Beijing, China
June 2, 2008
- Year-over-year, revenues
increased to RMB 1.56 million from RMB 1.04 million, and the
net loss of RMB 29.77 million decreased from RMB 31.36
million.
- Year-over-year, deferred
revenue increased to RMB 400 million from RMB 327 million
and advances from customers increased to RMB 105 million
from RMB 94 million.
- Management reiterates
revenue and net income guidance for FY2008
- GMO pipeline on track
Origin Agritech Limited
(NASDAQ: SEED) (“Origin” or the “Company”), a technology-focused
supplier of crop seeds in China, today announced unaudited
financial results for the second quarter ended March 31, 2008.
Origin prepares its financial statements in accordance with
generally accepted accounting principles (GAAP) of the United
States.
FINANCIAL RESULTS OVERVIEW
During the second quarter of fiscal 2008, the Company generated
revenues of RMB 1.56 million (US$0.22 million), increasing
50.54% from revenue of RMB 1.04 million (US$0.13 million) for
the three months ended March 31, 2007.
Deferred revenue more than doubled to RMB 400.15 million
(US$57.07 million) at March 31, 2008 from RMB 112.05 million
(US$15.36 million) at December 31, 2007. This deferred revenue
reflects the value of Origin’s crop seeds after evidence of a
sales arrangement is confirmed, delivery to the customer is
made, and full pre-payment from the customer is received, but
before the final sales price is fixed and determined. The final
sales price is primarily determined by sales volume incentives
that Origin gives to its customers. It is expected that majority
of this deferred revenue will be recorded on the income
statement in the fiscal 2008 third quarter ending June 30, 2008.
Gross loss for the three-months ended March 31, 2008 was RMB
3.30 million (US$ 0.47 million) compared to a loss of RMB 0.87
million (US$0.11 million) in the same period of the prior year.
The operating expenses for the three months ended March 31, 2008
were RMB 33.84 million (US$4.83 million), an increase of 10.03%
from RMB 30.76 million (US$3.98 million) in the same period of
the prior year. The increase was mainly caused by the increase
in general and administrative expenses, which increased 27.80%
year over year caused by the increase in the legal fees and
other fees paid for professional services.
- Selling and marketing
expenses were RMB 11.62 million (US$1.66 million) for
the second quarter of 2008, representing a decrease of
3.42% from RMB 12.03 million (US$1.56 million) for the
same period of the last year.
- General and
administrative expenses of RMB 16.85 million (US$2.40
million) for the second quarter ended March 31, 2008,
increased 27.80% from RMB 13.19 million (US$1.71
million) for the three months ended March 31, 2007,
which was mainly caused by the increase in the legal
fees and other fees paid for professional services.
- Research and
development expenses during the quarter were RMB 5.37
million (US$0.77 million), as compared with RMB 5.54
million (US$0.72 million) for the three months ended
March 31, 2007.
Operating loss for the second
quarter of 2008 amounted to RMB 37.14 million (US$5.30 million)
compared with an operating loss of RMB 31.62 million (US$4.09
million) for the same period in 2007.
Net loss for the second quarter of 2008 was RMB 29.77 million
(US$4.25 million), or RMB 1.30 (US$0.18) per diluted share,
compared to a net loss of RMB 31.37 million (US$4.06 million),
or RMB 1.34 (US$0.17) per diluted share in the same period one
year ago.
Balance Sheet
Origin's balance sheet at March 31, 2008 included cash and cash
equivalents of RMB 235.18 million (US$33.54 million).
Investments in US Government Agency bonds amounted to RMB 84.07
million (US$11.99 million). The Company has a working capital of
RMB 194.73 million (US$27.77 million), and a shareholders'
equity of RMB 261.98 million (US$37.36 million).
Deferred revenue was RMB 400.15 million (US$ 57.07 million) for
the three-months ended March 31, 2008 as compared to RMB 326.92
million (US$42.33 million) for the same period last year.
Advance from customers was RMB 105.17 million (US$ 15.00
million) for the three-months ended March 31, 2008 as compared
to RMB 93.54 million (US$12.11 million) for the same period last
year.
Company Update
As the Chinese corn seed markets continue a period of
transition, the Company has taken the necessary steps to make
sure that it maintains market leadership during this time.
Origin enjoys a solid reputation among farmers and has
outperformed competitors with its hybrid seed products
portfolio. Furthermore, the Company strongly believes its
research and development efforts on biotechnology and GMO will
eventually payoff. The focus remains on the successful
introduction of genetically modified crop seeds in China. Origin
will emerge as one of the leading bio-agricultural players to
compete in China.
GMO Pipeline Update
Our Phase 5 Phytase corn is progressing well as we continue to
expect a final approval before the end of this year. This would
mark the first GMO corn product approved for commercialization
in China. Upon approval, the product would be able to be sold
into the Chinese marketplace.
We expect to gain significant operating leverage with our
genetically modified corn products whereby we expect to be able
to charge an additional technology fee for each corn product
carrying the GMO trait. Our initial estimates suggest that this
fee would be approximately a 20% increase in the overall price
and would add incrementally to our gross margin as we expect the
cost of production for GMO seeds to be similar to conventional
hybrids.
Fiscal 2008 Guidance
Based on its current outlook, and existing and anticipated
business conditions, Origin reiterates the revenue guidance for
FY 2008 in the range of US$75 million to US$80 million and net
income range of US$0.5 million to US$2 million, for the fiscal
year ending September 30, 2008. This net income figure is
inclusive of roughly US$2.7 million dollars in expected non-cash
interest expense from our convertible debt offering. Exclusive
of this non-cash expense, we expect a net income range of US$3.0
to US$4.5 million.
Founded in 1997 and headquartered in Beijing, Origin Agritech
Limited (NASDAQ: SEED) is one of China’s leading,
vertically-integrated agricultural technology company
specializing in agri-biotech research, development and
production to supply the growing populations of China. Origin
develops, grows, processes, and markets crop seeds to farmers
throughout China and parts of Southeast Asia via a network of
approximately 3,800 first-level distributors and 65,000
second-level distributors and retailers. The hybrid seed
industry is estimated at US$2 billion and that is expected to
double by 2010. The Company currently operates facilities in 30
of China’s 32 provinces as well as Beijing. Since Origin
launched its first entirely internally developed seed in 2003,
the Company has developed and commercialized an internally
developed proprietary seed portfolio of twelve corn hybrids,
twelve rice hybrids and two canola hybrids as of 2007.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except number of share and per share
data)
|
|
|
Three months
ended March 31, |
|
|
|
2007 |
|
2007 |
|
2008 |
|
2008 |
|
|
|
RMB |
|
US$ |
|
RMB |
|
US$ |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
1,036
|
|
134 |
|
1,560
|
|
222 |
|
Cost of revenues |
|
(1,902) |
|
(246) |
|
(4,857) |
|
(693) |
|
|
|
|
|
|
|
|
|
|
|
Gross loss
|
|
(866) |
|
(112) |
|
(3,297) |
|
(471) |
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Selling and
marketing |
|
(12,027) |
|
(1,557) |
|
(11,615) |
|
(1,657) |
|
General and
administrative |
|
(13,188) |
|
(1,708) |
|
(16,854) |
|
(2,404) |
|
Research and
development |
|
(5,540) |
|
(717) |
|
(5,371) |
|
(766) |
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses |
|
(30,755) |
|
(3,982) |
|
(33,840) |
|
(4,827) |
|
|
|
|
|
|
|
- |
|
|
|
Loss from
operations |
|
(31,621) |
|
(4,094) |
|
(37,137) |
|
(5,298) |
|
Interest expense |
|
(4,963) |
|
(643) |
|
(9,904) |
|
(1,412) |
|
Share of earnings
in equity investee companies |
|
(1,037) |
|
(134) |
|
1,378
|
|
197 |
|
Interest income |
|
2,543
|
|
329 |
|
1,013
|
|
144 |
|
Other income
(loss) |
|
710 |
|
92 |
|
(306) |
|
(44) |
|
Changes in the
fair value of embedded derivatives |
|
- |
|
- |
|
4,991
|
|
712 |
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes and minority interests |
|
(34,368) |
|
(4,450) |
|
(39,965) |
|
(5,701) |
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
Current |
|
(278) |
|
(36) |
|
9 |
|
1 |
|
Deferred |
|
2,727
|
|
353 |
|
7,291
|
|
1,040
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
2,449
|
|
317 |
|
7,300
|
|
1,041
|
|
|
|
|
|
|
|
|
|
|
|
Loss before
minority interests |
|
(31,919) |
|
(4,133) |
|
(32,665) |
|
(4,660) |
|
Minority interests |
|
553 |
|
72 |
|
2,898
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
(31,366) |
|
(4,061) |
|
(29,767) |
|
(4,247) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
– basic |
|
(1.34) |
|
(0.17) |
|
(1.30) |
|
(0.18) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share – diluted |
|
(1.34) |
|
(0.17) |
|
(1.30) |
|
(0.18) |
|
|
|
|
|
|
|
|
|
|
|
Shares used in
calculating basic net loss per share |
|
23,364,058
|
|
23,364,058
|
|
22,974,059
|
|
22,974,059
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
calculating diluted net loss per share |
|
23,364,058
|
|
23,364,058
|
|
22,974,059
|
|
22,974,059
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend per
share |
|
- |
|
- |
|
- |
|
- |
CONSOLIDATED BALANCE
SHEETS
(In thousands, except share data)
|
|
|
September 30, |
|
March 31, |
|
|
|
2007 |
2007 |
|
2008 |
2008 |
|
|
|
RMB |
US$ |
|
RMB |
US$ |
|
|
|
|
|
|
(unaudited) |
(unaudited) |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
162,314
|
21,663
|
|
235,184
|
33,540
|
|
Debt securities |
|
133,968
|
17,880
|
|
84,071
|
11,990
|
|
Accounts
receivable, net |
|
2,750 |
367 |
|
4,012 |
572 |
|
Due from related
parties |
|
7,384 |
986 |
|
9 |
1 |
|
Advances to
suppliers |
|
1,029 |
137 |
|
16,529
|
2,357 |
|
Advances to
growers |
|
24,452
|
3,263 |
|
3,360 |
479 |
|
Inventories |
|
449,207
|
59,952
|
|
708,192
|
100,997
|
|
Income tax
recoverable |
|
1,760 |
235 |
|
1,708 |
244 |
|
Prepaid expenses
and other current assets |
|
11,459
|
1,529 |
|
11,303
|
1,612 |
|
|
|
|
|
|
|
|
|
Total current
assets |
|
794,323
|
106,012
|
|
1,064,368
|
151,792
|
|
Land use rights,
net |
|
21,554
|
2,877 |
|
20,742
|
2,958 |
|
Plant and
equipment, net |
|
143,043
|
19,091
|
|
147,067
|
20,974
|
|
Equity investments |
|
58,882
|
7,858 |
|
59,338
|
8,462 |
|
Goodwill |
|
16,665
|
2,224 |
|
16,665
|
2,377 |
|
Due from related
parties |
|
7,325 |
978 |
|
4,789 |
683 |
|
Acquired
intangible assets, net |
|
43,057
|
5,746 |
|
46,922
|
6,692 |
|
Deferred income
tax assets |
|
12,828
|
1,712 |
|
28,736
|
4,098 |
|
Other assets |
|
13,306
|
1,776 |
|
14,916
|
2,127 |
|
|
|
|
|
|
|
|
|
Total assets |
|
1,110,983
|
148,274
|
|
1,403,543
|
200,163
|
|
|
|
|
|
|
|
|
|
Liabilities,
minority interests and shareholders’ equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term
borrowings |
|
268,400
|
35,821
|
|
240,940
|
34,361
|
|
Accounts payable |
|
14,365
|
1,917 |
|
13,601
|
1,940 |
|
Due to growers |
|
17,811
|
2,377 |
|
2,973 |
424 |
|
Due to related
parties |
|
4,233 |
565 |
|
28,618
|
4,081 |
|
Advances from
customers |
|
82,187
|
10,970
|
|
105,174
|
15,000
|
|
Deferred revenues |
|
23,238
|
3,101 |
|
400,154
|
57,067
|
|
Income tax payable |
|
39,059
|
5,213 |
|
39,059
|
5,570 |
|
Other payables and
accrued expenses |
|
50,054
|
6,680 |
|
39,118
|
5,579 |
|
|
|
|
|
|
|
|
|
Total current
liabilities |
|
499,347
|
66,644
|
|
869,637
|
124,022
|
|
|
|
|
|
|
|
|
|
Long-term
borrowings |
|
1,880 |
251 |
|
940 |
134 |
|
Convertible notes,
net of discount |
|
173,669
|
23,178
|
|
171,512
|
24,460
|
|
Embedded
derivatives-redemption feature |
|
86,937
|
11,603
|
|
58,072
|
8,282 |
|
Other long-term
liabilities |
|
3,458 |
461 |
|
3,658 |
522 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
765,291
|
102,137
|
|
1,103,819
|
157,420
|
|
Minority interests |
|
48,775
|
6,510 |
|
37,743
|
5,383 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
|
|
Preferred stock
(no par value;1,000,000 shares authorized, none
issued) |
|
- |
- |
|
|
|
|
Common stock (no
par value; 60,000,000 shares authorized,
22,974,059 issued and outstanding shares as of
September 30, 2007 and March 31, 2008 |
|
- |
- |
|
- |
- |
|
Additional paid-in
capital |
|
377,324
|
50,359
|
|
379,563
|
54,130
|
|
Retained earnings
(deficit) |
|
(41,404) |
(5,526) |
|
(86,540) |
(12,342) |
|
Treasury stock at
cost (498,851 shares) |
|
(29,377) |
(3,921) |
|
(29,377) |
(4,190) |
|
Accumulated other
comprehensive loss |
|
(9,626) |
(1,285) |
|
(1,665) |
(238) |
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity |
|
296,917
|
39,627
|
|
261,981
|
37,360
|
|
|
|
|
|
|
|
|
|
Total liabilities,
minority interests and shareholders’ equity |
|
1,110,983
|
148,274
|
|
1,403,543
|
200,163
|
|
|
