BEIJING and CHANGGE,
China, May
9, 2012 /PRNewswire-Asia-FirstCall/ -- Zhongpin Inc.
("Zhongpin", Nasdaq: HOGS), a leading meat and food processing
company in the People's Republic of
China, today reported higher sales revenues and lower net
income for the three months ended March 31,
2012 compared with the first quarter 2011.
First Quarter 2012 highlights:
- Sales revenues increased 31% to $374.1
million in the first quarter 2012 from $285.8 million in the first quarter 2011.
- Net income decreased 27.8% to $12.2
million in the first quarter 2012 from $16.9 million in the first quarter 2011.
- Basic earnings per share decreased 29.8% to $0.33 in the first quarter 2012 from $0.47 in the first quarter 2011 on average basic
shares outstanding that were 4.6% higher than in the first quarter
2011.
- Diluted earnings per share decreased 29.8% to $0.33 in the first quarter 2012 from $0.47 in the first quarter 2011 on average
diluted shares outstanding that were 3.5% higher than in the first
quarter 2011.
- Guidance for 2012 is maintained: Zhongpin expects that sales
revenues should be within a range of US$1.55 billion to
$1.72 billion for 2012. Gross profit
margin is expected to be within the range of 8.6% to 10.2%.
Net profit margin is expected to be within the range of 3.3% to
4.2%. The resulting diluted earnings per share for the year 2012 is
expected to be within the range of $1.36 to $1.92 per share, assuming average diluted common
shares outstanding of about 37.5 million shares in 2012.
Assumptions and judgments supporting the guidance are shown
below.
- As of March 31, 2012, Zhongpin
had a total annual capacity of 904,760 metric tons for pork, pork
products, and vegetables and fruits.
Mr. Xianfu Zhu, Chairman and
Chief Executive Officer for Zhongpin, said, "The intense
competitive pressure in the pork market to gain market share
continued in the first quarter as the pork industry goes through
consolidation. As a result, pork prices did not increase, as a
percent, as much as hog prices increased, which narrowed the gross
profit spread between the cost of hogs and the price of pork.
Further, substantial promotion costs were required to be
competitive in both keeping and gaining market share. As expected,
we incurred higher expenses in promotion, marketing, and operations
to build market share and prepare the Company for increasing
success in the future.
"Although, pork prices and volumes were generally higher in the
first quarter than in the first quarter of 2011, we expect the
prices of both hogs and pork to decline approximately 15% to 20% in
2012, so it will continue to be difficult to report higher results
in 2012 than in 2011.
"As you know, in 2012 we are slowing the rate of our capacity
expansions and focusing on greater use of existing facilities,
which we believe should help offset some of the pressure on our
financial results.
"Given the challenging competition that is very likely to
continue in the marketplace in 2012, we still expect to report
somewhat higher revenues in 2012 than 2011, a somewhat lower gross
profit margin, and a somewhat lower net profit margin than in 2011,
and diluted earnings per share within the range of $1.36 to $1.92 per share in 2012.
"Zhongpin provides outstanding, flavorful, and increasingly
convenient pork products with the highest product quality and
safety, from farm to fork. Those products are the foundation of our
success and our future. We offer more than 410 types of pork
products and more than 25 different categories of vegetables and
fresh fruits and have more than 90 new products under development
as of March 31, 2012, so we believe
that our existing products and those in our new product pipeline
will continue to be attractive to consumers and help Zhongpin gain
market share in the challenging years ahead."
Capacity and market expansions in 2012
Zhongpin is investing approximately $58.5
million to build a new production, research and development,
and training complex in Changge, Henan province, excluding the cost of land use
rights that we have already obtained. When completed, we anticipate
that this new facility will have a production capacity of about
100,000 metric tons for prepared pork products. Adjacent to this
new production facility, we also plan to develop a center for
research and development, training, and quality assurance and
control. Construction for the first phase with a production
capacity of approximately 50,000 metric tons for prepared pork
products started in the second quarter of 2011 and is scheduled to
be completed by the second quarter of 2012.
Zhongpin is investing approximately $18.0
million in a cold-chain logistics distribution center in
Anyang, Henan. This distribution
center will have processing capacity, a temperature adjustable
warehouse with a floor area of approximately 27,000 square meters,
a distribution center, and a quality control center. The
distribution center will be used for third-party cold-chain
logistics service. Zhongpin expects to put this distribution center
into operation in the third quarter of 2012.
Zhongpin plans to invest approximately $87.5 million in a chilled and frozen food
processing and distribution center in Kunshan, Jiangsu, which is near Shanghai. The center will be built in three
phases. The first phase will include a processing center,
cold-chain logistics center, and business complex. Zhongpin expects
to invest about $35.0 million on the
first phase that should be put into operation in the fourth quarter
of 2012.
