SOURCE: China Modern Agricultural Information Inc.

China Modern Agricultural Information Inc.

October 15, 2012 08:30 ET

China Modern Net Income Increases 96.6% and Reports EPS of $0.37 for the Fiscal Year 2012

HARBIN, CHINA--(Marketwire - Oct 15, 2012) - China Modern Agricultural Information Inc. ("the Company") (OTCBB: CMCI), a high-tech livestock company specializing in the breeding of cows and calves, the production and sale of milk and the sale of organic fertilizer, today announced net income for the 2012 fiscal year end totaled $17.4 million, or earnings per share of $0.37.

Financial Highlights for the Fiscal Year Ended June 30, 2012

  • Revenue increased 19% year-over-year to $29.8 million from $25 million;
  • Gross profit increased 46% to $19.1 million; gross margin improved to 64% from 52%;
  • Net income increased 96.6% to $17.4 million versus $8.9 million in 2011;
  • Earnings per share of $0.37 based on 47 million shares outstanding;
  • Cash totaled $16.9 million or $0.32 per share;
  • Working capital increased year-over-year 184.6% to $23.4 million;

Operational Highlights for the Fiscal Year Ended June 30, 2012

  • Acquired Yulong Cattle Co., in November 2011 which increased our number of the cows by 3,800 and improved our production capacity by approximately 90 tons per day.
  • Received several raw milk orders including 4,000 tons from Qiqihar Heshan Dairy, 4,000 tons raw milk order from Heilongjiang Nong kendelong Dairy, 5,000 tons raw milk order from Long Xing Dairy Co., and 6,000 tons raw milk order from Suihua Dongxing Dairy.

Mr. Youliang Wang, Chief Executive Officer of China Modern Agricultural Information, commented, "We are pleased to announce another year of strong growth of our company's financial performance for the fiscal year 2012. The revenue increased by 19% to $29.8 million of which $19.8 million from milk sales and $10.0 million from sales commission from farmers. The revenue from per milk cow increased 64% to $4,280, mainly driven by increased production capacity and higher sales price of raw fresh milk. Sales price increased up to 72% during the fiscal year. Despite an increase of feeding expenses, we have managed to significantly lower the cost of goods sold and improved our gross profit margin from 52% to 64% mainly through leasing grassland from local government and adopting a new business model."

Mr. Wang continued, "We believe the market for dairy products in China will grow rapidly for the long term, driven by China's economic growth, improved living quality and increased penetration of infant formula, which will in turn increase the demand for raw fresh milk production. To continually grow the revenue and hedge the risk of increasing feeding expenses and operating cost, we have acquired Yulong Cattle and changed our business model from solely relying on our own milk production to a mix of self production and leasing cows to the local farmers. To motivate and retain top-quality employees and related parties, we have also adopted a stock incentive plan in March 2012. We will continue to aggressively seek other opportunities to fuel the growth of our business, while enhancing our relationship with the local government and farming community going forward."

Financial Results for the Fiscal Year Ended June 30, 2012
Revenue for the fiscal year ended June 30, 2012 totaled $29.8 million, an increase of 19% as compared to $25 million for the same period in 2011. Revenue is generated predominately from the sale of fresh raw milk and fresh raw milk sales commissions from farmers. Revenue increased year-over-year due to an increase in the number of adult cows cared for from the acquisition of Yulong Cattle and the increase in sales price of milk per kg. The price of milk has increased from $ 0.31 per kg for the twelve months ended June 30, 2011 to $ 0.53 per kg as of June 30, 2012, an increase of 72%.

Gross profit for the fiscal year ended June 30, 2012 totaled $19.1 million, an increase of 46% compared to $13.1 million for the fiscal year ended June 30, 2011. Gross profit margin improved to 64% for the 2012 fiscal year as compared to 52% for the 2011 fiscal year. Management expects the gross profit margins to increase due to the reduced direct costs, especially in feeding food costs, because some milk production and distribution are entirely the responsibility of the local farmers under the new business model. Additionally, the management expects the price of raw milk to continue rising in the future.

Operating expenses for the fiscal year ended June 30, 2012 totaled $2.3 million as compared to $1.4 million for the fiscal year ended June 30, 2011. The main operating expenses consist of human resources, depreciation, professional service fees for filings required by U.S. securities laws, consulting expenses to a Chinese financial advisory company, business taxes and expenses for stock option plan, etc. Due to the new revenue stream introduced, we incurred $619,307 and $6,754 in business tax for the twelve months ended June 30, 2012 and 2011, respectively. We classified it as a selling expense which is included in operating expenses. This is the main reason for the increase in operating expenses during the twelve months ended June 30, 2012.

Net income for the 2012 fiscal year ended June 30, 2012 totaled $17.4 million, an increase of 96.6% compared to $8.9 million for the 2011 fiscal year ended June 30, 2011. Earnings per share for fiscal 2012 is $0.37, based on 47 million shares outstanding versus earnings per share of $0.23 for fiscal 2011, based on 38 million shares outstanding.

Liquidity and Capital Resources
As of June 30, 2012, China Modern had approximately $16.9 million in cash as compared to $5.5 million as of June 30, 2011. As of June 30, 2012, total current assets and total assets were approximately $23.8 million and $59.2 million, respectively. Working capital increased year-over-year by $15.2 million to $23.4 million as of June 30, 2012, as compared to $8.2 million as of June 30, 2011.

Cautionary Statement Regarding Forward Looking Information
Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our 8K/A dated March 31, 2011, and other recent filings. These filings are available at http://www.sec.gov/.

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