SOURCE: Agria Corporation

December 03, 2007 07:00 ET

Agria Reports Third Quarter 2007 Results

Revenues of US$47.1 Million for First Nine Months of 2007, With Diluted Earnings per ADS of US$0.48; Expect 4Q/2007 Revenue Growth of 60% to 70% Year-Over-Year

BEIJING--(Marketwire - December 3, 2007) - Agria Corporation (NYSE: GRO), an innovative China-based agri-solutions provider engaged in research and development, and production and sale of three different types of upstream agricultural products, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2007.

Revenues for the third quarter of 2007 were RMB 73.3 million (US$9.8 million), compared to revenues of RMB 71.3 million for the third quarter of 2006. Net income was RMB 41.1 million (US$5.5 million), compared to RMB 44.4 million in the year ago period. Excluding share-based compensation expense of RMB 4.4 million (US$583 thousand) in the third quarter of 2007, net income for the third quarter of 2007 (non-GAAP) was RMB 45.5 million (US$ 6.1 million).

In the third quarter of 2007, gross profit was RMB 55.5 million (US$7.4 million) compared to RMB 49.7 million in the third quarter of 2006. In the third quarter of 2007, the company achieved gross margins of 77.2% and 68.5% from its sheep breeding and seedling segments, respectively, while revenues from the sheep breeding and seedling segments accounted for 84% and 16%, respectively, of total revenues. Revenue from the company's corn seed segment was nil in the third quarter of 2007 compared to RMB 6.1 million in the same period in 2006. Due to seasonality of the corn seeds production and sale, the third quarter typically represents the low point of the year for the corn seed segment and therefore the low point for total quarterly revenues. Typically, corn seeds are harvested in September; sales usually start in October and end in or before June of the following year, with minimal to nil corn seed sales from July through August, and only sales of any remaining old inventory in September.

For the third quarter 2007, basic and diluted earnings per ADS were RMB 0.82 (US$ 0.11) and RMB 0.78 (US$ 0.10), respectively, compared to RMB 0.89 per basic and diluted ADS in the same period in 2006. Excluding share-based compensation expense of RMB 4.4 million (US$ 583 thousand) in the third quarter of 2007, diluted earnings per ADS (non-GAAP) were RMB 0.86 (US$ 0.12). Each ADS represents two ordinary shares of the company.

Revenues for the nine month period ended September 30, 2007 were RMB 352.7 million (US$ 47.1 million), compared to revenues of RMB 340.5 million for the nine month period ended September 30, 2006. Net income for the nine month period ended September 30, 2007 was RMB 184.5 million (US$ 24.6 million), compared to RMB 186.5 million in the same period of 2006. Excluding share-based compensation expense of RMB 4.4 million (US$ 583 thousand) in the nine months ended September 30, 2007, net income for the nine months ended September 30, 2007 (non-GAAP) was RMB 188.9 million (US$ 25.2 million).

For the nine months ended September 30, 2007, gross profit was RMB 213.3 million (US$ 28.5 million) compared to RMB 206.7 million for the first nine months ended September 30, 2006. For the first nine months ended September 30, 2007, the company achieved gross margins of 39.9%, 74.1% and 69.2% from its corn seed, sheep breeding and seedling segments, respectively, while revenues from the corn seeds, sheep breeding and seedling segments accounted for 38.0%, 48.8% and 13.2%, respectively, of total revenues.

For the nine month period ended September 30, 2007, basic and diluted earnings per ADS were RMB 3.69 (US$ 0.49) and RMB 3.62 (US$ 0.48), respectively, compared to RMB 3.73 per basic and diluted ADS for the same period in 2006. Excluding share-based compensation expense of RMB 4.4 million (US$ 583 thousand) in the nine months ended September 30, 2007, diluted earnings per ADS (non-GAAP) were RMB 3.7 (US$ 0.49).

