China New Borun Announces First Quarter 2012 Financial Results

05/15/12

1Q12 Revenue Increased 26.1% Year-Over-Year
1Q12 Operating Cash Flow of RMB56.5 million

BEIJING, May 15, 2012 /PRNewswire-Asia/ -- China New Borun Corporation (NYSE: BORN; "Borun" or the "Company"), a leading producer and distributor of corn-based edible alcohol in China, today announced unaudited financial results for the first quarter of 2012.

First Quarter 2012 Quick View

Total revenue increased 26.1% to RMB721.2 million ($114.6 million(1)) from RMB571.8 million in the first quarter of 2011.
Gross profit decreased 13.6% to RMB109.9 million ($17.5 million) from RMB127.1 million in the first quarter of 2011.
Net income decreased 17.9% to RMB63.7 million ($10.1 million) from RMB77.6 million in the first quarter of 2011.
Diluted earnings per American Depositary Share ("ADS") were RMB2.48 ($0.39) for the quarter ended March 31, 2012. Each ADS represents one of the Company's ordinary shares.

Commenting on the results for the quarter, Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, stated, "Demand for edible alcohol and our by-products remained strong throughout the quarter, and we continue to operate our facilities at full capacity, making us one of the most efficient producers of edible alcohol in the country. Driven by the strong demand for edible alcohol in China and our effective capacity utilization, our first quarter revenue exceeded our previously stated guidance."

Mr. Wang added, "We are currently in an environment where higher corn prices have resulted in our cost of goods increasing at a faster rate than revenues. This has resulted in pressure on our operating profits. We view these prices as a short-to-medium term aberration and we think that they will normalize over time. In the meantime, while we cannot control the price of corn, we can operate as efficiently as possible in order to mitigate the effect of the high corn prices. Our return on assets and return on equity numbers for the past twelve months are 15.5% and 23.6%, respectively, demonstrating how we are committed to efficiency. At the same time, our business continues to generate healthy cash flows."

(1) This press release contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars for the quarter ended March 31, 2012 were made at a rate of RMB6.2943 to USD1.00, the rate published by the People's Bank of China on March 31, 2012. China New Borun Corporation makes no representation that the Renminbi or US dollar amounts referred to in this press release could have been or could be converted into US dollars or Renminbi, at any particular rate or at all.

First Quarter 2012 Financial Performance

For the first quarter of 2012, revenue increased by 26.1% year-over-year to RMB721.2 million ($114.6 million) from RMB571.8 million in the same period of 2011. Key factors affecting the Company's results of operations are as follows:

Revenue from edible alcohol, driven by higher sales volume, increased by 25.8% to RMB517.8 million ($82.3 million) in the first quarter of 2012, compared to RM411.5 million in the first quarter of 2011. The combination of strong demand for edible alcohol and the Company's expanded production capacity contributed to the sales volume growth of 25.3% year-over-year to 93,052 tons. In the first quarter of 2012, sales price of edible alcohol increased by 0.4% year-over-year to RMB 5,565 per ton.
Revenue from DDGS Feed increased by 46.8% to RMB133.8 million ($21.3 million) in the first quarter of 2012, compared to RMB91.1 million in the first quarter of 2011, as sales volume increased by 41.9% year-over-year to 80,219 tons. In addition to the Company's expanded capacity, the implementation of crude corn oil production increased DDGS Feed yield per ton of corn processed. In the first quarter of 2012, sales price of DDGS Feed increased by 3.5% year-over-year to RMB1,668 per ton.
Beginning in March 2011, the Company began to deep-process corn germ into crude corn oil and eliminated corn germ production in its Daqing facilities. Additionally, in September 2011, the Company began producing crude corn oil and eliminated corn germ production in its Shandong facilities. Consequently, since the fourth quarter of 2011, the Company no longer sells corn germ.
Revenue from liquid carbon dioxide increased by 13.3% to RMB 14.8 million ($2.4 million) in the first quarter of 2012 compared to RMB 13.1 million in the first quarter of 2011 as a result of increases in sales volume during the period being offset in part by a decrease in sales price per ton. In the first quarter of 2012, sales volume increased by 22.6% to 33,281 tons and sales price decreased by 7.6% year-over-year to RMB445 per ton.
Beginning in March 2011, the Company began selling the by-product crude corn oil produced at its Daqing facilities, and in September 2011 the Company also began selling crude corn oil produced at its Shandong facilities. Revenue from crude corn oil increased by 534.5% to RMB 54.8 million ($8.7 million) in the first quarter of 2012, compared to RMB 8.6 million in the first quarter of 2011, as sales volume increased by 583.4% year-over-year to 7,247 tons and sales price decreased by 7.2% year-over-year to RMB7,559 per ton.

During the first quarter of 2012, gross profit decreased by 13.6% to RMB109.9 million ($17.5 million) from RMB127.1 million in the same period of 2011. Gross margin for the first quarter of 2012 decreased to 15.2% from 22.2% in the same period of 2011, primarily due to corn cost increasing at a faster rate than selling price during the first quarter of 2012.

Operating income decreased by 15.7% to RMB94.1 million ($15.0 million) in the first quarter of 2012, from RMB111.7 million in the same period of 2011, due to the Company's strong revenue growth and offset by increased cost of goods sold.

Selling expenses were RMB1.2 million ($0.2 million) in the first quarter of 2012, which were stable compared to the same period of 2011.

General and administrative expenses were RMB14.6 million ($2.3 million) in the first quarter of 2012, which were stable compared to RMB14.3 million in the same period of 2011.

Income tax expenses in the first quarter of 2012 were RMB21.2 million ($3.4 million), representing an effective tax rate of 25.0%.

