N@N

Origin Agritech Limited Reports Unaudited First Quarter Financial Results for Three Months Ended December 31, 2010

^{Published on 2011-02-22 14:05:28 - Market Wire}
 

BEIJING--([ BUSINESS WIRE ])--Origin Agritech Limited (NASDAQ: SEED) (aOrigina or the aCompanya), a technology-focused supplier of hybrid and genetically modified crop seeds in China, today announced unaudited financial results for the first quarter ended December 31, 2010. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.

FINANCIAL RESULTS OVERVIEW

During the first quarter of fiscal 2011, the Company generated revenues of RMB 17.19 million (US$2.60 million), a decrease of 55.47% from RMB 38.60 million (US$5.65 million) generated in the three months ended December 31, 2009. RMB 16.83 million of the revenues this quarter were a result of the sales of canola seed products, 241,309 kg, for the three months ended December 31, 2010. The small remainder was a result of scrap sales. Across the industry, canola seeds, amongst other seed groups, sold lower volumes as a result of the changing planting schedules of farmers. The majority of Origina™s revenues are recorded in the fiscal third quarter as a result of our revenue recognition policy. The goods already sold and shipped to customers can be seen as Deferred Revenue line on the balance sheet and the Advances from Customers records the advance cash receipts from customers this selling season.

Gross profit for the three-months ended December 31, 2010 was RMB 8.61 million (US$1.3 million) compared to RMB 20.58 million (US$3.01 million) in the same period of the prior year. Gross margins for canola seeds for this quarter (exclusive of scrap sales) were 58.67% versus 53.3% for the canola seed sales for the same quarter in last year. This is a result of the higher pricing structure of our canola seed products this year.

Total operating expenses for the three-months ended December 31, 2010 were RMB 39.02 million (US$5.89 million) compared with RMB 38.96 million (US$5.71 million) reported for the same period in 2009. Selling and marketing expenses were RMB 10.64 million (US$1.61 million) for the first quarter of fiscal 2011 year, representing a increase of 1.59% from RMB 10.48 million (US$1.53 million) for the same period of the last year. General and administrative expenses of RMB 20.76 million (US$3.14 million) for the first quarter ended December 31, 2010, increased 1.76% from RMB 20.41 million (US$2.99 million) for the three months ended December 31, 2009. The research and development expenses increased to RMB 12.26 million (US$1.85 million) for the three-months ended December 31, 2010 from RMB 8.08 million (US$1.18 million) for the same quarter last year, with an increase of 51.73%. On a year over year comparison, our operating expenses are relatively flat annually in the general and administrative and selling and marketing categories, with an increasing spend toward our R&D. This is in line with our corporate goals of maintenance our existing infrastructure inclusive of our distribution network, and expanding our biotechnology portfolio.

Operating loss for the first quarter of fiscal 2011 year amounted to RMB 30.41 million (US$4.59 million) compared with an operating loss of RMB 18.38 million (US$2.69 million) for the same period in fiscal 2010 year.

Net loss for the first quarter of fiscal 2011 year was RMB 25.15 million (US$3.80 million), or RMB 0.94 (US$0.14) per basic and diluted share, as compared to a net loss of RMB 16.39 million (US$2.40 million), or RMB 0.59 (US$0.09) per basic and diluted share in the same period one year ago.

BALANCE SHEET

Origin's balance sheet at December 31, 2010 included cash and cash equivalents of RMB 184.03 million (US$27.79 million) and shareholders' equity of RMB 252.20 million (US$38.08 million). Short term borrowings decreased from RMB 208.90 million (US$ 30.59 million) at December 31, 2009 to RMB 20.00 million (US$ 3.02 million) at December 31, 2010.

Deferred revenue was RMB 211.07 million (US$ 31.87 million) as of December 31, 2010 as compared to RMB 220.38 million (US$ 32.28 million) for the same period-end date as of last year. This represents our orders received and shipped already for products this upcoming selling season.

The Company received Advances from Customers of RMB 385.66 million (US$58.23 million) as of December 31, 2010 as compared to RMB 295.30 million (US$43.25 million) as of December 31, 2009. This represents our cash receipts for products to be ordered this upcoming selling season.

FISCAL 2011 GUIDANCE

Based on its current outlook, and existing and anticipated business conditions, Origin reiterates the revenue guidance for FY 2011 in the range of RMB 600 million to RMB 650 million.

About Origin

Founded in 1997 and headquartered in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is Chinaa™s leading, vertically-integrated agricultural biotechnology company specializing in research, development and production to supply the growing populations of China. Origin develops, grows, processes, and markets high quality, hybrid 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, and possesses a pipeline of genetically modified seed products including glyphosate resistant corn and Bt Corn. The first genetically modified corn seed product for China, Phytase corn, was approved in November 2009 of which Origin possesses exclusive rights. For further information, please log on [ www.originagritech.com ].

Forward Looking Statement

This release contains forward-looking statements. All forward-looking statements included in this release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "continue," or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those risk factors discussed in Origin's filings with the SEC including its annual report on Form 20-F to be filed. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Questions and Answers

1.Why do your first quarter revenues change from year to year?As a reminder, the majority of Origina™s revenues are recorded in the fiscal third quarter as a result of our revenue recognition policy.The goods already sold and shipped to existing customers can be seen in the aDeferred Revenuea line on the balance sheet and the aAdvances from Customersa records the advance cash receipts from customers this selling season.

2.What is your financial guidance on the bottom line for this year? Presently, we are not giving bottom line guidance for fiscal year 2011, and we historically have not provided financial guidance for net income.

3.What new GMO products are in production currently?With the approval of Phytase Corn in November 2009, we still have herbicide resistance, pest resistance (Bt), nitrogen assimilation, and drought tolerance in the pipeline and worldwide license rights to the herbicide resistance and pest resistance (Bt) traits.See chart below.

4.Where do you expect the company to be in 5 years and what steps are you taking to reach those goals?We expect to continue to be growing and expanding our current market to be the rising leader in China by diversifying revenue streams and additional products to accent our key corn seed products.We currently are layering in agricultural chemicals into our existing seed portfolio.Additionally, while Origin was the first company for corn GM in China, we expect to continue to advance our leading position in GM products in China through continued, long term investment in R&D initiatives in and in potential licensing agreements for our traits.

5. Can you provide us with an update to your acquisition strategy? Currently, we are focused on accenting our own seed product portfolio with complementary products, such as agricultural chemicals, and driving our successful suite of products into the marketplace.We are looking at smaller acquisitions in China or globally given the changing dynamic landscape which can add distinct competencies to our company, such as strong seed germplasm, regional distribution, or production capacity as in the case of agricultural chemicals.However we do evaluate each opportunity on a case-by-case basis on specific fit and potential future value to the company.