SOURCE: Sen Yu International Holdings, Inc.

Sen Yu International Holdings, Inc.

May 17, 2011 07:00 ET

Sen Yu International Holdings, Inc. Reports Fiscal Third Quarter 2011 Results

Higher Revenue and Sharp Increase in Gross Profit Driven by Increased Orders for Commercial Hogs From Major Customers

JIAMUSI CITY, CHINA--(Marketwire - May 17, 2011) - Sen Yu International Holdings, Inc. ("Sen Yu International" or the "Company") (OTCBB: CSWG), a leading commercial hog breeder and supplier in the People's Republic of China, today announced its financial results for its fiscal third quarter ended March 31, 2011.

Third Quarter 2011 Highlights

  • Total revenue increased 36% to $20.3 million from $14.9 million a year ago
  • Gross profit increased 107% to $5.5 million from $2.7 million a year ago
  • Gross margin increased to 27.2% from 17.9% in the same period last year on increased sales and strong increases in the average market price for hogs
  • Operating expenses were $1.6 million, up from $1 million in the same period last year
  • Operating income rose 139% to $3.9 million from $1.6 million a year ago
  • Adjusted net income, which excludes a non-cash expense related to the change in fair value of warrants for the third quarter of 2011, was $3.9 million, versus $1.4 million for the same period last year, last year there was no such non-cash expense relating to fair value of warrants
  • Net income was $55,696, or $0.00 per diluted share
  • Working capital increased 85% to $37.8 million at March 31, 2011, from $20.5 million at June 30, 2010
  • Shareholders' equity inclusive of noncontrolling interest increased 77% to $39.6 million at March 31, 2011, from $22.5 million at June 30, 2010

"We experienced higher revenue and gross profit in what is typically a slower season following the Chinese holidays," stated Mr. Zhenyu (Jack) Shang, Founder, Chairman and CEO of Sen Yu International Holdings, Inc. "This was driven by increased orders from our two major customers, Beijing Dahongmen and Beijing Fifth Meat Factory, resulting in solid revenue increases and a 107% increase in gross profit for the quarter. Hog sales increased by 13,761 head over the third quarter of last year. Going forward, we believe that our efficient business model, coupled with advanced breeding techniques and the superior quality of our Canadian breeding hogs will allow us to capture more market share and drive our growth."

Third Quarter 2011 Results

Revenue for the three months ended March 31, 2011, increased 36% to $20.3 million from $14.9 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 99,055 heads for the quarter ended March 31, 2011 from 85,294 heads during the three months ended March 31, 2010.

Cost of goods sold for the three months ended March 31, 2011 increased by $2.5 million, or 21%, to $14.8 million from $12.2 million for the three months ended March 31, 2010. The increase was primarily attributable to increased sales volume.

Gross profit for the three months ended March 31, 2011, increased by $2.8 million, or 107% to $5.5 million from $2.7 million for the three months ended March 31, 2010. The increase was primarily due to the increase in sales volume for the period. Gross margin for the three months ended March 31, 2011, increased to 27.2% from 17.9% for the three months ended March 31, 2010. The increase in gross margin was due to the fact that the Company sold more commercial hogs in the three months ended March 31, 2011. The average market price per commercial hogs increased significantly during the three month period ended March 31, 2011 while the cost of sales remained stable.

Operating expenses for the three months ended March 31, 2011, increased $591,213, or 57%, to $1.6 million from $1 million for the three months ended March 31, 2010. The increase was primarily attributable to the increase in general and administrative expenses and selling expense. Selling expenses for the three months ended March 31, 2011 increased to $715,064 from $523,272 for the three months ended March 31. The increase was due to the increase of our revenue and the related transportation cost.

Operating income for the three months ended March 31, 2011, increased by $2.3 million, or 139%, to $3.9 million from $1.6 million for the same period a year ago. The increase was primarily due to an increase in sales.