Net income decreased by 17.9% to RMB63.7 million ($10.1 million) in the first quarter of 2012, compared to RMB77.6 million in the same quarter of 2011. In the first quarter of 2012, diluted earnings per share and per ADS were RMB2.48 ($0.39), and the Company had 25.725 million weighted average diluted shares outstanding.

As of March 31, 2012, the Company had cash and bank deposits of RMB337.7 million ($53.7 million), representing an increase from RMB223.9 million as of December 31, 2011. Cash flows provided by operating activities for the quarter ended March 31, 2012 were approximately RMB56.5 million ($9.0 million), reflecting the Company's strong operating results.

Financial Outlook

The Company estimates that its revenue for the second quarter of 2012 will be in the range of RMB735.0 million ($116.8 million) to RMB755.0 million ($120.0 million), an increase of approximately 1.5% to 4.2% over the same quarter in 2011.

This forecast reflects the Company's current and preliminary view, which is 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 Wednesday, May 16, 2012 (8:00 p.m. Beijing time on Wednesday, May 16, 2012) to discuss the results and highlights from the first quarter of 2012 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:                                                 1-718-354-1231
Hong Kong Toll Free:                                                800-930-346
Hong Kong Toll:                                                         852-2475-0994
China Toll Free:                                                         800-819-0121
China Toll Free (Mobile):                                            400-620-8038
Conference ID:                                                          73960905

A replay of the webcast will be accessible through May 23, 2012 on http://ir.chinanewborun.com or by dialing:

United States toll free:                                                1-866-214-5335
International:                                                              1-718-354-1232
Passcode                                                                  73960905

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol in China. Borun's edible alcohol products are primarily sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage that is sold throughout China in retail stores, restaurants and bars. The Company also produces DDGS Feed, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production. China New Borun is based in Shouguang, Shandong Province. Additional information about the company can be found at http://www.chinanewborun.com and in documents filed with the U.S. Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

Contact Information

Three Part Advisors, LLC
John Palizza
Phone: +1-888-870-0798
Email: jpalizza@threepa.com

CHINA NEW BORUN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

	December 31, 2011	March 31, 2012
	RMB	RMB	US$
Assets
Cash	223,875,750	337,695,342	53,650,977
Trade accounts receivable, net of allowance for doubtful accounts of nil and nil, respectively	300,023,348	302,203,195	48,012,201
Inventories	86,205,820	115,734,352	18,387,168
Advance to suppliers	143,742,755	143,807,933	22,847,327
Other receivables	12,682,305	13,986,223	2,222,046
Prepaid expenses	3,957,293	4,222,629	670,866
Total current assets	770,487,271	917,649,674	145,790,585
Property, plant and equipment, net	1,127,381,307	1,109,208,062	176,224,213
Land use right, net	57,583,427	57,295,792	9,102,806
Intangible assets, net	17,301,257	16,344,696	2,596,746
Total assets	1,972,753,262	2,100,498,224	333,714,350

Liabilities and shareholders' equity
Trade accounts payable	13,200,118	17,357,050	2,757,582
Accrued expenses and other payables	86,945,695	93,576,260	14,866,826
Income taxes payable	34,475,778	18,248,169	2,899,158
Short-term borrowings	508,700,000	578,200,000	91,860,890
Total current liabilities	643,321,591	707,381,479	112,384,456
Total liabilities	643,321,591	707,381,479	112,384,456
Shareholders' equity
Ordinary share – (December 31, 2011 and March 31, 2012: par value of RMB0.0068259, 25,725,000 shares issued and outstanding)	175,596	175,596	25,725
Additional paid-in capital	468,132,187	468,132,187	74,373,987
Retained earnings – appropriated	99,586,852	99,586,852	15,821,752
Retained earnings – unappropriated	762,010,754	825,695,828	131,181,518
Accumulated other comprehensive loss	(473,718)	(473,718)	(73,088)
Total shareholders' equity	1,329,431,671	1,393,116,745	221,329,894
Total liabilities and shareholders' equity	1,972,753,262	2,100,498,224	333,714,350

CHINA NEW BORUN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	For the three-month period ended,
	March 31, 2011	December 31, 2011	March 31, 2012
	(RMB)	(RMB)	(RMB)	(US$)

Revenues	571,811,302	762,037,367	721,175,850	114,576,021
Cost of goods sold	444,664,817	641,947,866	611,298,467	97,119,373
Gross profit	127,146,485	120,089,501	109,877,383	17,456,648
Operating expenses:
Selling	1,159,400	1,746,508	1,162,789	184,737
General and administrative	14,309,065	13,474,509	14,580,533	2,316,466
Total operating expenses	15,468,465	15,221,017	15,743,322	2,501,203
Operating income	111,678,020	104,868,484	94,134,061	14,955,445
Other (income) expenses:
Interest income	(309,197)	(373,057)	(319,400)	(50,744)
Interest expense	8,047,668	9,046,705	9,555,927	1,518,187
Others, net	6,332	(30,810)	(15,898)	(2,526)
Total other expense, net	7,744,803	8,642,838	9,220,629	1,464,917
Income before income taxes	103,933,217	96,225,646	84,913,432	13,490,528
Income tax expense	26,319,074	24,076,500	21,228,358	3,372,632
Net income	77,614,143	72,149,146	63,685,074	10,117,896

Earnings per share:
Basic and diluted	3.02	2.80	2.48	0.39
Weighted average ordinary shares outstanding:
Basic and diluted	25,725,000	25,725,000	25,725,000	25,725,000

SOURCE China New Borun Corporation

Press Release