ABAC Renmin Tianli Group, Inc. (MM)

WUHAN CITY, China, Nov. 13, 2017 /PRNewswire/ -- Renmin Tianli Group, Inc. (NASDAQ: ABAC) ("Renmin Tianli" or the "Company"), a producer of breeder hogs, market hogs and black hogs, as well as specialty processed black hog pork products sold through retail outlets and the internet, with headquarters in Wuhan City, Hubei Province, China, today announced its financial results for the three and nine months ended September 30, 2017.

Mr. Luchang Zhou, Chief Executive Officer of Renmin Tianli, commented, "Our third quarter revenues decreased by 13.4% to $6.79 million primarily due to a decrease in sales from our hog farming business despite continued growth of our retail business. Revenues from hog farming decreased by 15.3% to $6.21 million, primarily due to a 26.2% decrease in the average selling price per hog despite a 14.8% increase in the number of hogs sold during the third quarter. Our retail business remained strong, with revenues increasing 13.2% to $0.58 million and volume increasing by 11.7% to 121,031 kilograms. Our margins improved significantly, with gross margin improving by 5.8 percentage points to 16.7% and operating margin improving by 6.5 percentage points to 5.4%, as the severe floods in July 2016 negatively affected our margins for the third quarter of last year. The improvement in margins was also a result of ongoing cost control efforts on employee payrolls. Looking ahead, we expect hog pricing to remain the biggest uncertainty facing our business."

Third Quarter 2017 Financial Results

Revenues for the third quarter of 2017 decreased by $1.05 million, or 13.4%, to $6.79 million from $7.84 million for the same period of last year. The decrease in revenues reflected the impact from lower prices for regular market hogs and black hogs, and fewer black hogs available for sale.

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $1.12 million, or 15.3%, to $6.21 million for the third quarter of 2017 from $7.33 million for the same period of last year. The Company sold a total of 35,014 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $177 per hog during the third quarter of 2017, compared to 30,500 hogs sold and a blended average selling price of $240 per hog for the same period of last year.

Revenues for the third quarter of 2017 from regular breeder hog sales increased by 9.5% to $1.00 million with the number of regular breeder hogs sold increasing by 8.3% to 3,962 hogs and the average selling price of regular breeder hogs increasing by 1.2% to $251 per hog. Revenues for the third quarter of 2017 from regular market hog sales decreased by 4.3% to $3.01 million as the number of regular market hogs sold increased by 40.4% to 19,978 hogs while the average selling price of regular market hogs decreased by 31.7% to $151 per hog. Revenues for the third quarter of 2017 from black market hogs decreased by 32.7% to $2.20 million with the number of black hogs sold decreasing by 12.2% to 11,074 hogs and the average selling price of black hogs decreasing by 23.6% to $198 per hog.

We sold 121,031 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $0.58 million for the third quarter of 2017. This compares to108,390 kilograms sold at approximately $5 per kilogram and revenues of $0.52 million for the same period of last year. These revenues, combined with the sales of black market hogs, led to $2.78 million in revenues from our black hog program for the third quarter of 2017, compared to $3.78 million for the same period of last year.

Gross profit

Cost of goods sold decreased by $1.33 million, or 19.0%, to $5.66 million for the third quarter of 2017 from $6.98 million for the same period of last year. Cost of goods sold for hog farming decreased by $1.32 million, or 20.1%, to $5.27 million for the third quarter of 2017 from $6.59 million for the same period of last year. Cost of goods sold for retail decreased by $5,000, or 1.3%, to $0.39 million for the third quarter of 2017 from $0.39 million for the same period of last year.

Overall gross profit increased by $0.28 million, or 32.2%, to $1.13 million for the third quarter of 2017 from $0.86 million for the same period of last year. This increase in our gross profit was primarily related to an increase in gross profit of $0.20 million, or 27.7%, for our hog farming segment. Gross profits for hog farming and retail were $0.94 million and $0.19 million, respectively, for the third quarter of 2017, compared to $0.74 million and $0.12 million, respectively, for the same period of last year.

