Deyu Agriculture Corp. Records Strong First Quarter 2012 Results and Schedules Results Conference Call and Webcast

BEIJING, May 16, 2012 /PRNewswire-Asia-FirstCall/ -- Deyu Agriculture Corp. (OTC: DEYU.PK) (the "Company"), a Beijing, 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 first quarter ended March 31, 2012.

First Quarter (Q1) Highlights:

• From Q1 2011 to Q1 2012, revenue increased 71.2% to 62.7 million;
• Corn division sales improved 110.8% to $43.2 million;
• Grain division sales rose 117.5% to $14.7 million;
• Bulk trading division gross margin increased by 437 basis points;
• Gross profit improved 58.4% to $12.4 million;
• Net income available to common stockholders increased 85.7% to $6.2 million
• Earnings per diluted share for the quarter increased 108.3% to $0.50

Summarized First Quarter 2012 Results:

* Represents net income available to common stockholders.
** Earnings per diluted share for the quarter of $0.50 on 12.6 million shares. For Q1 2011, the Company reported fully diluted earnings per share of $0.24 on 14.6 million shares.

"I am very pleased with our solid revenue, cash flow and earnings growth," said Jianming Hao, Deyu's Chief Executive Officer. Our corn division continued to drive results, our grain division sustained its progress, and we further developed the bulk trading division. In particular, we were especially delighted to see the Taizihu Group, which we acquired in February 2012, generate $4.3 million in sales revenue. In terms of our products, we are excited to see that the incorporation of new and rare grain varieties which have provided us with higher gross margins."

"With our corn sales network expanding from 7 of China's provinces to 15 provinces since the first quarter of last year, and our retail distribution network doubling to approximately 20,000 supermarkets and convenience stores during the same time period, we were able to provide our products to a broader spectrum of customers across the nation," added Mr. Hao. "Our new processing center has considerably enhanced our storage and turnover capabilities, and has facilitated our supply to our growing customer base. We believe we are off to a great start this year and we look forward to continuing to provide customers with our quality grain products."

First Quarter 2012 Financial Results

Revenue

The Company had sales of $62.7 million in Q1 2012 compared to sales of $36.6 million in Q1 2011, an increase of $26.1 million or 71.2%.

Net sales from the Company's corn division increased $22.7 million or 110.8%, from $20.5 million in Q1 2011 to $43.2 million in Q1 2012. This growth was attributable to the expansion of the Company's sales network, the increase in storage capacity and turnover, as well as the Company obtaining sufficient working capital.

Revenue from the Company's grain division increased $7.9 million or 117.5%, from $6.7 million in Q1 2011 to $14.6 million in Q1 2012. This increase consisted of an increase of $3.6 million or 53% attributable to the Company's sustaining Grain Division sales and $4.3 million of sales revenue added by the Taizihu Group, which the Company acquired in February 2012. Through the Taizihu Group, the Company now offers and sells bean-based products, fruit vinegars and juices, and grain beverages. The increase in the Company's sustaining grain sales was primarily due to growth of market share through the expansion of the Company's sales network and promotional activities.

Sales from the Company's bulk trading division decreased $4.5 million, from $9.4 million in Q1 2011 to $4.9 million in Q1 2012. This decrease was mainly attributable to the Company shifting its strategies towards reducing transactions with lower margins. In Q1 2012, the Company focused on exploring diversified grain varieties with higher gross margins such as kidney beans, green beans and sunflower seeds instead of rapidly expanding its sales scale in spite of low margins.

Gross Profit & Gross Margin

The Company's gross profit increased $4.6 million or 58.4%, from $7.8 million in Q1 2011 to $12.4 million in Q1 2012. The increase included $2.4 million in its corn division and $2.3 million in its grain division. This improvement was mainly attributable to the Company's growth in sales volume. Total sales volume for the three months ended March 31, 2012 increased to 141,696 tons from 87,288 tons for the three months ended March 31, 2011.

The Company's gross margin decreased to 19.8% for Q1 2012 from 21.4% for Q1 2011. The decrease in gross margin was the combined result of a decrease in gross margin in the corn division and in the grain division, partially offset by an increase in the bulk trading division.

Gross profit in Corn Division was $7.1 million, contributing to 57.3% of total gross profit for Q1 2012. Gross margin for our Corn Division was 16.5% for Q1 2012, down from 22.9% for Q1 2011. The decrease in gross margin was mainly attributable to the continuous increase in the purchase price of raw corn and supplemental procurement from suppliers.

Gross profit in the Grain Division was $4.7 million, contributing to 38.1% of total gross profit for the first quarter of 2012. Gross margin for the Grain Division was 32.3% for the first quarter of 2012, down from 36.7% for the same quarter of prior year. The decrease in gross margin was mainly attributable to the diversification of the Company's product lines during the first quarter of 2012 with the additions of new products containing mixed gross margins, which targeted a wider scope of end consumers. The majority of gross margin for the Grain Division was still primarily driven by the Company's sustaining grain products having a steady gross margin quarter over quarter.