Mr. Alan Lai, chairman and co-CEO of Agria Corporation, commented, "We continue to gain significant momentum as we leverage our proven operational and commercialization ability, extensive sales and distribution, and track record of innovation. The third quarter -- typically the lowest of the season -- developed as expected with a high level of corn contract activity entering the fourth quarter. As a result, we now expect to achieve sequential growth in Q4/2007 and Q1/2008. The successful completion of our recent IPO on the New York Stock Exchange will help us establish our brand on an even larger scale. While we have built our business organically to date, as a public company, we now have a currency to use for strategic acquisitions of land, products and distribution channels. Overall, we remain very confident in our near- and long-term prospects and will continue to work to build shareholder value."

Third Quarter 2007 Segment Highlights

--  Corn Seeds: The third quarter typically represents the low season
    annually for corn seed sales. Based on sales orders received, the company
    is optimistic about the corn seeds segment and overall prospects for the
    fourth quarter. Agria is also in the process of acquiring additional land
    for future growth. The company expects average selling prices of
    proprietary corn seeds will improve in the fourth quarter compared to the
    same period in 2006, while average selling prices of generic corn seeds
    will experience typical declines.  Agria's corn seed R&D pipeline remains
    strong. The company expects to introduce two new proprietary corn seeds to
    the market in 2008.
    
--  Sheep Breeding: Sales of Agria's frozen sheep semen remained strong in
    the third quarter and the growth trend is expected to continue in the
    fourth quarter. Average selling prices of the company's frozen sheep semen
    remained stable with the potential for price increases. Agria is currently
    building a new sheep breeding center which it expects will significantly
    boost the company's production capacity of sheep breeding products.
    
--  Seedlings: Agria introduced several new seedling products in the
    quarter and continues to explore growth opportunities in new areas.
    

As of September 30, 2007, Agria had cash and cash equivalents of RMB 288.6 million (US$ 38.5 million). This does not include approximately US$183 million, net of issuance costs, in proceeds from the company's initial public offering completed in November 2007.

Business Outlook

Based primarily on the sales orders received to date, Agria expects to generate total revenues in the range of approximately RMB 238 million (US$ 31.8 million) to RMB 253 million (US$ 33.8 million) for the fourth quarter of 2007, representing year-over-year growth in the range of 60% to 70%, respectively, compared to RMB 149 million in the fourth quarter of 2006. This forecast reflects Agria's current and preliminary view, which is subject to change.


Convenience Currency Translation

The conversion of RMB into U.S. dollars in this release, made solely for the convenience of the reader, is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York as of September 28, 2007, which was RMB 7.4928 to US$ 1.0000. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on September 28, 2007, or at any other date. The percentages stated in this press release are calculated based on RMB.


Investor Conference Call / Webcast Details

The dial-in number for the live audio call beginning on December 3, 2007 at 8:00 a.m. U.S. Eastern Time (9:00 p.m. December 3, 2007 in Beijing) is +1-201-689-8560. A live webcast of the conference call will be available on Agria's website at www.agriacorp.com.

A replay of the call will be available approximately 2 hours after the conclusion of the live call through midnight on December 17, 2007, U.S. Eastern Time (1 p.m., December 18, 2007 in Beijing) by telephone at +1-201-612-7415. To access the replay use conference ID# 263900, with account #3055. A webcast replay will also be available at www.agriacorp.com.


About Agria Corporation

Agria Corporation (NYSE: GRO) is an innovative China-based agri-solutions provider focusing on research and development, production and distribution of three different types of upstream agricultural products. Its diversified portfolio of products comprises corn seeds, sheep breeding and seedlings, including proprietary products developed through its own research and development capability. The company has access to approximately 27,000 acres of farmland in seven provinces and its extensive distribution network provides direct or third party distribution in 14 provinces. For more information about Agria Corporation, please visit www.agriacorp.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Agria Corporation's strategic and operational plans, contain forward-looking statements. Agria may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Agria's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, Agria's limited operating history makes it difficult to evaluate our future prospects and results of operations; natural or man-made disasters could damage our seed production, which would cause us to suffer production losses and a material reduction of our revenues; outbreaks of disease in livestock and/or food scares in China would materially and adversely affect our sheep breeding business; we primarily rely on arrangements with village collectives to produce our corn seed products, and if we are unable to continue these arrangements or enter into new arrangements with other village collectives to increase our production, our total land acreage devoted to corn seed production may decrease and our growth may be inhibited; our growth prospects may be materially and adversely affected if we are unable to continue to develop or acquire products to meet the demands of Chinese farmers or to produce our existing products in sufficient quantities; and one or more of our distributors may engage in activities that are harmful to our brand and to our business, and other risks outlined in Agria's filings with the U.S. Securities and Exchange Commission, including its Form F-1/A filed on November 2, 2007. All information provided in this press release is as of December 3, 2007, and Agria does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Non-GAAP Financial Measures

To supplement our consolidated financial information prepared in accordance with U.S. GAAP, Agria Corporation uses non-GAAP measures of net income and earnings per share and per ADS, which are adjusted to exclude share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release.

Agria believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based compensation expenses that may not be indicative of its operating performance from a cash perspective. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Agria's historical performance and liquidity. Agria intends to compute its non-GAAP financial measures using the same consistent method from quarter to quarter. We believe these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP net income and earnings per share and per ADS excluding share-based compensation expenses is that these non-GAAP measures exclude share-based compensation charge that has been and will continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.


                             Agria Corporation
                  Consolidated Statements of Operations
         (In thousands of RMB, except per share and per ADS data)
                                (Unaudited)


                           Three months ended         Nine months ended
                          30-Sep       30-Sep       30-Sep       30-Sep
                            2006         2007         2006         2007

Revenue:
Corn seeds                    6,137           --      148,263      133,853
Sheep breeding products      52,868       61,482      150,386      172,081
Seedlings                    12,254       11,814       41,848       46,769
                        -----------  -----------  -----------  -----------
Total revenue                71,259       73,296      340,497      352,703
                        -----------  -----------  -----------  -----------

Cost of revenue:
Corn seeds                   (5,489)          --      (86,867)     (80,395)
Sheep breeding products     (13,054)     (14,046)     (39,683)     (44,589)
Seedlings                    (2,995)      (3,717)      (7,207)     (14,396)
                        -----------  -----------  -----------  -----------
Total cost of revenue       (21,538)     (17,763)    (133,757)    (139,380)
                        -----------  -----------  -----------  -----------

Gross profit                 49,721       55,533      206,740      213,323

Operating (expense)
 income (Note 1):
Selling expenses             (2,402)      (2,971)      (9,944)     (10,908)
General and
 administrative
 expenses                    (1,243)      (7,554)      (4,688)     (11,116)
Research and
 development expenses          (562)        (642)      (3,185)      (1,667)
Government Grants                80           --           80           --
                        -----------  -----------  -----------  -----------
Total operating
 expenses                    (4,127)     (11,167)     (17,737)     (23,691)
                        -----------  -----------  -----------  -----------

Operating profit             45,594       44,366      189,003      189,632
Interest income                  63          693          213          843
Interest expense             (1,345)      (4,033)      (3,759)      (6,272)
Other income                     79          123        1,044          297
                        -----------  -----------  -----------  -----------
Income before income tax     44,391       41,149      186,501      184,500
Income tax                       --           --           --           --
                        -----------  -----------  -----------  -----------
Net income                   44,391       41,149      186,501      184,500
                        ===========  ===========  ===========  ===========

Earnings per share:
-Basic                      RMB0.44      RMB0.41      RMB1.87      RMB1.85
-Diluted                    RMB0.44      RMB0.39      RMB1.87      RMB1.81
                        ===========  ===========  ===========  ===========




Weighted average number
 of ordinary shares
 outstanding:

-Basic                  100,000,000  100,000,000  100,000,000  100,000,000
-Diluted                100,000,000  105,603,039  100,000,000  101,955,592

Earnings per ADS (Note 2):
-Basic                      RMB0.89      RMB0.82      RMB3.73      RMB3.69
-Diluted                    RMB0.89      RMB0.78      RMB3.73      RMB3.62
                        ===========  ===========  ===========  ===========

Note 1:
Share-based
 compensation expense
 are included in
 general and
 administrative
 expenses                        --        4,365           --        4,365
                        ===========  ===========  ===========  ===========

Note 2:
Each ADS represents two
 ordinary shares.



