May 23, 2012

Deyu reports higher Q1 2012 sales

Deyu Agriculture Corp. made higher sales for Q1 2012 worth US$62.7 million compared with Q1 2011 sales of US$36.6 million, a rise of 71.2% or equivalent to US$26.1 million.

In a release on May 16, the company reported the following 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 US$43.2 million; grain division sales rose 117.5% to US$14.7 million; bulk trading division gross margin increased by 437 basis points; gross profit improved 58.4% to US$12.4 million; net income available to common stockholders increased 85.7% to US$6.2 million; and earnings per diluted share for the quarter increased 108.3% to US$0.50.

Net sales from the company's corn division increased US$22.7 million or 110.8% from US$20.5 million in Q1 2011 to US$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 US$7.9 million or 117.5% from US$6.7 million in Q1 2011 to US$14.6 million in Q1 2012. This increase consisted of an increase of US$3.6 million or 53% attributable to the company's sustaining Grain Division sales and US$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 US$4.5 million, from US$9.4 million in Q1 2011 to US$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.

The company's gross profit increased US$4.6 million or 58.4% from US$7.8 million in Q1 2011 to US$12.4 million in Q1 2012. The increase included US$2.4 million in its corn division and US$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, increased to 141,696 tonnes from 87,288 tonnes 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 US$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.