China New Borun Corporation, a leading producer and distributor of corn-based edible alcohol in China, today announced its unaudited financial results for the first quarter ended March 31, 2014.
Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "I am delighted that we executed on our plans and delivered very strong first quarter financial results. Driven by greater sales volume and a firm average selling price of our products, revenue grew 39% year-over-year, and gross margin expanded more than 400 basis points to a 24-month high of 14.5%."
First Quarter 2014 Quick View
* Total revenue increased 38.8% to RMB625.7 million ($101.7 million[1]) from RMB450.7 million in the first quarter of 2013.
* Gross profit increased 92.1% to RMB90.5 million ($14.7 million) from RMB47.1 million in the first quarter of 2013.
* Net income increased 208.3% to RMB39.3 million ($6.4 million) from RMB12.8 million in the first quarter of 2013.
* Basic and diluted earnings per American Depositary Share ("ADS") were RMB1.53 ($0.25) for the quarter ended March 31, 2014. Each ADS represents one of the Company's ordinary shares.
Mr. Wang continued, "More encouragingly, demand for edible alcohol from baijiu producers remains solid, and we anticipate to further benefit from the industry's recovering trend for the remainder of 2014. At the same time, our strong sourcing capability enables us to keep corn cost relatively stable, and as such, we are very confident to grow full-year 2014 profits."
First Quarter 2014 Financial Performance
For the first quarter of 2014, total revenue increased by 38.8% year-over-year to RMB625.7 million ($101.7 million) from RMB450.7 million in the same period of 2013. The increase in total revenue was mainly attributable to higher sales volumes for all of our products.
Revenue breakdown by product line is as follows:
* Revenue from edible alcohol increased by 27.4% to RMB399.4 million ($64.9 million) in the first quarter of 2014, compared to RMB313.5 million in the first quarter of 2013. The sales volume of edible alcohol in the first quarter of 2014 increased by 27.5% year-over-year to 75,838 tons, primarily due to higher demand from baijiu industry during the quarter. The average selling price was RMB5,267 per ton, unchanged from the same period of last year.
* Revenue from DDGS feed increased by 58.4% to RMB153.4 million ($24.9 million) in the first quarter of 2014, compared to RMB96.8 million in the first quarter of 2013. The sales volume of DDGS feed in the first quarter of 2014 increased by 42.3% year-over-year to 69,079 tons, and the average selling price increased by 11.3% year-over-year to RMB2,221 per ton.
* Revenue from liquid carbon dioxide increased by 42.9% to RMB11.6 million ($1.9 million) in the first quarter of 2014, compared to RMB8.2 million in the first quarter of 2013. The sales volume of liquid carbon dioxide in the first quarter of 2014 increased by 69.4% year-over-year to 31,333 tons, while the average selling price decreased by 15.7% year-over-year to RMB372 per ton.
* Revenue from crude corn oil increased by 40.6% to RMB45.4 million ($7.4 million) in the first quarter of 2014, compared to RMB32.2 million in the first quarter of 2013. The sales volume of crude corn oil in the first quarter of 2014 increased by 43.2% year-over-year to 6,034 tons, while the average selling price decreased by 1.8% year-over-year to RMB7,517 per ton.
* We began generating revenue from our newly-completed chlorinated polyethylene ("CPE") and foam insulation plants since the fourth quarter in 2013. Revenue from CPE was RMB14.9 million ($2.4 million) in the first quarter of 2014, and the sales volume was 1,698 tons at average selling price of RMB8,749 per ton. Revenue from foam insulation was RMB1.0 million ($0.2 million) in the first quarter of 2014, and the sales volume was 938 cubic meters at average selling price of RMB1,099 per cubic meter.
During the first quarter of 2014, gross profit increased by 92.1% to RMB90.5 million ($14.7 million) from RMB47.1 million in the same period of 2013. Gross margin for the first quarter of 2014 increased to 14.5%, from 10.4% in the same period of 2013, which was primarily attributable to the recovered market demand, as well as the Company's continued efforts in optimizing its sourcing capability to stabilize the corn cost.
Income from operations increased by 117.4% to RMB78.8 million ($12.8 million) in the first quarter of 2014, from RMB36.2 million in the same period of 2013, primarily driven by higher gross profit earned.
Selling expenses increased by RMB0.1 million, or 15.8% to RMB1.2 million ($0.2 million) in the first quarter of 2014, from RMB1.1 million in the same period of 2013. Selling expenses for the first quarter 2014 accounted for 0.19% of total revenue, compared to 0.23% for the first quarter 2013.
General and administrative expenses increased by RMB0.7 million, or 7.0% to RMB10.5 million ($1.7 million) in the first quarter of 2014, from RMB9.8 million in the same period of 2013. General and administrative expenses for the first quarter 2014 accounted for 1.7% of total revenue, compared to 2.2% for the first quarter 2013.
Interest expense increased by RMB6.1 million or 30.9% to RMB26.0 million ($4.2 million) in the first quarter of 2014, from RMB19.9 million in the same period of 2013, mainly due to the interest expense arisen from the second tranche of Borun Bond issued at the April of 2013.
Income tax expenses in the first quarter of 2014 were RMB13.1 million ($2.1 million), representing an effective tax rate of 25%.
Net income increased by 208.3% to RMB39.3 million ($6.4 million) in the first quarter of 2014, compared to RMB12.8 million in the same quarter of 2013. In the first quarter of 2014, basic and diluted earnings per ordinary share and per ADS were RMB1.53 ($0.25), and the Company had 25.7 million weighted average basic and diluted shares outstanding.
As of March 31, 2014, cash and bank deposits of RMB424.4 million ($69.0 million) decreased by RMB96.9 million, compared with RMB521.3 million as of December 31, 2013. Cash flows used in operating activities for the first quarter of 2014 were RMB332.0 million ($54.0 million), which was mainly due to that the Company completed the pre-stored of corn during this quarter.
These corns could satisfy the Company's production needs during the non-harvest season in 2014. As of March 31, 2014, inventory balance of RMB937.4 million ($152.4 million) increased by RMB584.2 million, compared with RMB353.2 million as of December 31, 2013.
Financial Outlook
The Company estimates that its revenue for the second quarter of 2014 will be in the range of RMB640 million ($104.0 million) to RMB670 million ($108.9 million), an increase of approximately 1.8% to 6.6% over the same quarter of 2013.
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.