Gross profit in the Bulk Trading Division was $0.6 million, contributing to 4.6% of total gross profit for Q1 2012. Gross margin for the Bulk Trading Division was 11.7% for the three months ended March 2012 which was relatively lower compared to the Company's other divisions, which was mainly due to its business nature of high turnover rate and relatively lower cost maintenance. Gross margin increased to 11.7% from 7.3% for Q1 2011. The increase was mainly attributable to the trading of certain rare grain varieties with higher gross margins such as kidney beans, green beans and sunflower seeds, driven by anticipation of the demand and pricing trends in the market.

Net Income

In Q1 2012, the Company's net income available to common stockholders and earnings per diluted share were $6.2 million and $0.5, respectively, compared to $3.3 million and $0.24, respectively, in Q1 2011, an increase of $2.9 million or 85.7%. The increase was a combined result of the increase of sale revenue and gross profit as described above, and a decrease of $1.2 million of loss derived from discontinued operations which was no longer within the consolidation scope in 2012.

Recent Updates

In February 2012, the Company acquired the Taizihu Group, which has a well-established grain product line that includes over 100 types of bean-based products, fruit vinegars and juices and other grain products. By leveraging the Taizihu Group's product lines, Deyu looks to capture a more substantial share of market for health food and drinks through integrating its sales network of approximately 20,000 supermarkets and retail stores with the Taizihu Group's sales channels, which consist of 100 distributors in more than 10 provinces in China, as well as export channels to Germany, Japan, and other countries.

Additionally, in April 2012, we introduced a new product line under the "Deyu" brand name that features a variety of noodle products, including smooth surfaced noodles, mushroom noodles, egg noodles and high gluten noodles. The Company is working with leading noodle OEM (Original Equipment Manufacturing) producers, in offering these products through its extensive distribution channels in China.

Business Outlook

"We are confident that we will continue to build on our success in upcoming quarters," remarked by Mr. Hao. "Our ample resources, improved warehouse capacity, advanced production lines, exclusive logistics, and extensive sales networks are key competitive advantages that we will look to continue to leverage in 2012. In particular, we plan to continue to work with leading noodle Original Equipment Manufacturers to provide our new noodle products through our extensive distribution channels in China. We believe these products will quickly gain popularity in China, as noodles are staple Chinese diet and our brand name is established among consumers in the nation. While we strive to increase our market share, we are carefully considering other vertical and horizontal acquisitions to help us further grow our business, as well as developing more large feed manufacturers as customers of our corn division."

"In regards to our sales and marketing strategies for the rest of 2012, we plan to continue shifting our focus away from rapidly increasing the number of stores selling our products as a whole, to continue to promote our brand name and our products regionally, and to increase customer sales on a per store basis. With our acquisition of the Taizihu Group, we are looking to considerably build up our export business as well. For our bulk trading division, we anticipate we will continue diversifying our grain varieties, particularly to include more rare grain types based on market demand. While we are pleased with our progress, we are confident that we have sound strategies in mind that will help us further improve our results in future quarters."

Conference Call

The Company will host a conference call on May 17, 2012 at 8:30 AM EDT to discuss the Company's results for the first quarter ended March 31, 2012.

To join the conference call, use the dial-in information below. When prompted, ask for the "Deyu Agriculture Call" and/or be prepared to provide the conference ID.

Date: 05/17/2012
Time: 8:30 AM Eastern
Conference Line Dial-In (US): 877-407-9205
International Dial-In:  201-689-8054
Conference ID#: 394583
Webcast Link:  http://www.investorcalendar.com/IC/CEPage.asp?ID=168617

Dial in at least 10 minutes before the call to ensure timely participation. A playback will be available until 11:59 PM May 31, 2012. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally.

Utilize the pass code below for replay (both required)

Account#: 286
Conference ID#: 394583

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 of the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. Deyu has an extensive wholesale network in over 15 provinces and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. The Company's facilities include advanced 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 the Company'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. 

Investor Contact:

Mr. Kevin Fickle, President
NUWA Group LLC.
Tel: +1-925-330-8315
Email: [email protected]

Company Contact: 

Ms. Amy He, Acting Chief Financial Officer 
Deyu Agriculture Corp.
Tel: +86-10-5224-1802 X389
Email: [email protected]

Ms. Cynthia Yang, Assistant to Acting CFO
Tel: +1-646-820-8060
Email: [email protected]

- Financial Tables Follow –

Note: Please refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2012 for additional notes, which are an integral part of these consolidated financial statements

SOURCE Deyu Agriculture Corp.

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