Zhongpin will be investing approximately $49.0 million to build a slaughtering and
processing plant, low temperature prepared pork plant, and
logistics center in Tangshan, Hebei province. This facility will have an
annual production capacity of about 60,000 metric tons for chilled
pork, 20,000 metric tons for frozen pork, and 22,000 metric tons
for prepared pork products. The construction is scheduled to start
in the second quarter of 2012 and the new facility for chilled and
frozen pork is expected to begin operations in the first quarter of
2013.
Zhongpin will be investing approximately $10.5 million in a by-product processing plant in
Changge, Henan province. This
facility will have a production capacity for 100 million meters of
casings and 300 billion units of raw material to make heparin
sodium. The construction started in March
2012 and the new facility is expected to begin operations in
the fourth quarter of 2012.
Zhongpin has established a joint venture company, of which the
Company owns 65%, with Henan Xinda Animal Husbandry Company Limited
in June 2011. The joint venture
company is financed by capital contributions and bank loans. All
capital contributions to the joint venture company have been made
to date. The joint venture company will provide 20,000 sire boars
annually. The facility for sire boar breeding is under construction
and should start operating in the second quarter 2012.
As of March 31, 2012, Zhongpin had
an annual capacity of 728,760 metric tons for chilled and frozen
pork, 126,000 tons for prepared pork products, 20,000 tons for pork
oil, and 30,000 tons for vegetables and fruits, for a combined
total of 904,760 metric tons.
Guidance for the year 2012
Mr. Warren Wang, Zhongpin's Chief
Financial Officer, said, "We are maintaining our prior guidance
that we issued on March 13, 2012.
"Our guidance for 2012 is based on several assumptions that
include:
- Continuation of China's
policies designed to stimulate domestic consumption and economic
growth.
- Average hog prices in China
are expected to decrease about 15% to 20% in 2012 from 2011, based
on the assumed forecasted trend for the supply of live hogs and the
increasing cost to raise hogs.
- A higher percentage of sales from our higher-margin chilled
pork and prepared pork products in 2012 compared with 2011, while
we plan to continue to increase sales volumes of processed pork
products to optimize our product structure.
- Average capacity utilization for the year of about 75% for pork
products.
- Increasing distribution efficiencies and reduction in the
duration of delivery times through the expansion of our cold-chain
logistics system, networks, and services.
- Total government subsidies for Zhongpin are expected to be
$5 million in 2012.
"In addition, we have assumed that the more aggressive price
competition that we saw in the latter part of 2011 and the first
quarter of 2012 will continue in 2012, especially aggressive
promotion efforts by our major competitors.
"We have assumed that we will increase our expenses in four
areas in 2012:
- First, we will continue to build our brand and do that more
aggressively in 2012 than in 2011;
- second, we will increase our investments in human
resources, especially in training and recruiting;
- third, we will increase research and development for new
customized products with different styles and tastes to further
satisfy customer needs in different regions, with the objective of
capturing more market share for prepared pork products; and
- fourth, we will advance our information technology and
information systems more rapidly to support our cold-chain
logistics system, optimize the structure of the supply chain, and
to reduce the management cost.
"Lastly, we have assumed that the historical trend of increasing
costs for labor, energy, environmental protection, and quality
assurance and control will continue into the future, including in
2012.
"Given those comments and assumptions, we are maintaining our
prior guidance.
"For the year 2012, we expect that Zhongpin's sales revenues
should be within a range of US$1.55 billion to $1.72 billion.
"Gross profit margin is expected to be within the range
of 8.6% to 10.2%.
"Net profit margin is expected to be within the range
of 3.3% to 4.2%.
"Diluted earnings per share for the year 2012 are expected to be
within the range of $1.36 to $1.92 per share, assuming average diluted common
shares outstanding of about 37.5 million shares in 2012.
"Zhongpin believes that China's
meat and food industry will continue to consolidate in 2012 at a
more rapid pace than in 2011, which may result in higher market
shares for the leading producers. We believe that Zhongpin is
equipped to meet the challenge of increasing competition and that
our guidance for 2012 can be achieved."
Sales revenues
Total sales revenues increased $88.3
million or 31% to $374.1
million for the three months ended March 31, 2012 from $285.8
million in the first quarter 2011 primarily due to higher
average selling prices and higher sales volume for pork products.
The higher volume resulted mainly from continuing increases in the
number of retail outlets, geographic expansion of our distribution
network and processing facilities, and higher sales to chain
restaurants, food service providers, and wholesalers and
distributors in China. The
following table shows the changes in our tonnage, sales revenues,
and average price per metric ton by product division.
