ORIGIN AGRITECH LTD. 
By BEIJING, Jan. 8, 2014 /PRNewswire/ -- Origin Agritech Limited (NASDAQ: SEED) ("Origin" or the "Company"), a technology-focused supplier of crop seeds in China, today announced unaudited financial results for the fiscal year ended September 30, 2013. These unaudited year end results reflect the Company's consolidated financial statements during the period from October 1, 2012 to September 30, 2013. Origin prepares its consolidated financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.
UNAUDITED FINANCIAL RESULTS OVERVIEW
Fiscal year 2013 was the first year after the corporate-wide restructuring program carried out during fiscal year 2012, and as a result the Company's financial performance has turned around significantly despite headwinds we faced in the seed industry and the impact of unfavorable weather in the Northeastern China region. Operating profit for fiscal year 2013 was RMB18.16 million (US$2.92 million), representing a significant turnaround from the operating loss of RMB3.47 million for fiscal year 2012. The turnaround of the operating profit was despite the fact that revenues declined 13% from RMB 552.11 million in the fiscal year 2012 to RMB481.69 million (US$77.30 million) in the fiscal year 2013.
Year-over-Year Comparison of Operating Performance
2013 (RMB 2012 (RMB Year-over-
million) million) Year Change
---------- ---------- -----------
Revenues 481.69 552.11 (13%)
-------- ------ ------ ----
Gross Profit 166.61 164.33 1%
------------ ------ ------ ---
Operating Expense 148.45 167.80 (12%)
----------------- ------ ------ ----
Operating Profit
(loss) 18.16 (3.47) n/a
---------------- ----- ----- ---
Revenue decline was mainly due to the discontinued cotton and agricultural chemical businesses and lower sales for the Company's corn and rice seed businesses. Excluding the cotton and agricultural chemical businesses, revenues decreased by 8% from RMB 524.80 million to RMB 481.69 million (US$77.30 million), mainly due to a 5% lower of sales volume and 3% price decline. Increasing competition in the seed markets and unfavorable weather for our Northeast operations were among the headwinds we faced during fiscal year 2013. Industry competition increased as the inventory in the seed market in China has reached historically high levels before the 2013 planting season.
Overall Analysis
Total revenues for the fiscal year ended September 30, 2013 were RMB481.69 million (US$77.30 million), a decrease of 13% from RMB552.11 million during the fiscal year ended September 30, 2012. Overall, the year-over-year decrease in revenues was mainly due to the divestment of the cotton and pesticide businesses, and the drop in sales volume of corn and rice as a result of increasing competition in the crop seed market and unfavorable weather for our Northeast operations in fiscal year 2013.
Corn seed products remained our strongest product line, accounting for 80% of our overall sales. Total revenues from corn seeds were RMB387.60 million (US$62.20 million) in fiscal year 2013, compared with RMB416.73 million in the fiscal year ended September 2012. Revenues from rice product line for the year ended September 30, 2013 decreased by approximately 18% to RMB72.71 million (US$11.66 million) from RMB88.14 million in the fiscal year ended September 30, 2012. Sales of canola seeds increased by 9% to RMB21.77 million (US$3.49 million) in fiscal year 2013 compared to RMB19.94 million in fiscal year 2012. With the divestment of the cotton and pesticide businesses in fiscal year 2012, the revenue from those businesses was nil for the fiscal year 2013 from RMB27.09 million in the year ended September 2012.
Operating expenses for the fiscal year ended September 30, 2013 were RMB148.45 million (US$ 23.82 million), representing a decrease of 12% from RMB167.80 million in the fiscal year 2012, which was mainly because our expense control efforts helped to lower the operating expenses despite the increase in higher doubtful receivables allowance and shipping expenses.
Operating income for the fiscal year ended September 30, 2013 was RMB18.16 million (US$2.92 million), compared to the operating loss of RMB3.47 million for the fiscal year ended September 30, 2012. The increase in operating results was mainly due to our improvement in gross profit and expenses control effort.
Net income for the fiscal year ended September 30, 2013 was RMB7.49 million (US$1.21 million), representing a significant improvement from the net loss of RMB1.43 million for the fiscal year ended September 30, 2012. The year-over-year improvement was mainly due to the improvement in operating performance of the core businesses and rigorous expense management.
Net income per share was RMB 0.32 or US$ 0.05 for the fiscal year 2013, compared with net loss of RMB(0.06) in fiscal year 2012.
Statement of Cash Flow
As of September 30, 2012 and 2013, we had approximately RMB152.79 million and RMB131.98 million (US$21.47 million), respectively, in cash and cash equivalents. Total borrowings as of September 30, 2012 and 2013 were RMB74.00 million and RMB286.32 million (US$46.57 million), respectively. During fiscal year 2013, Net cash used in operating activities was RMB146.11 million (US$23.78 million), down from cash inflow of RMB82.71 million for the fiscal year ended September 30, 2012, as the inventory balance increased significantly year-over-year.
Net cash used in investing activities was RMB68.28 million (US$11.11 million) for the fiscal year ended September 30, 2013 compared with RMB143.38 million for the fiscal year ended September 30, 2012. Net cash provided by financing activities was RMB191.69 million (US$31.18 million) for the fiscal year ended September 30, 2013 compared with RMB83.40 million for the fiscal year ended September 30, 2012. The increase in borrowing was mainly related to the bank loans for settlement of seed purchases and for financing the construction of a new corn seed processing plant in Xinjiang.
Research and Development Activities
Origin was built on its strong R&D platform, and we strongly believe a commitment to R&D is essential to the growth of the Company. During fiscal year 2013, we continued to make significant progress both in our conventional hybrid crop seed development programs and biotechnology R&D activities. Our R&D investment of RMB42.16 million represented 8.75% of our total revenue in fiscal year 2013.
Key developments for Origin's GM corn seeds:
Phytase: Four commercial hybrids with phytase traits have completed the variety production test and are pending the variety approval from the Chinese government.
Glyphosate Tolerance: One GM glyphosate tolerance event (the unique DNA recombination event that took place in one plant cell) passed Phase 4 - Production Test and is waiting for the Phase 5 Safety Certificate. Two more glyphosate tolerance events are being submitted for Phase 3 - Environment Release Test. In addition, more than one thousand events are undergoing Phase 1 - Laboratory Research;
Bacillus Thuringiensis (Bt): Two insect tolerant events are going through Phase 2 - Intermediate Test. Over two hundred events are undergoing Phase 1 - Laboratory Research;
Glyphosate + Bacillus Thuringiensis (Bt): Three events of the Company's glyphosate and insect tolerant traits have advanced into Phase 3 - Environment Release Test. More than 4,500 events of the stacked traits (inserting more than one gene in a seed via biotechnology) are being screened in Phase 1 - Laboratory Research.
Hybrid Corn Seed Development Program:
In addition to GM crop seeds, Origin has a large R&D program developing conventional hybrid crop seeds. In China, new hybrid seed varieties need to go through an official approval process prior to sales. This approval process typically involves three to four years of registration trials and normally proceeds according to the following sequential steps:
Pre-Registration -- Registration Trial 1 -- Registration Trial 2 -- Field Demo -- Approval
Each step leading up to Approval takes approximately one year unless it needs to be repeated. In some localities Registration Trial 2 and Field Demo are treated as one and the same step.
During fiscal year 2013, we have more than 45 tests going through different stages of the approval process. As the results of multiyear testing, we received registration approval for seven of our new varieties.
Outlook
With the industry inventory for seeds, especially corn seed, at historically high levels, we expect the market to continue with increasing competition in fiscal year 2014. However, we will continue our disciplined management approach and deepen our restructuring effort in different levels to improve our operational efficiency. We expect our earnings performance to improve again and revenue growth to turnaround in the FY2014.
Conference Call Information
The Company will host a teleconference on January 8, 2014, at 8:00 a.m. ET / 9:00 p.m. Beijing time to discuss the fiscal year 2013 results. To participate in the call, please dial +1-877-870-4263 in North America, or +1-412-317-0790 internationally, approximately 5 minutes prior to the scheduled start time.
About Origin
Founded in 1997 and headquartered in Zhong-Guan-Cun (ZGC) Life Science Park in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is China's leading agricultural biotechnology company, specializing in crop seed breeding and genetic improvement, seed production, processing, distribution, and related technical services. Leading the development of crop seed biotechnologies, Origin Agritech's phytase corn was the first transgenic corn to receive the Bio-Safety Certificate from China's Ministry of Agriculture. Over the years, Origin has established a robust biotechnology seed pipeline including products with glyphosate tolerance and pest resistance (Bt) traits. Origin operates production centers, processing centers and breeding stations nationwide with sales centers located in key crop-planting regions. Product lines are vertically integrated for corn, rice and canola seeds. For further information, please log on to the Company's website at: www.originseed.com.cn.
Forward Looking Statement
This release contains forward-looking statements. All forward-looking statements included in this release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "continue," or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those risk factors discussed in Origin's filings with the SEC including its annual report on Form 20-F to be filed. We undertake no obligation to revise or update publicly any forward-looking statements for any reasons.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of share and per share data)
September 30,
-------------
2012 2013 2013
RMB RMB US$
ASSETS
Current Assets
Cash and cash equivalents 152,789 131,978 21,467
Accounts receivable, less allowance for doubtful amounts of RMB6,752 7,065 1,949 317
and RMB12,110 as of September 30, 2012 and 2013, respectively
Due from related parties 2,082 3,400 553
Advances to suppliers 7,802 9,768 1,589
Advances to growers 88,194 58,473 9,511
Inventories 282,544 470,811 76,580
Income tax recoverable 2,159 1,163 189
Other current assets 16,407 7,000 1,139
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Total current assets 559,042 684,542 111,345
Restricted cash - 14,350 2,334
Land use rights, net 32,318 33,205 5,401
Plant and equipment, net 317,085 354,735 57,699
Equity investments 22,433 24,894 4,049
Goodwill 11,973 11,973 1,947
Acquired intangible assets, net 25,585 23,117 3,760
Deferred income tax assets 1,755 - -
Other assets 5,246 11,256 1,831
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Total assets 975,437 1,158,072 188,366
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LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings 35,000 205,000 33,344
Current portion of long-term borrowings 4,000 16,500 2,684
Accounts payable 5,031 4,590 747
Due to growers 4,304 37,875 6,161
Due to related parties 2,769 1,530 249
Advances from customers 435,044 371,571 60,438
Deferred revenues 23,243 22,069 3,590
Income tax payable 39,060 39,060 6,353
Other payables and accrued expenses 56,744 53,783 8,748
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Total current liabilities 605,195 751,978 122,314
Long-term borrowings 35,000 64,819 10,543
Other long-term liability 21,810 21,030 3,420
Total liabilities 662,005 837,827 136,277
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Commitments and contingencies
Shareholders' equity:
Preferred stock (no par value; 1,000,000 shares authorized, none issued)
- - -
Common stock (no par value; 60,000,000 shares authorized,
23,382,812 and 22,905,926 shares issued and outstanding
as of September 30, 2012 and 2013, respectively) - - -
Additional paid-in capital 397,671 399,564 64,991
Accumulated deficit (100,967) (93,473) (15,204)
Treasury stock at cost (498,851 and 1,110,237shares as of September (29,377) (35,659) (5,800)
30, 2012 and 2013, respectively)
Accumulated other comprehensive loss (6,280) (4,390) (714)
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Total Origin Agritech Limited shareholders' equity 261,047 266,042 43,273
Non-controlling interests 52,385 54,203 8,816
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Total equity 313,432 320,245 52,089
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Total liabilities and equity 975,437 1,158,072 188,366
======= ========= =======
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except number of share and per share data)
Year ended September 30,
------------------------
2011 2012 2013 2013
RMB RMB RMB US$
Revenues 567,434 552,111 481,694 77,297
Cost of revenues (371,591) (387,783) (315,082) (50,561)
Gross profit 195,843 164,328 166,612 26,736
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Operating expenses
Selling and marketing (56,831) (56,437) (55,375) (8,886)
General and administrative (86,748) (77,585) (66,153) (10,615)
Research and development (44,771) (37,629) (42,162) (6,766)
Other income, net 5,120 3,852 15,241 2,446
-----
Total operating expenses, net (183,230) (167,799) (148,449) (23,821)
-------- -------- -------- -------
Income(loss) from operations 12,613 (3,471) 18,163 2,915
Interest expense (1,469) (4,029) (11,326) (1,818)
Share of net income of equity investments 1,616 4,030 5,161 828
Loss on liquidation of a subsidiary (13,582) - - -
Interest income 1,771 2,547 1,776 285
Income (loss) before income taxes 949 (923) 13,774 2,210
Income tax expense
Current (6,991) (589) (2,707) (434)
Deferred (6,739) (1,273) (1,755) (282)
------ ------ ------ ----
Income tax expense (13,730) (1,862) (4,462) (716)
------- ------ ------ ----
Net income (loss) (12,781) (2,785) 9,312 1,494
Less: Net income (loss) attributable to 10,298 (1,351) 1,818 292
non-controlling interests
Net income (loss) attributable to Origin (23,079) (1,434) 7,494 1,202
Agritech Limited
Other comprehensive income (loss)
Net income (loss) (12,781) (2,785) 9,312 1,494
Foreign currency translation difference 2,939 117 1,890 303
----- --- ----- ---
Comprehensive income (loss) (9,842) (2,668) 11,202 1,797
Less: Comprehensive income (loss) 10,298 (1,351) 1,818 292
attributable to non-controlling interests
Comprehensive income (loss) (20,140) (1,317) 9,384 1,505
attributable to Origin Agritech Limited
Net income (loss) attributable to Origin Agritech (1.00) (0.06) 0.32 0.05
Limited per share - basic
Net income (loss) attributable to Origin Agritech (1.00) (0.06) 0.32 0.05
Limited per share - diluted
Shares used in calculating basic net income 23,351,615 23,382,812 23,259,127 23,259,127
(loss) per share
Shares used in calculating diluted net income 23,351,615 23,382,812 23,278,443 23,278,443
(loss) per share
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended September 30,
2011 2012 2013 2013
RMB RMB RMB US$
Operating activities:
Net income (loss) (23,079) (1,434) 7,494 1,202
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 23,307 19,541 28,164 4,581
Loss (gain) on disposal of plant and equipment 6,252 1,401 (4,505) (733)
Gain on disposal of a land use right - (825) - -
Gain on disposal of an equity investment (1) - - -
Loss on disposal of Kunfeng's assets - 1,814 - -
Loss on liquidation of a subsidiary 13,583 - - -
Impairment on receivables 1,872 4,038 5,358 872
Inventory write down 12,978 27,453 38,561 6,272
Deferred income tax assets 6,739 1,273 1,755 282
Non-controlling interests 10,298 (1,351) 1,818 292
Share-based compensation expense 4,638 3,327 1,893 308
Share of net income of equity investments (1,616) (4,030) (5,161) (828)
Changes in operating assets and liabilities:
Accounts receivable, net 1,560 (4,486) (242) (39)
Due from related parties (76) 3,101 (1,318) (214)
Advances to growers (37,932) (9,571) 29,721 4,834
Advances to suppliers (8,432) 4,616 (27) (4)
Inventories 15,175 (102,230) (226,828) (36,895)
Income tax recoverable 590 (4) 996 162
Other current assets 4 48,648 9,574 1,557
Other assets (3,010) 14,394 3,135 510
Accounts payable (3,220) (709) (441) (72)
Due to growers (34,239) (3,643) 33,571 5,460
Due to related parties 984 1,041 (1,239) (202)
Advances from customers 49,136 37,111 (63,473) (10,324)
Deferred revenues (3,299) 3,431 (1,174) (191)
Income tax payable 4,113 - - -
Other long-term liabilities (7,003) 21,810 (780) (127)
Other payables and accrued expenses 8,135 17,997 (2,961) (482)
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Net cash provided by operating activities 37,457 82,713 (146,109) (23,779)
====== ====== ======== =======
Investing activities:
Dividends received 2,467 2,100 2,700 439
Purchase of plant and equipment (56,332) (104,214) (63,282) (10,293)
Liquidation of a subsidiary (67,980) - - -
Additional capital injection to an equity investment (600) - - -
Proceeds from disposal of land use right - 1,140 - -
Proceeds from disposal of plant and equipment - 5,495 7,875 1,281
Deposits for purchase of acquired technology and (1,280) - (5,781) (940)
land use rights
Deposits for purchase of plant and equipment (11,468) (43,874) (5,470) (890)
Purchase of land use rights - (431) (1,829) (298)
Purchase of intangible assets (19,197) (3,599) (2,492) (405)
------- ------ ------ ----
Net cash provided by (used in) investing activities (154,390) (143,383) (68,279) (11,106)
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Financing activities:
Restricted cash - - (14,350) (2,334)
Proceeds from short-term borrowings 20,000 105,000 274,000 44,567
Repayment of short-term borrowings (85,900) (90,000) (99,000) (16,103)
Proceeds from long-term borrowings - 39,000 37,319 6,070
Repurchase of common stock - - (6,282) (1,022)
Capital injection from a non-controlling shareholder 19,600 29,400 - -
Dividends paid to non-controlling shareholders (12,090) - - -
Proceeds from exercise of share options 2,654 - - -
--- --- ---
Net cash (used in) provided by financing activities (55,736) 83,400 191,687 31,178
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Net increase (decrease) in cash and cash equivalents (172,669) 22,730 (22,701) (3,707)
Cash and cash equivalents, beginning of year 299,672 129,942 152,789 24,852
Effect of exchange rate changes on cash and cash equivalents 2,939 117 1,890 322
----- --- ----- ---
Cash and cash equivalents, end of year 129,942 152,789 131,978 21,467
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Supplemental disclosures of cash flow information:
Income taxes paid 6,990 589 2,707 440
===== === ===== ===
Interest paid 1,469 4,029 11,326 1,842
===== ===== ====== =====
Supplemental disclosure of non-cash investing activities:
Disposal of assets in lieu of payment for liabilities - 1,814 - -
Other current assets to be received from liquidation of a subsidiary 45,236 - - -
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CONTACT:
Origin Agritech Limited
Dr. James Chen
Chief Financial Officer
james.chen@originseed.com.cn
or
Kay Liu
Investor Relations
ke.liu@originseed.com.cn
+86-138-1193-7764
SOURCE Origin Agritech Limited