                              Agria Corporation
                   Consolidated Statements of Operations
         (In thousands of US$, except per share and per ADS data)
                                (Unaudited)


                                 Three months ended      Nine months ended
                                             30-Sep                 30-Sep
                                               2007                   2007

Revenue:
Corn seeds                                       --                 17,864
Sheep breeding products                       8,205                 22,966
Seedlings                                     1,577                  6,242
                               --------------------   --------------------
Total revenue                                 9,782                 47,072
                               --------------------   --------------------

Cost of revenue:
Corn seeds                                       --                (10,730)
Sheep breeding products                      (1,875)                (5,951)
Seedlings                                      (496)                (1,921)
                               --------------------   --------------------
Total cost of revenue                        (2,371)               (18,602)
                               --------------------   --------------------

Gross profit                                  7,411                 28,470

Operating (expense) income
 (Note 1):
Selling expenses                               (397)                (1,456)
General and administrative
 expenses                                    (1,008)                (1,484)
Research and development
 expenses                                       (86)                  (222)
                               --------------------   --------------------
Total operating expenses                     (1,491)                (3,162)
                               --------------------   --------------------

Operating profit                              5,920                 25,308
Interest income                                  93                    113

Interest expense                               (538)                  (837)
Other income                                     16                     40
                               --------------------   --------------------
Income before income tax                      5,491                 24,624
Income tax                                       --                     --
                               --------------------   --------------------
Net income                                    5,491                 24,624
                               ====================   ====================

Earnings per share:
-Basic                                      US$0.05                US$0.25
-Diluted                                    US$0.05                US$0.24
                               ====================   ====================
Weighted average number of
 ordinary shares outstanding:

-Basic                                  100,000,000            100,000,000
-Diluted                                105,603,039            101,955,592

Earnings per ADS (Note 2):
-Basic                                      US$0.11                US$0.49
-Diluted                                    US$0.10                US$0.48
                               ====================   ====================

Note 1:
Share-based compensation
 expense are included in
 general and administrative
 expenses                                       583                    583
                               ====================   ====================

Note 2:
Each ADS represents two
 ordinary shares.



                             Agria Corporation
                   Reconciliation of Non-GAAP measures
         (In thousands of RMB, except per share and per ADS data)
                                (Unaudited)


                                 Three months ended     Nine months ended
                                  30-Sep     30-Sep     30-Sep     30-Sep
                                    2006       2007       2006       2007



Net income                          44,391     41,149    186,501    184,500
Share based compensation
 expense                                --      4,365         --      4,365
                                ---------- ---------- ---------- ----------

Non-GAAP net income                 44,391     45,514    186,501    188,865
                                ========== ========== ========== ==========

Net income per ADS - basic         RMB0.89    RMB0.82    RMB3.73    RMB3.69
Net income per ADS - diluted       RMB0.89    RMB0.78    RMB3.73    RMB3.62
                                ========== ========== ========== ==========

Non-GAAP net income per ADS -
 basic                             RMB0.89    RMB0.91    RMB3.73    RMB3.78
Non-GAAP net income per ADS -
 diluted                           RMB0.89    RMB0.86    RMB3.73    RMB3.70
                                ========== ========== ========== ==========

Weighted average shares used in
 calculating basic net income
 per ADS                        50,000,000 50,000,000 50,000,000 50,000,000
Weighted average shares used in
 calculating diluted net income
 per ADS                        50,000,000 52,801,520 50,000,000 50,977,796



                             Agria Corporation
                   Reconciliation of Non-GAAP measures
         (In thousands of US$, except per share and per ADS data)
                                (Unaudited)


                                  Three months ended      Nine months ended
                                              30-Sep                 30-Sep
                                                2007                   2007


Net income                                     5,491                 24,624
Share-based compensation
 expense                                         583                    583
                               ---------------------  ---------------------

Non-GAAP net income                            6,074                 25,207
                               =====================  =====================

Net income per ADS - basic                   US$0.11                US$0.49
Net income per ADS - diluted                 US$0.10                US$0.48
                               =====================  =====================

Non-GAAP net income per ADS -
 basic                         US$              0.12  US$              0.50
Non-GAAP net income per ADS -
 diluted                       US$              0.12  US$              0.49
                               =====================  =====================

Weighted average shares used
 in calculating basic net
 income per ADS                           50,000,000             50,000,000
Weighted average shares used
 in calculating diluted net
 income per ADS                           52,801,520             50,977,796

Note 1: Each ADS represents two common shares.

                            Agria Corporation
                        Consolidated Balance Sheets
                              (In thousands)


                                      (Audited)   (Unaudited)  (Unaudited)
                                       31-Dec       30-Sep       30-Sep
                                         2006         2007         2007
                                        (RMB)        (RMB)        (US$)
ASSETS
Current assets:
Cash and cash equivalents                  42,782      288,615       38,519
Accounts receivable (net of
 allowance for doubtful accounts)         156,440      132,960       17,745
Inventories                                58,007       56,290        7,513
Prepayments and other current assets       22,584       97,926       13,069
Amounts due from related parties            1,059          118           16
                                     ------------ ------------ ------------
Total current assets                      280,872      575,909       76,862
                                     ------------ ------------ ------------

Non-current assets:
Property, plant and equipment, net         40,126       51,867        6,922
Investment                                    205          205           27
Intangible assets, net                     74,437       90,036       12,016
Deferred share issuance costs                  --       15,631        2,086
Other assets, net                          94,836      106,775       14,250
                                     ------------ ------------ ------------
Total non-current assets                  209,604      264,514       35,301
                                     ------------ ------------ ------------
Total assets                              490,476      840,423      112,163
                                     ============ ============ ============

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term bank borrowings                 36,900       26,400        3,523
Long-term bank borrowing, current
 portion                                    1,500           --           --
Accounts payable                           27,161       13,242        1,767
Accrued expenses and other
 liabilities                               14,907       36,430        4,862
Amount due to a shareholder                29,992      187,972       25,087
Amounts due to related parties             16,884        4,001          534
                                     ------------ ------------ ------------
Total current liabilities                 127,344      268,045       35,773
                                     ------------ ------------ ------------

Non-current liabilities:
Amounts due to related parties              8,996        8,996        1,201
                                     ------------ ------------ ------------
Total non-current liabilities               8,996        8,996        1,201
                                     ------------ ------------ ------------
Total liabilities                         136,340      277,041       36,974
                                     ------------ ------------ ------------

Series A Redeemable convertible
 preferred shares
 (par value US$0.0000001 per share;
 100,000,000 shares authorized; nil
 and 2,400,000 shares issued and
 outstanding at December 31, 2006
 and September 30, 2007)                       --       65,111        8,690
                                     ------------ ------------ ------------
Redeemable ordinary shares (par
 value US$0.0000001 per share; nil
 and  6,250,000 shares issued and
 outstanding at December 31, 2006
 and September 30, 2007)                      --      155,928       20,810
                                     ------------ ------------ ------------

Shareholders’ equity:
Ordinary shares (par value
 US$0.0000001 per share;
 499,900,000,000 shares authorized;
 100,000,000 shares issued and
 outstanding at December 31, 2006
 and September 30, 2007)                      --           --           --
Additional paid-in capital                  8,098        4,365          582
Statutory reserves                         76,953       76,953       10,270
Retained earnings                         269,085      261,025       34,837
                                     ------------ ------------ ------------
Total shareholders’ equity                354,136      342,343       45,689
                                     ------------ ------------ ------------
Total liabilities, preferred shares
 and shareholders’ equity                 490,476      840,423      112,163
                                     ============ ============ ============

Contact Information

  • Contacts:

    Matt Feng
    Investor Relations
    China Tel: 86 10 8785-9020
    Email Contact

    David Pasquale
    EVP
    The Ruth Group
    U.S. Tel: +646-536-7006
    Email Contact