|
|
Sales by Division
(unaudited)
|
|
|
First quarter
ended
March 31, 2012
|
|
First quarter
ended
March31, 2011
|
|
Metric
tons
|
|
Sales
revenues
(millions)
|
|
Average
price per
metric ton
|
|
Metric
tons
|
|
Sales
revenues
(millions)
|
|
Average
price per
metric ton
|
Pork and Pork
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled
pork
|
|
87,146
|
|
$
248.8
|
|
$ 2,855
|
|
70,099
|
|
$
168.6
|
|
$
2,405
|
Frozen
pork
|
|
25,523
|
|
67.0
|
|
$ 2,625
|
|
32,736
|
|
73.5
|
|
$
2,245
|
Prepared pork
products
|
|
21,426
|
|
55.7
|
|
$ 2,600
|
|
20,114
|
|
41.3
|
|
$
2,053
|
Vegetables and
Fruits
|
|
2,906
|
|
2.6
|
|
$
895
|
|
3,288
|
|
2.4
|
|
$
730
|
Total
|
|
137,001
|
|
$
374.1
|
|
$ 2,731
|
|
126,237
|
|
$
285.8
|
|
$
2,264
|
Chilled pork revenues increased on higher tonnage at higher
average prices per ton. Chilled pork revenues increased 48% in the
first quarter 2012 from the first quarter 2011. Chilled pork
tonnage increased 24% and the average price per metric ton
increased 19% in the first quarter 2012 from the first quarter
2011. The higher average selling price for chilled pork was mainly
due to fluctuations in the market price of pork or pork-related
products and changes of our product mix within this product
division. The increase in chilled pork revenues was also due to
successful capacity expansion, increased sales to existing
customers, and increased volume of sales of our products as we
entered new geographic markets, expanded our points of sales, and
gained new customers.
Frozen pork revenues decreased on lower tonnage at higher
average prices. Frozen pork revenues decreased 9% in the first
quarter 2012 from the first quarter 2011. Frozen pork tonnage
decreased 22% and the average price per metric ton increased 17% in
the first quarter 2012 from the first quarter 2011. The decrease in
tonnage was due to the strategic adjustment of our product mix
towards selling less frozen pork products, which have a lower
profit margin. The higher average selling price of frozen pork
products was the result of fluctuations in the market price of pork
or pork-related products.
Prepared pork revenues increased on higher tonnage at higher
average prices. Revenues from prepared pork products increased 35%
in the first quarter 2012 from the first quarter 2011. Prepared
pork tonnage increased 7% and the average price per metric ton
increased 27% in the first quarter 2012 from the first quarter
2011. Prepared pork products are becoming more important to our
business since customers are increasingly demanding them for their
convenience and flavor. We plan to gradually increase sales from
prepared pork products by building our brand recognition and
expanding our capacity for these products.
Pork products totaled 99.3% of total sales revenues in the first
quarter 2012 and 99.2% in the first quarter 2011.
Vegetables and fruits revenues increased on lower tonnage at
higher average prices. Vegetables and fruits revenues increased 8%
in the first quarter 2012 from the first quarter 2011. Tonnage of
vegetables and fruits decreased 12% and the average price per
metric ton increased 23% in the first quarter 2012 from the first
quarter 2011. Vegetables and fruits were 0.7% of total revenues in
the first quarter 2012 and 0.8% in the first quarter 2011.
Distribution channels
The sales of pork and vegetable products are closely related to
the particular regional markets in which our distribution channels
are located. Therefore, the increase in metric tons sold for the
first quarter of 2012 was partly attributable to our efforts to
expand our distribution channels.
The following table shows revenues by distribution channel. In
the first quarter 2012, retail channels accounted for 31.3% of
sales revenues, wholesalers and distributors were the largest at
41.1%, restaurants and food services were 25.7%, and exports were
1.9% of sales revenues. The expansion in our distribution channels
and geographical coverage has been a significant factor in the
increase in our sales volume.
|
|
Sales Revenues by
Distribution Channel
(unaudited)
|
U.S.$ in millions except
%
|
|
First quarter
ended
March 31
|
|
Net
change
|
|
Percent
change
|
|
|
2012
|
|
2011
|
|
|
Retail
channels
|
|
$
117.0
|
|
$
107.7
|
|
$
9.3
|
|
9%
|
Wholesalers and
distributors
|
|
153.7
|
|
97.4
|
|
56.3
|
|
58%
|
Restaurants and food
services
|
|
96.1
|
|
77.2
|
|
18.9
|
|
24%
|
Export
|
|
7.3
|
|
3.5
|
|
3.8
|
|
109%
|
Total
|
|
$
374.1
|
|
$
285.8
|
|
$
88.3
|
|
31%
|
The increase in sales to different distribution channels was
mainly due to the following factors: (a) our production capacity
has increased because we completed the expansion project of our
facilities in Taizhou in the Jiangsu province and in Changchun in the Jilin province in December 2011, and we maintained our capacity
utilization rate on average for all facilities; (b) we have built
our brand image and brand recognition through general advertising,
display promotions, and sales campaigns; (c) we have increased the
number of stores and other channels through which we sell our
products; (d) we believe consumers are placing more importance on
food safety and are willing to pay higher prices for safe food
products; and (e) revenues from export sales increased 109% in the
first quarter 2012 from the first quarter 2011.
The following table shows the number of stores, supermarket
counters, and the city tier coverage where our distribution
channels generated sales volume in the first quarters of 2012 and
2011.
|
|
Numbers of
Stores, Counters, and Cities
Generating Sales Volume
(unaudited)
|
|
|
March
31,
|
|
Net
change
|
|
Percent
change
|
|
|
2012
|
|
2011
|
|
|
Retail
locations
|
|
|
|
|
|
|
|
|
Showcase
stores
|
|
161
|
|
165
|
|
(4)
|
|
(2)%
|
Branded
stores
|
|
1,329
|
|
1,105
|
|
224
|
|
20%
|
Supermarket
counters
|
|
1,948
|
|
2,108
|
|
(160)
|
|
(8)%
|
Total
|
|
3,438
|
|
3,378
|
|
60
|
|
2%
|
|
|
|
|
|
|
|
|
|
City tier coverage
for all distribution channels
|
|
|
|
|
|
|
|
|
First-tier
cities
|
|
29
|
|
29
|
|
-
|
|
-
|
Second-tier
cities
|
|
134
|
|
131
|
|
3
|
|
2%
|
Third-tier
cities
|
|
435
|
|
424
|
|
11
|
|
3%
|
Total
|
|
598
|
|
584
|
|
14
|
|
2%
|
As of March 31, 2012, our
customers included 139 international and domestic fast food
companies in China, 138 processing
factories, and 1,416 school cafeterias, factory canteens, hotels,
army bases, hospitals and government departments. As of
March 31, 2012, we also sold directly
to consumers in 3,438 retail stores and supermarkets in
China.
Cost of Sales
Cost of sales primarily includes our costs of raw materials,
labor costs, and overhead. Of our total cost of sales, our cost of
raw materials typically accounts for about 95% to 97%, our overhead
typically accounts for 2% to 3.5%, and our labor costs typically
account for 1.0% to 1.7%, with slight variations from period to
period. All of our meat products are derived from the same raw
materials, which are live hogs. Our vegetable and fruit products
are purchased from farmers located close to our processing facility
in Changge in the Henan province.
As a result, the purchasing costs of live hogs and vegetables and
fruits represent substantially all of our costs of raw materials.
The increase in our cost of sales was consistent with but
considerably higher than our increase in sales revenues.
|
|
Cost of Sales by
Division
(unaudited)
|
U.S.$ in millions except
%
|
|
First quarter
ended
March 31, 2012
|
|
First quarter
ended
March 31, 2011
|
|
|
Metric
tons
|
|
Amount
(millions)
|
|
Average
cost per
metric ton
|
|
Metric
tons
|
|
Amount
(millions)
|
|
Average
cost per
metric ton
|
Pork and Pork
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled
pork
|
|
87,146
|
|
$
227.1
|
|
$
2,606
|
|
70,099
|
|
$
149.6
|
|
$
2,134
|
Frozen
pork
|
|
25,523
|
|
62.8
|
|
$
2,461
|
|
32,736
|
|
67.8
|
|
$
2,071
|
Prepared pork
products
|
|
21,426
|
|
46.5
|
|
$
2,170
|
|
20,114
|
|
30.6
|
|
$
1,521
|
Vegetables and
Fruits
|
|
2,906
|
|
2.3
|
|
$
791
|
|
3,288
|
|
1.9
|
|
$
578
|
Total
|
|
137,001
|
|
$
338.7
|
|
$
2,472
|
|
126,237
|
|
$
249.9
|
|
$
1,980
|
Gross profit margin (gross profit divided by revenues) decreased
to 9.5% in the first quarter 2012 from 12.6% in the first quarter
2011 primarily due to (a) higher competition in the market, (b) the
decrease in the gap between pork prices and hog prices, (c)
increased promotional activities to grow our market share, and (d)
the increase in overhead due to the higher labor costs and utility
costs.
General, administrative, and selling expenses
General and administrative expenses increased $3.0 million or 47% to $9.4 million in the first quarter 2012 from
$6.4 million in the first quarter
2011. As a percent of revenues, general and administrative expenses
increased to 2.5% in the first quarter 2012 from 2.2% in the first
quarter 2011. The higher general and administrative expenses in the
first quarter 2012 were primarily due to a $1.2 million increase in the provision for bad
debts due to higher accounts receivable as of March 31, 2012 and a $0.9
million increase in salaries due to opening of the two new
facilities Taizhou Zhongpin and Changchun Zhongpin, and a
$0.6 million increase due to increase
in other taxes as a result of the property, plant, and equipment
being placed in service in December
2011 for the two new facilities and therefore we started
paying land and property taxes in the first quarter 2012.
Selling expenses increased $0.1
million or 1.5% to $6.4
million in the first quarter 2012 from $6.3 million in the first quarter 2011 due mainly
to higher sales of pork and pork products, a $0.4 million increase in salary expenses, and a
$0.2 million increase in other
selling expenses, partly offset by a $0.5
million decrease in advertising expenses. Selling expenses
as a percent of revenues decreased to 1.7% in the first quarter
2012 from 2.2% in the first quarter 2011.
Interest expense, net
Interest expense, net of interest income, increased $2.2 million or 41% to $7.6 million in the first quarter 2012 from
$5.4 million in the first quarter
2011 primarily due to (a) higher interest rates in the first
quarter 2012 compared with first quarter 2011 because the People's
Bank of China increased interest
rates to cool down China's
economy; (b) higher outstanding loan balances during the first
quarter 2012 than in the first quarter 2011, and (c) bank notes
that were cashed in during the first quarter 2012 that generated
interest expenses.
Other income and government subsidies
Other income and government subsidies increased $0.5 million or 50% to $1.5 million in the first quarter 2012 from
$1.0 million in the first quarter
2011 primarily due to a $0.6 million
increase in other income due to a value-added-tax refund in the
first quarter 2012, partly offset by a $0.2
million decrease in government subsidies.
Provision for income taxes
The effective tax rate in China
on income generated from the sale of prepared products is 25% and
there is no income tax on income generated from the sale of raw
products, including raw meat products and raw vegetable and fruit
products. The provision for income taxes decreased $0.3 million in the first quarter 2012 from the
first quarter 2011, due mainly to higher sales of prepared meat
products at lower profit margins.
Net income
Net income decreased $4.7 million
or 27.8% to $12.2 million in the
first quarter 2012 from $16.9 million
in the first quarter 2011.
The reduction was mainly due to higher sales revenues from
higher tonnage sold at higher average prices; the higher sales
revenues were more than offset by (a) higher cost of sales since
the cost of hogs increased at a higher percentage than did the
price of pork products, higher promotional activities were required
to grow market share, and labor and utility costs continued to
rise; (b) general and administrative expenses were higher due to a
provision for bad debts and higher salaries; and (c) higher
interest expense and lower government subsidies. The higher
expenses were mainly due to intense competitive pressure in the
pork market as the industry continues to consolidate and companies
are required to vie aggressively to win additional market share in
a variety of ways. Zhongpin's net profit margin (net income divided
by sales revenues) declined to 3.3% in the first quarter 2012 from
6.2% in the first quarter 2011.
Earnings per share
The earnings per share numbers below are based on net income
attributable to Zhongpin Inc. shareholders.
Basic earnings per common share decreased 29.8% to $0.33 in the first quarter 2012 from $0.47 in the first quarter 2011. Average basic
shares outstanding increased 4.6% to 37,498,563 shares in the first
quarter 2012 from 35,850,877 shares in the first quarter 2011.
Diluted earnings per common share decreased 29.8% to
$0.33 in the first quarter 2012 from
$0.47 in the first quarter 2011.
Average diluted shares outstanding increased 3.5% to 37,503,019
shares in the first quarter 2012 from 36,224,022 shares in the
first quarter 2011.
Common shares issued and outstanding were 40,355,502 shares as
of March 31, 2012. Zhongpin common
shares held in Zhongpin's treasury were 3,166,838 shares as of
March 31, 2012. The shares held in
the treasury are included in the common shares issued and
outstanding.
Liquidity and capital resources
During the first quarter 2012, Zhongpin's net cash flow
increased cash and equivalents by $24.6
million. Cash and equivalents totaled $160.5 million as of March
31, 2012 compared with $135.8
million as of December 31,
2011. As of March 31, 2012,
working capital (current assets minus current liabilities) was
$(10.5) million.
Net cash used in operating activities in the first quarter 2012
was $3.7 million, primarily from net
income that provided $12.2 million,
depreciation that provided $5.5
million, accounts payable and accounts receivable that used
a net of $2.9 million, inventories
that used $13.3 million, and other
items that used $5.2 million.
Net cash used in investing activities in the first quarter 2012
was $24.6 million, primarily for
construction in progress, deposits for the purchase of land use
rights, and additions to property and equipment that together used
$24.6 million.
Net cash provided by financing activities in the first quarter
2012 was $52.7 million, primarily
from the proceeds from loans and notes, net of repayments, that
provided $57.0 million, a repurchase
of common stock that used $2.8
million, and the repayment of a capital lease obligation
that used $1.5 million.
As a result, including the effect from foreign currency exchange
rate changes on cash, Zhongpin increased its cash and cash
equivalents in the first quarter 2012 by $24.6 million. Cash and cash equivalents on
March 31, 2011 totaled $160.5 million compared with $135.8 million as of December 31, 2011.
Zhongpin believes its existing cash and cash equivalents,
together with its ability to secure bank borrowings, will be
sufficient to finance its investment in new facilities, with
budgeted capital expenditures of about $141.9 million over the next 12 months, and to
satisfy its working capital needs. It intends to satisfy its
short-term debt obligations that mature over the next 12 months
through additional short-term bank loans, in most cases by rolling
over the maturing loans into new short-term loans with the same
lenders.
Conference call and webcast
Zhongpin will host its first quarter 2012 earnings conference
call and live webcast at 8:00 a.m. Eastern
Daylight Time (New York) on
Thursday, May 10, 2012 (which is also
8:00 p.m. in China on the same day).
The dial-in details for the live conference call are:
U.S. toll-free
number
|
1-866-549-1292
|
International dial-in
number
|
+852-3005-2050
|
Mainland China toll-free
number
|
800 876 8626 (land
line)
|
Mainland China toll
mobile
|
400 681 6949
(mobile)
|
Mainland China toll
mobile
|
400 889 9481
(mobile)
|
Participant PIN
code
|
326 957#
|
The live webcast and archive of the conference call will be
available on the Investor Relations section of Zhongpin's website
at http://www.zpfood.com.
A telephone replay of the call will be available after the
conclusion of the conference call through 8:00 a.m. Eastern Daylight Time, May 24, 2012. The dial-in details for the
telephone replay are:
U.S. toll-free
number
|
1-866-753-0743
|
Mainland China toll free
number
|
800 876 5016 (land
line)
|
International dial-in
number
|
+852-3005-2020
|
Conference
reference
|
145 136#
|
About Zhongpin
Zhongpin Inc. is a leading meat and food processing company that
specializes in pork and pork products, vegetables, and fruits in
China. Its distribution network in
China covers 20 provinces plus
Beijing, Shanghai, Tianjin, and Chongqing and includes 3,438 retail outlets as
of March 31, 2012. Zhongpin's export
markets include Europe,
Hong Kong, and other countries in
Asia. For more information about
Zhongpin, please visit Zhongpin's website at
http://www.zpfood.com.
Safe harbor statement
Certain statements in this news release may be forward-looking
statements made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Zhongpin has based its
forward-looking statements largely on its current expectations and
projections about future events and trends that it believes may
affect its business strategy, results of operations, financial
condition, and financing needs.
These projections involve risks and uncertainties that could
cause actual results to differ materially from those in the
forward-looking statements, which may include but are not limited
to such factors as downturns in the Chinese economy, unanticipated
changes in product demand, interruptions in the supply of live pigs
and or raw pork, the effects of weather on hog feed production,
poor performance of the retail distribution network, delivery
delays, freezer facility malfunctions, Zhongpin's ability to build
and commence new production facilities according to intended
timelines, the ability to prepare Zhongpin for growth, the ability
to predict Zhongpin's future financial performance and financing
ability, changes in regulations, and other information detailed in
Zhongpin's filings with the United States Securities and Exchange
Commission. These filings are available from www.sec.gov or from
Zhongpin's website at www.zpfood.com.
You are urged to consider these factors carefully in evaluating
Zhongpin's forward-looking statements and are cautioned not to
place undue reliance on those forward-looking statements, which are
qualified in their entirety by this cautionary statement. All
information provided in this news release is as of the date of this
release. Zhongpin does not undertake any obligation to update any
forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.
For more information, please contact:
Zhongpin Inc.
Mr. Sterling Song (English and
Chinese)
Director of Investor Relations
Telephone +86 10 8455 4188 extension 106 in Beijing
ir@zhongpin.com
Mr. Warren (Feng) Wang (English
and Chinese)
Chief Financial Officer
Telephone +86 10 8455 4388 in Beijing
warren.wang@zhongpin.com
Christensen
Mr. Julian (Yujia) Zhao (English
and Chinese)
Telephone +86 10 5826 4727 in Beijing
yzhao@christensenir.com
Mr. Tom Myers (English)
Mobile +86 139 1141 3520 in Beijing
tmyers@christensenir.com
ZHONGPIN
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
|
(Amount in U.S.
dollars) (Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2012
|
|
2011
|
|
|
|
|
|
Revenues
|
|
|
|
|
Sales revenues
|
$
|
374,127,384
|
$
|
285,783,221
|
Cost of sales
|
|
(338,651,649)
|
|
(249,866,971)
|
Gross
profit
|
|
35,475,735
|
|
35,916,250
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
General and administrative
expenses
|
|
(9,416,975)
|
|
(6,427,546)
|
Selling
expenses
|
|
(6,437,120)
|
|
(6,273,320)
|
Research & development
expenses
|
|
(86,628)
|
|
(431,506)
|
Impairment loss
|
|
-
|
|
-
|
Total operating expenses
|
|
(15,940,723)
|
|
(13,132,372)
|
|
|
|
|
|
Income from
operations
|
|
19,535,012
|
|
22,783,878
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
Interest
income(expenses),net
|
|
(7,625,481)
|
|
(5,437,069)
|
Other income (expenses),net
|
|
563,605
|
|
(66,845)
|
Government
subsidies
|
|
915,348
|
|
1,114,621
|
Total
other income (expense)
|
|
(6,146,528)
|
|
(4,389,293)
|
|
|
|
|
|
Net income before
taxes
|
|
13,388,484
|
|
18,394,585
|
Provision for income
taxes
|
|
(1,193,329)
|
|
(1,511,390)
|
|
|
|
|
|
Net income after
taxes
|
|
12,195,155
|
|
16,883,195
|
Net (income)/loss attributable to
noncontrolling interest
|
|
2,160
|
|
(154)
|
|
|
|
|
|
Net income
attributable to Zhongpin Inc. shareholders
|
|
12,197,315
|
|
16,883,042
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
582,654
|
|
3,807,915
|
Foreign currency translation
adjustment attributable
to noncontrolling interest
|
|
(863)
|
|
(1,062)
|
Foreign currency
translation adjustment attributable to
Zhongpin Inc. shareholders
|
|
581,791
|
|
3,806,853
|
|
|
|
|
|
Comprehensive
income
|
|
12,777,809
|
|
20,691,110
|
Comprehensive income attributable to
noncontrolling
interest
|
|
1,297
|
|
(1,216)
|
Comprehensive income
attributable to Zhongpin Inc.
shareholders
|
$
|
12,779,106
|
$
|
20,689,894
|
ZHONGPIN
INC.
|
CONDENSED
CONSOLIDATED
BALANCE SHEETS
|
(Amount in U.S.
dollars)
|
|
|
|
|
|
|
|
March
31,
|
|
December 31,
|
|
|
2012
|
|
2011
|
ASSETS
|
|
(
Unaudited)
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
160,488,031
|
|
135,845,095
|
Restricted cash
|
|
108,518,607
|
|
91,444,216
|
Bank notes
receivable
|
|
47,975,915
|
|
29,171,060
|
Accounts receivable, net of
allowance for doubtful
accounts of $3,907,144 and
$2,323,920
|
|
70,209,486
|
|
40,161,898
|
Other receivables, net of
allowance for doubtful
accounts of $530,104 and $449,048
|
|
1,671,814
|
|
1,081,311
|
Purchase deposits
|
|
12,842,852
|
|
14,320,357
|
Inventories
|
|
55,266,805
|
|
41,944,020
|
Prepaid expenses
|
|
304,724
|
|
379,633
|
Allowance
receivables
|
|
954,845
|
|
3,116,108
|
VAT recoverable
|
|
35,741,158
|
|
30,472,864
|
Deferred tax
assets
|
|
573,392
|
|
572,791
|
Other current
assets
|
|
1,665,428
|
|
1,545,534
|
Total current
assets
|
|
496,213,057
|
|
390,054,887
|
|
|
|
|
|
Long term
investment
|
|
476,622
|
|
476,122
|
Property and equipment
(net)
|
|
427,971,935
|
|
427,929,871
|
Deposits for purchase of land
usage rights
|
|
38,537,116
|
|
27,930,404
|
Construction in
progress
|
|
56,857,539
|
|
47,887,224
|
Land usage rights
|
|
96,565,051
|
|
96,981,393
|
Deferred charges
|
|
6,816
|
|
8,665
|
Total
assets
|
|
1,116,628,136
|
|
991,268,566
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Short-term loans
|
|
155,103,470
|
|
115,653,574
|
Bank notes payable
|
|
223,392,593
|
|
177,627,006
|
Long-term loans - current
portion
|
|
30,490,586
|
|
16,016,419
|
Capital lease
obligation
|
|
4,274,305
|
|
5,769,600
|
Accounts payable
|
|
44,412,624
|
|
15,693,948
|
Other payables
|
|
24,741,671
|
|
26,873,586
|
Accrued
liabilities
|
|
12,998,099
|
|
12,596,651
|
Deposits from
customers
|
|
9,014,165
|
|
12,550,096
|
Tax payable
|
|
2,199,164
|
|
1,822,812
|
Deferred subsidy-current
portion
|
|
68,845
|
|
68,773
|
Total current
liabilities
|
|
506,695,522
|
|
384,672,465
|
|
|
|
|
|
Deferred tax
liabilities
|
|
524,949
|
|
524,399
|
Deposits from customers-Long term
portion
|
|
2,278,500
|
|
2,615,449
|
Long-term loans
|
|
90,848,382
|
|
97,261,330
|
Deferred subsidy-Long term
portion
|
|
1,973,567
|
|
1,988,693
|
Total
liabilities
|
|
602,320,920
|
|
487,062,336
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Common stock:par value $0.001;
100,000,000 authorized;
40,355,502 and 40,355,502 shares
issued and outstanding
|
|
40,355
|
|
40,355
|
Additional paid-in
capital
|
|
239,782,199
|
|
239,364,449
|
Retained earnings
|
|
246,397,386
|
|
234,200,071
|
Less: Treasury stock, at cost:
3,166,838 and 2,798,538
shares in 2012 and 2011
|
|
(26,225,647)
|
|
(23,131,074)
|
Accumulated other comprehensive
income
|
|
53,486,844
|
|
52,905,053
|
Total Zhongpin Inc.
Shareholders' Equity
|
|
513,481,137
|
|
503,378,854
|
Noncontrolling
interest
|
|
826,079
|
|
827,376
|
Total shareholders'
equity
|
|
514,307,216
|
|
504,206,230
|
Total liabilities and
shareholders' equity
|
|
1,116,628,136
|
|
991,268,566
|
ZHONGPIN
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
|
(Amount in U.S.
dollars) (Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
|
2012
|
|
2011
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
|
$
12,195,155
|
|
$
16,883,195
|
|
Adjustments to reconcile
net income to
|
|
|
|
|
|
net cash provided
by (used in) operations:
|
|
|
|
|
|
|
Depreciation
|
|
5,537,984
|
|
3,964,080
|
|
|
Amortization of
intangible assets
|
|
516,966
|
|
456,188
|
|
|
Loss from
sale-leaseback
|
|
-
|
|
-
|
|
|
Provision for allowance
for bad debt
|
|
1,657,949
|
|
388,054
|
|
|
Staff welfare
amortization
|
|
-
|
|
-
|
|
|
Impairment
loss
|
|
-
|
|
-
|
|
|
Other
income
|
|
(129,699)
|
|
-
|
|
|
Gain on disposal of a
subsidiary
|
|
-
|
|
-
|
|
|
Stock-based compensation
expense
|
|
417,749
|
|
368,627
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(31,521,161)
|
|
(7,515,312)
|
|
|
|
Other
receivables
|
|
(950,981)
|
|
(968,464)
|
|
|
|
Purchase
deposits
|
|
1,489,444
|
|
(504,858)
|
|
|
|
Prepaid
expenses
|
|
75,128
|
|
(461,894)
|
|
|
|
Inventories
|
|
(13,251,435)
|
|
(6,910,560)
|
|
|
|
Allowance
receivables
|
|
2,160,068
|
|
(1,835,583)
|
|
|
|
VAT
recoverable
|
|
(5,225,549)
|
|
(3,410,453)
|
|
|
|
Deferred tax
asset/liability,net
|
|
-
|
|
-
|
|
|
|
Other current
assets
|
|
(118,029)
|
|
22,422
|
|
|
|
Deferred
charges
|
|
1,855
|
|
7,052
|
|
|
|
Accounts
payable
|
|
28,643,061
|
|
8,880,836
|
|
|
|
Other
payables
|
|
(2,035,430)
|
|
773,741
|
|
|
|
Deferred
subsidy
|
|
-
|
|
-
|
|
|
|
Accrued
liabilities
|
|
388,216
|
|
2,261,200
|
|
|
|
Tax payable
|
|
373,669
|
|
(76,742)
|
|
|
|
Deposits from
customers
|
|
(3,541,776)
|
|
(2,311,969)
|
|
|
|
Deposits from
customers-Long term portion
|
|
(338,991)
|
|
(153,576)
|
|
|
|
Other noncurrent
assets
|
|
-
|
|
-
|
|
Net cash provided (used)
by operating activities
|
|
(3,655,807)
|
|
9,855,984
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Deposits for purchase of
land usage rights
|
|
(10,555,624)
|
|
(16,148,923)
|
|
Construction in
progress
|
|
(11,461,585)
|
|
(11,504,427)
|
|
Additions to property
and equipment
|
(2,585,772)
|
|
(2,484,867)
|
|
Additions to land usage
rights
|
|
-
|
|
-
|
|
Proceeds on sale of
fixed assets
|
|
5,905
|
|
-
|
|
Increase in restricted
cash
|
|
-
|
|
(38,251,560)
|
|
Investment in a
non-controlling entity
|
|
-
|
|
-
|
|
Proceeds from disposal
of a subsidiary
|
|
-
|
|
-
|
|
|
|
Net cash used in
investing activities
|
|
(24,597,076)
|
|
(68,389,777)
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
Proceeds from (repayment
of) bank notes, net
|
|
9,806,307
|
|
76,059,193
|
|
Proceeds from short-term
bank loans
|
|
88,785,573
|
|
48,608,579
|
|
Repayment of short-term
bank loans
|
|
(49,538,008)
|
|
(37,814,486)
|
|
Proceeds from long-term
loans
|
|
7,926,069
|
|
-
|
|
Repayment of long-term
loans
|
|
-
|
|
(1,228,744)
|
|
Repayment of capital
lease obligation
|
|
(1,498,250)
|
|
(1,783,221)
|
|
Proceeds from offering
of common stock
|
|
-
|
|
66,356,662
|
|
Repurchase of common
stock
|
|
(2,812,322)
|
|
-
|
|
Proceeds from exercised
warrants and option
|
|
-
|
|
-
|
|
Capital contribution by
non-controlling interest
|
|
-
|
|
797,485
|
|
|
|
Net cash provided by
financing activities
|
|
52,669,369
|
|
150,995,468
|
|
|
|
|
|
|
|
|
|
Effect of rate changes
on cash
|
|
226,450
|
|
931,197
|
|
Increase in cash and
cash equivalents
|
|
24,642,936
|
|
93,392,872
|
|
Cash and cash
equivalents, beginning of period
|
|
135,845,095
|
|
84,172,186
|
|
Cash and cash
equivalents, end of period
|
|
$ 160,488,031
|
|
$ 177,565,058
|
|
|
|
|
|
|
|
|
Supplemental disclosures
of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
|
$
8,122,027
|
|
$
5,158,272
|
|
Cash paid for income
taxes
|
|
$
819,660
|
|
$
1,674,353
|
SOURCE Zhongpin Inc.