SOURCE: Sen Yu International Holdings, Inc.

Sen Yu International Holdings, Inc.

November 15, 2011 07:00 ET

Sen Yu International Holdings, Inc. Reports Fiscal First Quarter 2012 Results

Record Revenue and Profit Driven by Increased Orders for Commercial Hogs From Major Customers and Significantly Higher Market Prices for Pork

JIAMUSI CITY, CHINA--(Marketwire - Nov 15, 2011) - Sen Yu International Holdings, Inc. ("Sen Yu International" or the "Company") (OTCBB: CSWG), a leading commercial hog breeder and supplier in Heilongjiang Province, the People's Republic of China, today announced its financial results for its fiscal first quarter ended September 30, 2011.

Fiscal First Quarter Highlights

  • Total revenue increased 129.4% to a record $54.1 million from $23.6 million
  • Gross profit increased 260.2% year-over-year to $19.2 million from $5.3 million
  • Gross margin increased to 35.6% from 22.7% due to increased sales and strong increases in the average market price for hogs
  • Operating expenses were $2.3 million compared to $1.6 million in the same period last year
  • Operating income rose 349.6% to $17.0 million from $3.8 million a year ago
  • Adjusted net income for the fiscal first-quarter, which excludes a gain in the fair value of warrants, increased 356.8% to $16.9 million, or $0.60 per diluted share, versus $3.7 million, or $0.14 per diluted share, for the same period last year, which excludes a gain related to the fair value of warrants
  • Net income increased to $18.7 million, or $0.67 per diluted share, from $6.0 million, or $0.23 per diluted share, for the fiscal first quarter ended September 30, 2010
  • Working capital increased 34.3% to $79.6 million at September 30, 2011 from $59.2 million at June 30, 2011
  • Shareholders' equity inclusive of noncontrolling interest increased 33.8% to $80.0 million at September 30, 2011 from $59.8 million at June 30, 2011

"We are pleased to report significantly higher revenues and gross profits for our fiscal first quarter," stated Mr. Zhenyu (Jack) Shang, Founder, Chairman and CEO of Sen Yu International Holdings, Inc. "This increase was driven by increased orders from our two major customers, Beijing Dahongmen and Beijing Fifth Meat Factory and significantly higher market prices for hogs as compared to last year. As a result, revenue increased 129.4% during this quarter and gross profit increased 260.2%. Overall, hog sales increased by 59,034 heads to 193,595 in the first quarter. To stay competitive, we continue to refine our breeding techniques to ensure that our hogs are safe and of the highest quality. We believe the strong demand we see for our superior breeding hogs in China coupled with our efficient business model will allow us to capture more market share and steadily grow our business."

Fiscal First Quarter Results

Revenue for the three months ended September 30, 2011 increased 129.4% to $54.1 million from $23.6 million for the same period a year ago. The increase in revenues resulted from increased orders from the Company's major customers, Beijing Dahongmen and Beijing Fifth Meat Factory. Hog sales increased to 193,595 heads for the quarter ended September 30, 2011 from 134,561 heads for the three months ended September 30, 2010.

Cost of goods sold for the three months ended September 30, 2011 increased by $16.6 million, or 91.1%, to 34.8 million from $18.2 million for the three months ended September 30, 2010. The increase was primarily attributable to increased sales volume and was less than the increase in revenues for the period.

Gross profit for the three months ended September 30, 2011 increased by $13.9 million, or 260.2%, to $19.2 million from $5.3 million for the three months ended September 30, 2010. The increase was primarily due to the increase in sales volume for the period. Gross margin for the three months ended September 30, 2011 increased to 35.6% from 22.7% for the three months ended September 30, 2010. The increase in gross margin was due to higher unit sales for the quarter compared to the three months ended September 30, 2011. The average market price per commercial hogs increased significantly during the three month period ended September 30, 2011 compared to the same period last year.

Operating expenses for the three months ended September 30, 2011 increased by $713,756, or 45.5%, to $2.3 million from $1.6 million for the three months ended September 30, 2010. The increase was primarily attributable to the increase in selling expenses and compensation expenses. Selling expenses for the three months ended September 30, 2011 increased to $1.4 million from $832,828 for the three months ended September 30, 2010. The increase was due to the increase in our revenues and the related transportation costs.

Operating income for the three months ended September 30, 2011 increased by $13.2 million, or 349.6%, to $17.0 million from $3.8 million for the same period a year ago. The increase was primarily due to an increase in sales.

Net income for the fiscal first quarter ended September 30, 2011 was $18.7 million, or $0.67 per diluted share, which includes a gain of $1.8 million related to the change in the fair value of warrants, compared to $6.0 million, or $0.23 per diluted share for fiscal first quarter ended September 30, 2010, which includes a gain of $2.3 million related to the fair value of warrants. Excluding these items, adjusted net income for the three months ended September 30, 2011 was $16.9 million, or $0.60 per diluted share, which translates into a 356.8% increase in net income for the fiscal first quarter ended September 30, 2011.

Financial Condition

As of September 30, 2011, the Company had $29.0 million in cash and cash equivalents, an increase of 153.6% from $11.4 million as of June 30, 2011, and $79.6 million in working capital, an increase of 34.3% from working capital of $59.2 million at June 30, 2011. Shareholders' equity inclusive of noncontrolling interest at September 30, 2011 was approximately $80.0 million, an increase of 33.8% from $59.8 million at June 30, 2011. The Company generated $17.4 million in net cash flow from operating activities for the three months ended September 30, 2011 versus $871,501 in net cash used in operating activities for the three months ended September 30, 2010.

Business Outlook

"The prospects for our growth are compelling," commented Mr. Shang. "The industry in which we operate is underpinned by strong fundamentals. Pork has historically been the primary animal protein source in Chinese diets. China is already the world's largest consumer of pork and produces some 50 million tons of pork every year to feed a growing population of over 1.3 billion. In addition, government subsidies to help increase and spur pork production in China are likely to help increase breeders' profits and growth. As demand for high quality pork products continues to rise, we believe that breeders with superior quality hogs and breeding techniques, such as Sen Yu, are poised to grow and profit. Our efficient business model and ability to scale our production allows us to capture more market share as consumers look to purchase the highest quality pork products available."

About Sen Yu International Holdings, Inc.

Sen Yu International Holdings, Inc. (OTCBB: CSWG), through its subsidiaries, is the largest commercial hog breeder and supplier in Heilongjiang Province, the People's Republic of China (PRC). Founded in 2004 and based in Jiamusi City, the Company owns and operates two farms in Heilongjiang Province with an aggregate annual capacity of over 11,000 breeding hogs. For the fiscal year ended June 30, 2011, the Company sold more than 500,000 commercial hogs in the Beijing market. The Company also conducts genetic and breeding research to improve pork production capabilities.

To be added to the Company's email distribution for future news releases, please send your request to robert.haag@hamptongrowth.com.

Safe Harbor Statement

Certain statements in this release concerning our future growth prospects are "forward-looking statements," which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Such statements may include, without limitation, statements with respect to the Company's plans, objectives, projections, beliefs, expectations and intentions and other statements identified by words such as "guidance," "projects," "may," "could," "would," "should," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties (many of which are beyond the Company's control), including, but 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, 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 filings with United States Securities and Exchange Commission. These filings are available at www.sec.gov.

We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to stockholders. We do not undertake to update any forward-looking statements that may be made from time to time by us or on our behalf.

-- FINANCIAL TABLES FOLLOW --

Sen Yu International Holdings, Inc and Subsidiaries
Consolidated Statements of Operations (Unaudited)
For The Three Months Ended September 30,
2011 2010
(Unaudited) (Unaudited)
Revenues $ 54,056,283 $ 23,562,468
Cost of Goods Sold 34,816,269 18,221,146
Gross Profit 19,240,014 5,341,322
Operating Expenses
Selling expenses 1,350,787 832,828
General and administrative expenses 391,329 385,825
Losses on disposal of fixed assets 68 48,479
Bad debt for advanced to suppliers 4,147 202,962
Compensation Expense 537,519 100,000
Total Operating Expenses 2,283,850 1,570,094
Income From Operations 16,956,164 3,771,228
Other Income (Expense)
Interest expense, net (6,480 ) (71,034 )
Other income (expense), net 2,474 (442 )
Change in fair value of warrants 1,841,493 2,344,841
Total Other Income 1,837,487 2,273,365
Income from Continuing Operations Before Income Taxes 18,793,651 6,044,593
Income Tax Provision - -
Net Income Before Noncontrolling Interest 18,793,651 6,044,593
Less: Net income attributable to the noncontrolling interest 60,506 2,056
Net Income Attributable to Sen Yu International Holdings, Inc. $ 18,733,145 $ 6,042,537
Earnings Per Share:
- Basic $ 0.74 $ 0.29
- Diluted $ 0.67 $ 0.23
Weighted Common Shares Outstanding
- Basic 25,437,113 20,892,982
- Diluted 28,014,504 26,100,162
SEN YU INTERNATIONAL HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(Stated in US Dollars)
For The Three Months Ended September 30,
2011 2010
(Unaudited) (Unaudited)
Net Income Before Noncontrolling Interest $ 18,793,651 $ 6,044,593
Other Comprehensive Income:
Foreign Currency Translation Income 904,368 567,889
Comprehensive Income $ 19,698,019 $ 6,612,482
PART I - FINANCIAL INFORMATION
SEN YU INTERNATIONAL HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
September 30,
2011
June 30,
2011
Assets (Unaudited) (Audited)
Current Assets:
Cash and equivalents $ 29,017,518 $ 11,440,584
Inventories 1,749,390 1,544,675
Advance to suppliers, net 54,233,166 53,473,785
Prepayments and other current assets 66,055 72,169
Total Current Assets 85,066,129 66,531,213
Long-Term Assets
Property, Plant, Equipment and Breeding Stock, net 1,762,705 1,816,987
Construction in Progress - 213
Total Long-Term Assets 1,762,705 1,817,200
Total Assets 86,828,834 68,348,413
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses 541,906 455,044
Loans payable, net 1,158,635 1,128,517
Loans from shareholders/officers, net 738,033 794,354
Deferred interest income 16,126 31,858
Performance bond 1,096,443 1,083,016
Other current liabilities 7,041 9,169
Derivative liabilities-warrants 1,951,820 3,793,314
Total Current Liabilities 5,510,004 7,295,272
Temporary equity

Redeemable shares of common stock, 804,000 and 0 shares issued and outstanding, respectively

1,247,205


1,217,055
Total Liabilities 6,757,209 8,512,327
Shareholders' Equity:
Series B Convertible Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 1,707,603 and 1,988,429 shares issued and outstanding, respectively 1,708 1,988
Common stock, $0.001 par value, 300,000,000 shares authorized, 25,733,713 and 25,263,113 issued and outstanding, respectively 25,734 25,263
Additional paid-in capital 11,598,742 11,573,432
Reserve funds 9,394,071 6,745,351
Retained earnings 56,850,980 40,766,555
Accumulated other comprehensive income 4,298,239 3,393,871
Unearned compensation (2,444,122 ) (2,956,141 )
Total Sen Yu International Holdings, Inc. Shareholders' Equity 79,725,352 59,550,319
Noncontrolling Interest 346,273 285,767
Total Equity 80,071,625 59,836,086
Total Liabilities and Equity $ 86,828,834 $ 68,348,413
SEN YU INTERNATIONAL HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Stated in US Dollars)
For The Three Months Ended September 30,
2011 2010
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ 18,793,651 $ 6,044,593
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and amortization 111,697 122,476
Bad debt adjustment 4,147 202,963
Consulting fees adjusted from deferred 512,019 100,000
Stock-based compensation 25,500 -
Amortization of financing costs - 48,300
Loss on disposal of fixed assets 68 48,479
Loss on disposal of inventories 13,085 6,277
Provision for losses on inventories - (1,245 )
Change in fair value of warrants (1,841,493 ) (2,344,841 )
Accured interest for redeemable stock 30,150 -
Changes in operating assets and liabilities:
Accounts receivable - (627,419 )
Inventories (196,164 ) (243,331 )
Advanced to suppliers (99,369 ) (4,112,156 )
Prepayments and other current assets 6,923 (37,602 )
Accounts payable and accrued expenses 80,226 (67,651 )
Customer deposit - -
Deferred interest income (15,929 ) (25,095 )
Other current liabilities (2,214 ) 14,751
Net Cash Provided by (Used in)Operating Activities 17,422,297 (871,501 )
Cash Flows From Investing Activities:
Payment for purchase of equipment (39,427 ) (59,200 )
Payment for construction in progress - (34,929 )
Proceeds from sale of property and equipment 2,363 26,740
Net Cash Used in Investing Activities (37,064 ) (67,389 )
Cash Flows From Financing Activities:
Proceeds from discount on loans payable 15,929 25,095
Repayments for loans from shareholders/officers (57,346 ) (16,717 )
Proceeds the repayment of loans by shareholders/officers 216 19,795
Net Cash Provided by (Used in) Financing Activities (41,201 ) 28,173
Net Increase (Decrease) in Cash and Equivalents 17,344,032 (910,717 )
Effect of Exchange Rate Changes on Cash 232,902 75,254
Cash and Equivalents at Beginning of Period 11,440,584 5,825,842
Cash and Equivalents at End of Period $ 29,017,518 $ 4,990,379
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ - $ 153,033
Income taxes paid $ $
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Inventory transferred out to be breeding stock in fixed assets $ - $ 22,755
Construction in progress transferred out to be fixed assets $ 213 $ 28,745
Offset debt by fixed assets $ - $ 6,648

Contact Information

  • Investor Relations Contact:
    Robert Haag
    Managing Director
    Hampton Growth, LLC (HGR)
    Tel: +86-152-2174-3282
    Tel: +1-877-368-3566
    E-mail: Email Contact
    Website: www.hamptongrowth.com