DANDONG, China, Aug. 18, 2011 (GLOBE NEWSWIRE) -- North China Horticulture, Inc. (OTCBB:IDCX) ("North China Horticulture" or the "Company"), engages in the cultivation and sales of blueberry seedlings, today announced its financial results for the second quarter ended June 30, 2011.
Second Quarter 2011 Financial Highlights:
- Revenue increased 27%, from $2.83 million in Q2 2010 to $3.60 million in Q2 2011
- Gross profit rose 26%, from 2.23 million in Q2 2010 to $2.82 million in Q2 2011
| Summarized Second Quarter 2011 Results: | ||||||
| Q2 2011 | Q2 2010 | CHANGE | ||||
| Revenue | $3.60 million | $2.83 million | +27% | |||
| Gross Profit | $2.82 million | $2.23 million | +26% | |||
| Net Income | ($1.42 million) | $2.19 million | (165%) | |||
| Adjusted Net Income* | $1.20 million | $2.19 million | (45%) | |||
| EPS (Diluted) * | ($0.03) | $0.04 | (175%) | |||
| Adjusted EPS* | $0.024 | $0.044 | (45%) | |||
| *Please see the accompanying Non-GAAP Adjusted Net Income reconciliation with GAAP Net Income below the "Business Outlook Section." | ||||||
| *Earnings per diluted share of ($0.03) on 51.4 million shares. For the second quarter of 2010, the Company reported fully diluted earnings per share of $0.04 on 49.9 million shares. | ||||||
Guang Zhao, North China Horticulture's Chief Executive Officer, said, "Revenue growth this past quarter helped us keep on track of meeting our full year objectives of improved sales and profitability. While we were disappointed with our gross profit and net income this past quarter, we saw tremendous growth in China's blueberry market that leads us to believe that our profitability will improve in the future. Our unique cultivation techniques enable us to produce several different kinds of semi-mature blueberry plants more quickly and efficiently, and with higher survival rates, than many of our competitors. As the market for blueberries in China continues to grow, we are confident that our competitive advantages will help us gain traction in the industry."
2011 Second Quarter Financial Results
Revenue
In the second quarter of 2011, North China Horticulture had sales of $3.60 million compared to sales of $2.83 million in the second quarter of 2010, an increase of $0.77 million or 27 percent. This increase was mainly a result of increased market awareness of the Company's products and the expansion of the blueberry market in general.
Cost of Sales & Gross Profit
In the second quarter of 2011, North China Horticulture's cost of sales was a loss of $0.78 million as compared to a loss of $0.6 million during the second quarter of 2010, an increase of negative $0.18 million. This increase in cost of goods sold per sales ratio for the six and three months ended June 30, 2011 was mainly due to the higher unit selling prices for each seed in the first quarter of 2010, which were twice the unit price in 2011. The reason for the higher unit price was because of the age of seed. The unit price is higher with the two-year-old seed than the one-year-old seed. In other words, the unit price is increasing accordingly during the growing of seeds. Moreover, the costs of raw materials were also higher in 2011, which followed the trends of the market.
Our gross profit increased 39% to $4,078 million in the six months ended June 30, 2011 from $2,94 million in the same period 2010, and increased 26% to $2,82 million in the three months ended June 30, 2011 from $2,23 million in the same period 2010. Gross profit as a percentage of net revenue was 79% and 80% for the six months ended June 30, 2011 and 2010 respectively, and 78% and 79% for the three months ended June 30, 2011 and 2010, respectively.
Most of the maturity seeding plants we sold in the first quarter of 2010 were aged over 1 or 2 years, with a price twice as typical, so the gross margin of the first half year in 2010 is higher than that of 2011.
Net Income
Our net loss decreased 120%, to ($0.56) million in the six months ended June 30, 2011 from $2.87 million in 2010. Net loss decreased 165%, to ($1.42) million in the three months ended June 30, 2011 from $2.19 million in 2010. These changes was mainly due to the increase of G&A expenses, share based consulting fee, and bad debt expense in 2011. The share based consulting fee of $2.63 million affected our current profit, but for its strategic nature, we believe our financing activities may benefit from it in the future.
Business Outlook
"Right now, our primary goals are to increase our production capacity, produce downstream products and expand our distribution network," remarked Mr. Gao. "China's rapid economic growth, the increasing health and wellness consciousness of the nation's people, and government policy are all driving the market for blueberries in China. In particular, part of China's eleventh five-year plan encourages local and federal authorities to offer a variety of subsidies and tax incentives to farmers and agricultural producers in hopes of modernizing China's agriculture sector and alleviating rural poverty. With respect to these recent developments, we are working very hard to better position ourselves to meet potential heightened demand for our products. Notably, we are currently exploring the idea of producing downstream products, such as fresh and frozen blueberries. Our management team has extensive experience working in the processed food and beverage industries, and we want to leverage that experience in the future to produce lines of blueberry beverages and food products. Moreover, we are currently looking to expand our distribution network to boost our presence throughout China. The market for blueberries in China is developing very quickly, and we are making every effort to strengthen our operations as we anticipate improved demand for our products in the future. "
| Three Months Ended June 30 | ||
| 2011 | 2010 | |
| Net Income | $ (1,421,724) | $ 2,193,700 |
| Stock compensation | 2,625,008 | 0 |
| Adjusted Net Income (Loss) | $1,203,284 | $2,193,700 |
| Adjusted Earning (Loss) Per Share (Diluted) | $ 0.024 | $ 0.044 |
| The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. | ||
| Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. | ||
About North China Horticulture, Inc.
North China Horticulture was founded in March of 2008 in the People's Republic of China to meet the demands of the food and beverage industry for blueberry seedling varietals. The Company's offices and facilities are located in and around the city of Dandong in Liaoning Province. Currently, the Company has 42 greenhouses on six acres of land, and a production capacity of approximately nine million seedlings per year. North China Horticulture sells its seedlings to a number of agricultural enterprises throughout northern China, who replant and cultivate the seedlings to maturity in blueberry farms. The Company's unique cultivation techniques allow it to produce several different kinds of semi-mature blueberry plants more quickly and efficiently, and with higher survival rates, than many of its competitors. North China Horticulture currently has over 200 employees.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors set forth in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.