Overall gross margin was 16.7%, with gross margins for hog farming and retail of 15.1% and 33.2%, respectively, for the third quarter of 2017. This compared to overall gross margin of 10.9%, and gross margins for hog farming and retail of 10.0% and 23.5%, respectively, for the same period of last year. The improvement in our gross margin for hog farming was mainly from the absence in 2017 of an expense comparable to that recorded in 2016 as a result of the flood damage which was included as part of the cost of goods sold in 2016. The improvement in gross profit and gross margin from the retail segment was primarily the result of higher sale prices charged to our new customer and an increase in sales volume.

Operating income

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.18 million, or 19.0%, to $0.77 million for the third quarter of 2017 from $0.95 million for the same period of last year. The decrease was primarily the result of cost control over employee payrolls. Operating income for the third quarter of 2017 was $0.37 million, compared to operating loss of $0.09 million for the same period of last year. Operating margin for the third quarter of 2017 was 5.4%, compared to operating loss margin of 1.1% for the same period of last year.

Net income

Net income was $0.39 million for the third quarter of 2017, compared to net loss of $2.83 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail, was $0.39 million for the third quarter of 2017, compared to a loss of $1.78 million for the same period of last year. Net income for the third quarter of 2016 was adversely impacted by the net loss from our discontinued operation, Hang-ao, which was $1.05 million for the third quarter of 2016. Hang-ao was sold on December 23, 2016.

After the deduction for non-controlling interests, net income attributable to common shareholders for the third quarter of 2017 was $0.39 million, compared to net loss of $2.71 million for the same period of last year.

Nine Months Ended September 30, 2017 Financial Results

Revenues for the nine months ended September 30, 2017 decreased by $6.82 million, or 25.7%, to $19.69 million from $26.51 million for the same period of last year. The reduction in revenues is continuing to reflect the impact from the ongoing weak demand for regular breeder hogs, which also reduces prices for regular hogs and black hogs, and the reduction in the number of black hogs available for sale after the 2016 flood damage.

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $7.46 million, or 29.6%, to $17.74 million for the nine months ended September 30, 2017 from $25.20 million for the same period of last year. The Company sold a total of 97,410 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $182 per hog during the nine months ended September 30, 2017, compared to 99,446 hogs sold and a blended average selling price of $253 per hog for the same period of last year.

Revenues for the nine months ended September 30, 2017 from regular breeder hog sales decreased by 17.2% to $2.52 million with the number of regular breeder hogs sold decreasing by 16.1% to 10,143 hogs and the average selling price of regular breeder hogs decreasing by 1.2% to $248 per hog. Revenues for the nine months ended September 30, 2017 from regular market hog sales decreased by 19.3% to $8.44 million as the number of regular market hogs sold increased by 18.6% to 54,694 hogs while the average selling price of regular market hogs decreased by 32.2% to $154 per hog. Revenues for the nine months ended September 30, 2017 from black market hogs decreased by 42.0% to $6.78 million with the number of black hogs sold decreasing by 21.0% to 32,573 hogs and the average selling price of black hogs decreasing by 26.8% to $208 per hog.

We sold 395,835 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $1.95 million for the nine months ended September 30, 2017. This compares to 276,142 kilograms sold at approximately $5 per kilogram and revenues of $1.32 million for the same period of last year. These revenues, combined with the sales of black market hogs, led to $8.73 million in revenues from our black hog program for the nine months ended September 30, 2017, compared to $13.01 million for the same period of last year.

