsolete grain products.

Selling expenses for 2013 were $17.4 million, an increase of $1.3 million, or 8.0% from $16.2 million for 2012, which was mainly the combined result of the increase in freight and handling expenses off-set by a decrease in advertisement and payroll expenses incurred as a result of the reduction of retail sales. General and administrative expenses for 2013 were $13.2 million, an increase of $3.6 million or 37.2% compared to $9.6 million for 2012, which was primarily due to an increase in allowance for bad debts of account receivables and other receivables, the increased expenses for management team enhancement, as well as business development and the increase in taxes related to inter-subsidiary fixed asset transfers. Loss on impairment of asset valuation was $7.3 million for 2013, which represented the impairment loss of the land use rights of farmland, the construction of an uncompleted building and the idle ERP system for retail sales. Extraordinary loss (after taxes) for 2013 represented $1.2 million in inventory loss due to the collapse of our warehouses under a heavy snow storm in April 2013.

As a result of the above, we had net loss available to common stockholders of $26.8 million for 2013 compared to a net income of $16.0 million for 2012. Loss per diluted share was $2.52 on 10.6 million shares for 2013, compared to income per diluted share of $1.30 on 12.6 million shares for 2012.

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 anticipate the oversupply in the corn market will continue to impact our business in the coming months," said Mr. 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."

About Deyu Agriculture Corp.

Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province in the People's Republic of China. We have a nationwide sales network covering manufacturers, grain traders, wholesalers, distributors, institutional clients and retail stores in China. Deyu Agriculture Corp.'s facilities include sophisticated production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company's website is located at www.deyuagri.com.

Safe Harbor Statements

This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the current plans, estimates and projections of Deyu Agriculture Corp.'s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of 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, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company's ability to maintain its competitive position. Additional Information regarding risks can be found in the Company's quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov.

Company Contact:

Ms. Amy He, Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-8273-2870 x8522
Email: [email protected]

Financial Tables

SOURCE Deyu Agriculture Corp.

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED