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Asia Bio-Chem Group Corp. Announces Second Quarter 2011 Financial Results

^{Published on 2011-08-11 12:25:57 - Market Wire}
 

TORONTO, Aug. 11, 2011 /CNW/ - Asia Bio-Chem Group Corp. (TSX: ABC) ("Asia Bio-Chem" or the "Company") today announced its interim financial statements for the three-month and six-month periods ending June 30, 2011.

Interim Financial Results
Highlights

• Record revenues of $68.7 million in the second quarter and $119.8 million in the first half of 2011.
• Strong starch and germ prices contributed to a 20.7% improvement in sales during the second quarter of 2011 to $68.7 million compared with the same period in 2010.
• Production capacity for the Company's total operations was over 80% in the second quarter.
• Higher corn costs caused gross margin to decline to 12.2% during the second quarter and 13.7% during the first half year compared with 16.9% and 16.9% during the same periods of 2010, respectively.
• Lower gross profit and higher selling and general expenses caused net income to decline to $1.3 million or $0.02 per share during the second quarter compared with $4.5 million or $0.06 per share during the second quarter of 2010. For the first six months of 2011, though gross profit was flat, higher selling and general expenses caused net income to decline to $3.8 million or $0.05 per share compared with $6.6 million or 0.09 per share during the first half of 2010.
• The Company is strongly supported by its banking group as evidenced by the addition of $7.6 million (RMB 50 million) loan through CITIC Trust Co., Ltd., a national financial institution in China.  This RMB 50 million loan replaced the RMB 30 million loan from Shanghai Pudong Development Bank that was repaid in May 2011.
• The Company's Daqing downstream expansion will be delayed until later in 2012 due to the current corn processing market conditions and due to a delay of the local Government's financial commitment to the project.  The Company now expects the first phase of the project to contribute to revenues during the second half of 2012 and achieve margin improvement.

"We are pleased to report that both of our plants are running smoothly, capacity utilization is over 80% and we continue to enjoy a stable supply of corn," stated Mr. Zhiping Wang, President and CEO of Asia Bio-Chem.  "While corn costs have been higher during the quarter, we expect improved profitability as we work through the start-up gluten inventory and as starch prices start to reflect higher corn prices."

During the second quarter and the first six months of the year, revenues increased by 20.7% and 23.8%, respectively, compared with the same periods of 2010.  This increase was due to higher prices for starch and germ.  The gluten sold during the second quarter was, however, higher in moisture given that it was produced during the startup of Changtu and, as such, revenues and margin on this product were lower during the quarter.

Corn prices increased by 29.3% during the second quarter and by 29.0% during the first six months compared with the same periods of 2010.  Compared with the first quarter of 2011, corn prices increased by 16.5%.  As a result of the higher corn costs coupled with lower gluten and fibre prices, the Company's gross margin declined during the second quarter to 12.2% and to 13.7% during the first six months of 2011, compared with 16.9% during the second quarter of 2010 and 16.9% during the first six months of 2010.

SUMMARY FINANCIAL STATEMENTS

Higher transportation and administrative expenses combined with lower and flat gross profits caused EBITDA before stock-based compensation to decline by 38.4% for the second quarter and 23.5% for the first six months of 2011 compared with the same periods of 2010.

With the proceeds from the share issuance in the first quarter and increased borrowing and cash from operations, the Company's cash position was $14.8 million as at June 30, 2011.

Daqing Downstream Update
The Daqing downstream expansion is to be financed with a combination of cash flow, debt and equity raised from the offering of shares completed earlier this year.  Cash flow from operations has been negatively affected by rising corn costs and ongoing working capital requirements.  Further, the local government has been slow in its commitment of 40 million RMB ($6.0 million) which is part of an agreement entered into when the Daqing plant was being constructed in 2009. Given these factors, management has chosen to preserve its capital and reduce its immediate commitments to the project by delaying it's completion by approximately 6 months. Management remains committed to downstream expansion and expects the first phase of the project to contribute to revenues during the second half of 2012.

Conference Call
The Company will be hosting a conference call to discuss second quarter results on Friday, August 12, 2011. The conference call and replay details are as follows:

About Asia Bio-Chem Group Corp.
Asia Bio-Chem Group, through its wholly-owned subsidiaries in the People's Republic of China ("PRC"), is in the business of processing corn. From its plants in Liaoning and Heilongjiang Province, the Company has a total processing capacity of 900,000 tonnes of corn per year, which are processed into cornstarch, corn germ, gluten, and fiber for sale into the domestic Chinese market.

This news release contains certain statements that may be deemed "forward looking statements". Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects,", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Forward looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward looking statements, except as required by law, in the event that management's beliefs, estimates or opinions, or other factors, should change.