Gross profit

Cost of goods sold decreased by $4.59 million, or 21.5%, to $16.79 million for the nine months ended September 30, 2017 from $21.37 million for the same period of last year. Cost of goods sold for hog farming decreased by $4.90 million, or 24.0%, to $15.48 million for the nine months ended September 30, 2017 from $20.38 million for the same period of last year. The decrease in cost of goods sold for hog farming was primarily due to lower sales volume, which was partly offset by increased feed costs. In addition, large hogs normally require more feed to maintain their daily diet and are sold to pork dealers directly. To efficiently control our production costs during the downtrend cycle, we sold our regular market hogs at younger ages which can improve our inventory turnover rate and reduce relevant inventory maintenance cost. Cost of goods sold for retail increased by $0.47 million, or 56.5%, to $1.30 million for the nine months ended September 30, 2017 from $0.83 million for the same period of last year. The increase in cost of goods sold for retail was primarily due to increased sales volume.

Overall gross profit decreased by $2.23 million, or 43.4%, to $2.91 million for the nine months ended September 30, 2017 from $5.14 million for the same period of last year. This decrease in our gross profit reflected a decrease in gross profit of $2.56 million for our hog farming segment partially offset by improvement in our retail sales. Gross profits for hog farming and retail were $2.26 million and $0.65 million, respectively, for the nine months ended September 30, 2017, compared to $4.82 million and $0.32 million, respectively, for the same period of last year.

Overall gross margin was 14.8%, with gross margins for hog farming and retail of 12.7% and 33.2%, respectively, for the nine months ended September 30, 2017. This compared to overall gross margin of 19.4%, and gross margins for hog farming and retail of 19.1% and 24.4%, respectively, for the same period of last year. The reduction in our gross margin from our Hog Farming segment was due to the reduced selling prices for regular market hogs and black market hogs during the period. During the nine months ended September 30, 2017, we sold more large regular market hogs to pork dealers than the same period in 2016. However, the reduced sales prices of regular market hogs and increased feed costs for maintaining large market hogs caused our gross margin to decrease. The improvement in gross profit and gross margin from the retail segment was primarily the result of higher sale prices charged to our new customer and an increase in sales volume.

Operating income

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.57 million, or 18.7%, to $2.46 million for the nine months ended September 30, 2017 from $3.02 million for the same period of last year. The decrease was primarily the result of cost control over employee payrolls. Operating income for the nine months ended September 30, 2017 was $0.45 million, compared to $2.11 million for the same period of last year. Operating margin for the nine months ended September 30, 2017 was 2.3%, compared to 8.0% for the same period of last year.

Net income (loss)

Net income was $0.48 million for the nine months ended September 30, 2017, compared to net loss of $2.50 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail, was $0.48 million for the nine months ended September 30, 2017, compared to $0.57 million for the same period of last year. Net income for the nine months ended September 30, 2016 was adversely impacted by the net loss from our discontinued operation, Hang-ao, which was $3.07 million for the nine months ended September 30, 2016. Hang-ao was sold on December 23, 2016.

After the deduction for non-controlling interests, net income attributable to common shareholders for the nine months ended September 30, 2017 was $0.48 million, compared to net loss of $2.13 million for the same period of last year.

Financial Condition

As of September 30, 2017, the Company had cash and cash equivalents of $60.39 million, compared to $54.46 million at the end of 2016. Working capital as of September 30, 2017 was $62.64 million as compared to $57.50 million at December 31, 2016. Net cash provided by operating activities was $3.92 million for the nine months ended September 30, 2017, compared to $9.99 million for the same period of last year. Net cash used in investing activities was $nil for the nine months ended September 30, 2017, compared to $3.10 million for the same period of last year. Net cash used in financing activities was $0.59 million for the nine months ended September 30, 2017, compared to $0.30 million for the same period of last year.

About Renmin Tianli Group, Inc.

Renmin Tianli Group, Inc. (the "Company"), previously known as Aoxin Tianli Group, Inc., is in the business of breeding, raising and selling breeder and market hogs in China. The Company also sells specialty processed black hog pork products through supermarkets and other retail outlets, as well as the internet.

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information, please contact:

Tony Tian, CFA
Weitian Group LLC
Phone: +1-732-910-9692
Email: tony.tian@weitian-ir.com

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SOURCE Renmin Tianli Group, Inc.