Net income for three months ended March 31, 2011, was $55,696, or $0.00 per diluted share, which included a non-cash expense related to the change in the fair value of warrants, compared to $1.4 million or $0.08 cents per diluted share, for the three months ended March 31, 2010. This is due to the adoption of a new accounting policy that became effective January 1, 2009, which requires changes in the fair value of warrants to be recognized in earnings each quarter. Excluding this expense, adjusted net income for the three months ended March 31, 2011, was $3.9 million, which translates into a 172% increase in net income for the fiscal third quarter ended March 31, 2011 compared to the same period last year.

Financial Condition

As of March 31, 2011, Sen Yu Holdings had $14 million in cash and cash equivalents, up 139.6% from $5.8 million as of June 30, 2010, and $37.8 million in working capital, up 85% from working capital of $20.5 million at June 30, 2010. Shareholders' equity inclusive of noncontrolling interest at March 31, 2011, was approximately $39.6 million, an increase of 77% from $22.5 million at June 30, 2010.

The Company generated $4.4 million in net cash flow from operating activities in the nine months ended March 31, 2011, versus $1 million in net cash flow for the nine months ended March 31, 2010. The increase was primarily due to an increase of our net income as relates to the non cash charge.

Nine Month Operating Highlights

Revenue for the nine months ended March 31, 2011, totaled $73 million, compared to revenue of $59.8 million for the nine months ended March 31, 2010, an increase of 22%. Gross profit increased 43.4% to $17.9 million in the nine months ended March 31, 2011, versus $12.5 million in the nine months ended March 31, 2010. Gross margin was 24.5% for the nine months ended March 31, 2011, compared to 20.9% for the nine months ended March 31, 2010. Operating income for the nine months ended March 31, 2011, increased 44% to $13.4 million compared to $9.3 million for the nine months ended March 31, 2010. Net income for the nine months ended March 31, 2011 was $17.3 million, or $0.71 per diluted share, which included a non-cash expense related to the change in the fair value of warrants, compared to $9.2 million, or $0.86 per diluted share for the nine months ended March 31, 2010. Excluding this expense, adjusted net income for the nine months ended March 31, 2011, was $13.3 million, which translates into a 44% gain.

Business Outlook

"We continue to see significant growth for our industry, underpinned by strong demand for quality pork among Chinese consumers," said Mr. Zhenyu (Jack) Shang, Founder, Chairman and CEO of Sen Yu International Holdings, Inc. "China's economy continues to grow rapidly, buoyed by a rising middle class and the continued preference for pork as a main and most popular source of protein among the Chinese population. To meet rising consumer demand, we continue to refine our breeding techniques and expand production based on increases in orders for commercial hogs from our customers. Based on China's economic expansion and government policies encouraging domestic pig production, we believe pork production and consumption will continue to rise, helping to fuel strong revenues and profits in our business going forward."

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. 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 shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by us or on our behalf.

         SEN YU INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS
                           (UNAUDITED)

                          For The Three Months      For The Nine Months
                            Ended March 31,           Ended March 31,
                        ------------------------  ------------------------
                            2011         2010         2011         2010
                        -----------  -----------  -----------  -----------
                         Unaudited    Unaudited    Unaudited    Unaudited

Revenues                $20,308,812  $14,921,687  $72,952,746  $59,814,100

Cost of Goods Sold       14,788,442   12,249,758   55,059,096   47,334,053
                        -----------  -----------  -----------  -----------

Gross Profit              5,520,370    2,671,929   17,893,650   12,480,047
                        -----------  -----------  -----------  -----------

Operating Expenses

  Selling expenses          715,064      523,272    2,529,271    1,880,582

  General and
   administrative
   expenses                 476,572      441,349    1,474,407      740,927

  Losses on
   disposal of
   fixed assets              21,886            9       71,034      107,789

  Bad debt for
   advanced to
   suppliers                423,214       80,893      463,499      464,877
                        -----------  -----------  -----------  -----------
Total Operating
 Expenses                 1,636,736    1,045,523    4,538,211    3,194,175

Income From Operations    3,883,634    1,626,406   13,355,439    9,285,872

Other Income (Expense)
  Interest income
   (expense), net            22,342     (203,317)    (116,792)    (201,497)

  Other expense,
   net                       (1,552)           -       (1,541)      (6,451)

  Change in fair
   value of warrants     (3,861,173)           -    4,054,792            -

Total Other (Expense)
 Income                  (3,840,383)    (203,317)   3,936,459     (207,948)

Income from Continuing
 Operations Before
 Income Taxes                43,251    1,423,089   17,291,898    9,077,924


Income Tax Provision              -            -            -            -

Net Income Before
 Noncontrolling
 Interest                    43,251    1,423,089   17,291,898    9,077,924

  Less: Net loss
   attributable to
   the noncontrolling
   interest                 (12,445)     (17,702)     (15,861)    (131,489)
Net Income
 Attributable to Sen
 Yu International
 Holdings, Inc.         $    55,696  $ 1,440,791  $17,307,759  $ 9,209,413
                        ===========  ===========  ===========  ===========

Earnings Per Share:

   - Basic              $      0.00  $      0.07  $      0.82  $      0.87
                        ===========  ===========  ===========  ===========
   - Diluted            $      0.00  $      0.08  $      0.71  $      0.86
                        ===========  ===========  ===========  ===========

Weighted Common
 Shares Outstanding

   - Basic               21,721,267   20,087,080   21,169,077   10,589,708
                        ===========  ===========  ===========  ===========
   - Diluted             24,304,437   21,150,961   24,607,730   10,944,335
                        ===========  ===========  ===========  ===========






           SEN YU INTERNATIONAL HOLDINGS, INC AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS

                                                  March 31,     June 30,
                                                    2011          2010
                                                ------------  ------------
                                                              (Audited and
                 Assets                         (Unaudited)     restated)
Current Assets:
    Cash and cash equivalents                   $ 13,958,889  $  5,825,842
    Inventories, net                               1,934,068       943,642
    Advance to suppliers, net                     40,891,477    30,830,691
    Prepayments and other current assets              70,373       176,777
                                                ------------  ------------
      Total Current Assets                        56,854,807    37,776,952
                                                ------------  ------------

Property, Plant, Equipment and Breeding Stock,
 net                                               1,891,757     1,983,760
Construction in Progress                                 267        14,801
                                                ------------  ------------
      Total Long-Term Assets                       1,892,024     1,998,561
                                                ------------  ------------

      Total Assets                                58,746,831    39,775,513
                                                ============  ============

     Liabilities and Stockholders' Equity
Current Liabilities:
    Accounts payable and accrued expenses            356,976       390,644
    Loans payable, net                             1,098,118     1,066,924
    Convertible note, net                                  -     2,165,000
    Loans from stockholders/officers, net            698,055         5,460
    Deferred interest income                          47,165        39,036
    Other current liabilities                          8,511         1,721
    Derivative liabilities-warrants               16,889,136    13,654,111
                                                ------------  ------------
      Total Current Liabilities                   19,097,961    17,322,896
                                                ------------  ------------
      Total Liabilities                           19,097,961    17,322,896
                                                ============  ============
Stockholders' Equity:
    Series B Convertible Preferred Stock,
     $0.001 par value, 10,000,000 shares
     authorized, 1,988,429 and 1,152,380 shares
     issued and outstanding, respectively              1,988         1,152
    Common stock, $0.001 par value, 300,000,000
     shares authorized, 24,089,111 and
     20,892,982 issued and outstanding,
     respectively                                     24,089        20,893
    Additional paid-in capital                    10,237,206    10,860,373
    Reserve funds                                  5,767,484     3,570,029
    Retained earnings                             22,974,315     7,864,011
    Accumulated other comprehensive income         2,600,784       967,009
    Unearned compensation                         (2,226,952)   (1,116,667)
                                                ------------  ------------
      Total Sen Yu International Holdings, Inc.
       Stockholders' Equity                       39,378,914    22,166,800
                                                ------------  ------------
Noncontrolling Interest                              269,956       285,817
                                                ------------  ------------
      Total Equity                                39,648,870    22,452,617
                                                ------------  ------------
      Total Liabilities and Equity              $ 58,746,831  $ 39,775,513
                                                ============  ============






          SEN YU INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (UNAUDITED)

                                                For The Nine Months Ended
                                                        March 31,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------
                                                   Unaudited     Unaudited
Cash Flows From Operating Activities:
Net Income                                      $ 17,307,759  $  9,209,413
Adjustments to Reconcile Net Income to Net
 Cash Provided by Operating Activities
  Depreciation and amortization                      358,854       378,429
  Bad debt adjustment                                463,499       464,877
  Noncontrolling Interest                            (15,861)     (131,489)
  Consulting fees adjusted from deferred             351,258         9,320
  Amortization of financing costs                          -       181,886
  Loss on disposal of fixed assets                    71,034       107,789
  Loss on disposal of inventories                     18,912       252,209
  Provision for losses on inventories                 (1,245)            -
  Change in fair value of warrants                (4,054,792)            -
  Changes in operating assets and
   liabilities:
  Accounts receivable                                      -       634,550
  Inventories                                     (1,074,536)     (968,925)
  Advanced to suppliers                           (9,112,574)   (9,290,385)
  Prepayments and other current assets               108,821        (4,640)
  Accounts payable and accrued expenses              (39,178)      117,305
  Customer deposit                                         -        (4,270)
  Deferred interest income                             6,510        37,843
  Other current liabilities                            6,498       (40,659)
                                                ------------  ------------
Net Cash Provided by Operating Activities          4,394,959       953,253
                                                ------------  ------------
Cash Flows From Investing Activities:
  Payment for purchase of equipment                 (110,712)      (34,574)
  Payment for construction in progress               (69,749)            -
  Proceeds from sale of property and
   equipment                                          44,105        23,908
                                                ------------  ------------
Net Cash Used in Investing Activities               (136,356)      (10,666)
                                                ------------  ------------
Cash Flows From Financing Activities:
  Proceeds from discount on loans payable             (6,510)      (37,843)
  Proceeds from Convertible Notes                          -     2,165,000
  Proceeds from issuance of stock                  3,044,140
  Repayments for loans from
   stockholders/officers                             (19,863)       (8,136)
  Proceeds the repayment of loans by
   stockholders/officers                             714,335       151,262
                                                ------------  ------------
Net Cash Provided by Financing Activities          3,732,102     2,270,283
                                                ------------  ------------
Net Increase in Cash and Cash Equivalents          7,990,705     3,212,870
Effect of Exchange Rate Changes on Cash              142,342           (66)
Cash and Cash Equivalents at Beginning of
 Period                                            5,825,842        82,854
                                                ------------  ------------
Cash and Cash Equivalents at End of Period      $ 13,958,889  $  3,295,658
                                                ============  ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
  Interest paid                                 $    223,522  $          -
                                                ============  ============
  Income taxes paid                             $          -  $          -
                                                ============  ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
 AND FINANCING ACTIVITIES:
  Inventory transferred out to be breeding
   stock in fixed assets                        $    132,849  $      4,802
                                                ============  ============
  Construction in progress transferred out
   to be fixed assets                           $     84,292  $          -
                                                ============  ============
  Majority stockholder waive his right to
   the Company's debt                           $          -  $ 11,169,236
                                                ============  ============
  Issued shares for consulting service          $  1,461,543  $     23,000
                                                ============  ============
  Offset debt by fixed assets                   $      6,748  $          -
                                                ============  ============



Contact Information

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