China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced its unaudited financial results for the third quarter ended September 30, 2013.
Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "It is encouraging that China's edible alcohol market has begun to show signs of a modest recovery and the baijiu market also experienced a boom due to the PRC National Holiday. As a result, our sales volume of edible alcohol exceeded expectations, and our third quarter revenue soundly beat the high-end of guidance. As prepayment of corn was completed in the last quarter, we generated outstanding net operating cash flows this quarter, which provide us an excellent cash position to secure adequate corn in the coming harvest season and thereby sustain our competitive advantage. We are optimistic about the market momentum for the edible alcohol industry, and believe we are well positioned to grow revenue and profits in our seasonally peak fourth quarter."
"We are also encouraged by the early positive signs for our newly-completed chlorinated polyethylene and foam insulation plants. The feedback on trial product samples from prospective customers has been very positive, with some prospects rating our products among the best in market. We expect new revenue from this entirely new business line in the fourth quarter. The combination of improving market fundamentals in our core edible alcohol business and early positive momentum in our new business expansion bodes well for China New Borun for the foreseeable future." Mr. Wang concluded.
Third Quarter 2013 Quick View
Total revenue decreased 7.4% to RMB518.0 million ($84.3 million[1]) from RMB559.2 million in the third quarter of 2012.
Gross profit decreased 27.4% to RMB48.7 million ($7.9 million) from RMB67.0 million in the third quarter of 2012.
Net income decreased 68.9% to RMB10.8 million ($1.8 million) from RMB34.8 million in the third quarter of 2012.
Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.42 ($0.07) for the quarter ended September 30, 2013. Each ADS represents one of the Company's ordinary shares.
Net operating cash flow increased 212.5% to RMB473.0 million ($76.9 million) for the third quarter of 2013 from RMB151.3 million in the third quarter of 2012.
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 period ended September 30, 2013 were made at a rate of RMB6.148 to USD1.00, the rate published by the People's Bank of China on September 30, 2013. 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.
Third Quarter 2013 Financial Performance
For the third quarter of 2013, revenue decreased by 7.4% year-over-year to RMB518.0 million ($84.3 million) from RMB559.2 million in the same period of 2012. The decrease in revenue was mainly attributable to lower average selling prices and lower production volumes for all of our products, except for a slight increase in the average selling price of DDGS feed, primarily due to a longer scheduled annual maintenance period in this quarter, during which our production lines were temporarily shut down.
Revenue breakdown by product line is as follows:
Revenue from edible alcohol decreased by 7.4% to RMB353.8 million ($57.5 million) in the third quarter of 2013, compared to RMB381.8 million in the third quarter of 2012. The sales volume of edible alcohol in the third quarter of 2013 decreased by 1.1% year-over-year to 67,991 tons, primarily due to lower production volume as a result of a longer scheduled annual maintenance period during this quarter. The production volume decreased by 11.7% year-over-year to 63,332 tons in the third quarter of 2013. The average selling price decreased by 6.3% year-over-year to RMB5,203 per ton.
Revenue from DDGS feed decreased by 1.9% to RMB120.7 million ($19.6 million) in the third quarter of 2013, compared to RMB123.2 million in the third quarter of 2012. The sales volume of DDGS feed in the third quarter of 2013 decreased by 8.3% year-over-year to 55,047 tons, while the average selling price increased by 6.9% year-over-year to RMB2,193 per ton.
Revenue from liquid carbon dioxide decreased by 23.0% to RMB9.6 million ($1.6 million) in the third quarter of 2013, compared to RMB12.5 million in the third quarter of 2012. The sales volume of liquid carbon dioxide in the third quarter of 2013 decreased by 10.2% year-over-year to 24,015 tons, and the average selling price decreased by 14.3% year-over-year to RMB402 per ton.
Revenue from crude corn oil decreased by 19.1% to RMB33.7 million ($5.5 million) in the third quarter of 2013, compared to RMB41.7 million in the third quarter of 2012. The sales volume of crude corn oil in the third quarter of 2013 decreased by 17.0% year-over-year to 4,453 tons, and the average selling price decreased by 2.5% year-over-year to RMB7,565 per ton.
During the third quarter of 2013, gross profit decreased by 27.4% to RMB48.7 million ($7.9 million) from RMB67.0 million in the same period of 2012. Gross margin for the third quarter of 2013 decreased to 9.4%, from 12.0% in the same period of 2012, which was primarily attributable to a continued decrease in average selling price and a longer scheduled maintenance period.
Operating income, despite a lower year-over-year level of operating expenses, decreased by 31.7% to RMB37.2 million ($6.0 million) in the third quarter of 2013, from RMB54.4 million in the same period of 2012, primarily due to lower gross profit earned.
Selling expenses increased by RMB0.2 million, or 25.9% to RMB1.2 million ($0.2 million) in the third quarter of 2013, from RMB1.0 million in the same period of 2012.
General and administrative expenses decreased by RMB1.4 million, or 11.9% to RMB10.3 million ($1.7 million) in the third quarter of 2013, from RMB11.7 million in the same period of 2012, benefiting from disciplined cost control.
Interest expense increased by RMB15.8 million or 190% to RMB24.1 million ($3.9 million) in the third quarter of 2013, from RMB8.3 million in the same period of 2012, mainly due to the interest expense arisen from the Bond issued at the beginning of this year and the increased balance of short-term borrowings.
Income tax expenses in the third quarter of 2013 were RMB3.6 million ($0.6 million), representing an effective tax rate of 25%.
Net income decreased by 68.9% to RMB10.8 million ($1.8 million) in the third quarter of 2013, compared to RMB34.8 million in the same quarter of 2012. In the third quarter of 2013, basic and diluted earnings per share and per ADS were RMB0.42 ($0.07), and the Company had 25.7 million weighted average basic and diluted shares outstanding.
As of September 30, 2013, cash and bank deposits of RMB774.2 million ($125.9 million) increased by RMB163.5 million, compared with RMB610.7 million as of December 31, 2012. Cash flows generated in operating activities for the third quarter of 2013 were RMB473.0 million ($76.9 million) mainly due to decrease in prepayment for corn to the local granaries.
Financial Outlook
The Company estimates that its revenue for the fourth quarter of 2013 will be in the range of RMB550 million ($89.5 million) to RMB600 million ($97.6 million), an increase of approximately 9.3% to 19.2% over the same quarter of 2012.
This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.