Beverage Stock Review

[Roland Rick Perry]

China New Borun $BORN, $Announces First Quarter 2015 Unaudited Financial Results.

BEIJING, May 21, 2015 /PRNewswire/ -- China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced its unaudited financial results for the first quarter ended March 31, 2015.

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "We are glad that our top line beat the high end of our guidance for the first quarter, as we experienced better-than-expected demand for edible alcohol. However, the competitive landscape during the first quarter continued to be very challenging for the mid-to-low end baijiu producers, causing a sequential decline of 2.5% in average selling price ("ASP") for edible alcohol. At the same time, China government's recent move to ease import restrictions on corn caused double-digit percentage decline in the ASP of corn-based by-products.

Recognizing the challenging environment for corn processors, authorities in Heilongjiang province, including Finance Bureau, Food Bureau and Agricultural Development Bank of China, this April, jointly released guidance for subsidies to corn-processing entities with over 100,000 tons of corn capacity. As one of the largest corn processing companies in Heilongjiang province, we are qualified to participate in designated bids to not only purchase corn at favored prices but also potentially to receive RMB200 per ton of corn purchased through such bids and processed by the end of 2015. This subsidy grant coupled with our pre-purchase and storage capability should further enhance our significant cost advantages," Mr. Wang concluded.

First Quarter 2015 Quick View

Total revenue decreased 8.8% to RMB570.9 million ($93.0 million[1]) from RMB625.7 million in the first quarter of 2014.
Gross profit decreased 34.5% to RMB59.2 million ($9.6 million) from RMB90.5 million in the first quarter of 2014.
Net income decreased 59.8% to RMB15.8 million ($2.6 million) from RMB39.3 million in the first quarter of 2014.
Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.61 ($0.10) for the quarter ended March 31, 2015. Each ADS represents one of the Company's ordinary shares.
First Quarter 2015 Financial Performance

For the first quarter of 2015, revenue decreased by 8.8% year-over-year to RMB570.9 million ($93.0 million) from RMB625.7 million in the same period of 2014. The decrease in revenue was mainly due to the decrease in the average selling price in edible alcohol and its by-products and lower sales volume in by-products.

Revenue breakdown by product lines is as follows:

Revenue from edible alcohol decreased by 1.3% to RMB394.2 million ($64.2 million) in the first quarter of 2015, compared to RMB399.4 million in the first quarter of 2014. The sales volume of edible alcohol in the first quarter of 2015 increased by 1.3% year-over-year to 76,796 tons, while the average selling price of edible alcohol decreased by 2.5% year-over-year to RMB5,134 per ton.
Revenue from DDGS Feed decreased by 19.1% to RMB124.0 million ($20.2 million) in the first quarter of 2015, compared to RMB153.4 million in the first quarter of 2014. The sales volume of DDGS Feed in the first quarter of 2015 decreased by 2.3% year-over-year to 67,484 tons, and the average selling price decreased by 17.2% year-over-year to RMB1,838 per ton.
Revenue from liquid carbon dioxide decreased by 62.8% to RMB4.3 million ($0.7 million) in the first quarter of 2015, compared to RMB11.6 million in the first quarter of 2014. The sales volume of liquid carbon dioxide in the first quarter of 2015 decreased by 17.0% year-over-year to 26,015 tons, and the average selling price decreased by 55.3% year-over-year to RMB166 per ton.
Revenue from crude corn oil decreased by 15.5% to RMB38.4 million ($6.3 million) in the first quarter of 2015, compared to RMB45.4 million in the first quarter of 2014. The sales volume of crude corn oil in the first quarter of 2015 decreased by 4.0% year-over-year to 5,792 tons, while the average selling price decreased by 12.0% year-over-year to RMB6,613 per ton.
Revenue from chlorinated polyethylene (CPE) decreased by 32.7% to RMB10.0 million ($1.6 million) in the first quarter of 2015, compared to RMB14.9 million in the first quarter of 2014. The sales volume of CPE in the first quarter of 2015 decreased by 31.1% year over year to 1,170 tons, while the average selling price decreased by 2.3% to RMB8,547 per ton.
During the first quarter of 2015, gross profit decreased by 34.5% to RMB59.2 million ($9.6 million) from RMB90.5 million in the same period of 2014. Gross margin for the first quarter of 2015 decreased to 10.4%, from 14.5% in the same period of 2014, which was primarily attributable to a decrease in average selling price of edible alcohol and its by-products.

Operating income decreased by 41.3% to RMB46.2 million ($7.5 million) in the first quarter of 2015, from RMB78.8 million in the same period of 2014, primarily due to lower gross profit earned.

Selling expenses were RMB1.2 million ($0.2 million) in the first quarter of 2015, remain stable with that in the same period of 2014.

General and administrative expenses increased by RMB1.3 million, or 12.6% to RMB11.8 million ($1.9 million) in the first quarter of 2015, from RMB10.5 million in the same period of 2014.

Income tax expenses in the first quarter of 2015 were RMB5.3 million ($0.9 million), representing an effective tax rate of 25.0%.

Net income decreased by 59.8% to RMB15.8 million ($2.6 million) in the first quarter of 2015, compared to RMB39.3 million in the same quarter of 2014. In the first quarter of 2015, basic and diluted earnings per share and per ADS were RMB0.61 ($0.10), and the Company had 25.7 million weighted average basic and diluted shares outstanding.

As of March 31, 2015, cash and bank deposits of RMB664.6 million ($108.2 million) decreased by RMB165.8 million, compared with RMB830.4 million as of December 31, 2014. Cash flows generated from operating activities for the first quarter of 2015 were RMB14.1 million ($2.3 million), compared with cash flow used in operating of RMB332.0 million in the first quarter of 2014.

Financial Outlook

The Company estimates that its revenue for the second quarter of 2015 will be in the range of RMB620 million ($100.9 million) to RMB660 million ($107.5 million), a decrease of approximately 1.3% to a decrease of 7.3% over the same quarter of 2014.

This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

Conference Call

Borun's management will hold a corresponding earnings conference call and live webcast at 8:00 a.m. E.T. on Friday, May 22, 2015 (8:00 p.m. Beijing time on Friday, May 22, 2015) to discuss the results and highlights from the first quarter of 2015 and answer questions from investors. A webcast of the call will be available at http://ir.chinanewborun.com. Listeners may access the call by dialing:

United States Toll Free:
1-866-519-4004
US Toll/International:
1-845-675-0437
Hong Kong Toll Free:
800-906-601
Hong Kong Toll:
852-3018-6771
China Toll Free:
800-819-0121
China Toll Free (Mobile):
400-620-8038
Conference ID: