BORN China New Borun Corp. American Depositary Shares

BEIJING, Aug. 21, 2014 /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 second quarter of 2014. 

Mr. Jinmiao Wang, Chairman and Chief Executive Officer of Borun, commented on the results, "Although demand and average selling price for edible alcohol were solid in the first half of the second quarter, the market encountered an unexpected sharp drop nation-wide in demand and average selling price this June.  As a result, even though we recorded revenue growth at the high end of our second quarter guidance on better-than-expected volume shipment, our gross profits contracted year-over-year."

"Despite the challenging month of June, we continued to make progress in ramping up our chlorinated polyethylene ("CPE") and foam insulation businesses. During the quarter, we successfully scaled our CPE plant to full production capacity and grew total revenue from CPE and foam insulation by 47% sequentially to RMB23.4 million. It is worth noting that the new business has surpassed its gross breakeven point during the second quarter, and therefore we anticipate incremental positive contributions to profitability from the new business in the months ahead," Mr. Wang concluded.

Second Quarter 2014 Quick View

• Total revenue increased 6.4% to RMB668.9 million ($108.7 million[1]) from RMB628.5 million in the second quarter of 2013.
• Gross profit decreased 5.4% to RMB67.5 million ($11.0 million) from RMB71.4 million in the second quarter of 2013.
• Net income decreased 17.8% to RMB21.0 million ($3.4 million) from RMB25.5 million in the second quarter of 2013.
• Basic and diluted earnings per American Depositary Share ("ADS") were RMB0.82 ($0.13) for the quarter ended June 30, 2014. Each ADS represents one of the Company's ordinary shares.

Second Quarter 2014 Financial Performance

For the second quarter of 2014, revenue increased by 6.4% year-over-year to RMB668.9 million ($108.7 million) from RMB628.5 million in the same period of 2013. The increase in revenue was mainly attributable to higher sales volume of edible alcohol, partially offset by lower average selling prices, as well as incremental revenue contribution from the Company's CPE and foam insulation businesses that were introduced in the fourth quarter of 2013.

Revenue breakdown by product lines is as follows:  

• Revenue from edible alcohol increased by 4.1% to RMB425.9 million ($69.2 million) in the second quarter of 2014, compared to RMB409.0 million in the second quarter of 2013. Driven by higher production, the sales volume of edible alcohol in the second quarter of 2014 increased by 6.1% year-over-year to 83,505 tons, while the average selling price of edible alcohol decreased by 1.9% year-over-year to RMB5,100 per ton.
• Revenue from DDGS Feed increased by 2.1% to RMB159.8 million ($26.0 million) in the second quarter of 2014, compared to RMB156.5 million in the second quarter of 2013. The sales volume of DDGS Feed in the second quarter of 2014 decreased by 1.2% year-over-year to 74,155 tons, while the average selling price increased by 3.3% year-over-year to RMB2,155 per ton.
• Revenue from liquid carbon dioxide decreased by 17.0% to RMB11.4 million ($1.8 million) in the second quarter of 2014 compared to RMB13.7 million in the second quarter of 2013. The sales volume of liquid carbon dioxide in the second quarter of 2014 decreased by 2.6% year-over-year to 32,751 tons, and the average selling price decreased by 14.8% year-over-year to RMB347 per ton.
• Revenue from crude corn oil decreased by 1.4% to RMB48.5 million ($7.9 million) in the second quarter of 2014 compared to RMB49.2 million in the second quarter of 2013. The sales volume of crude corn oil in the second quarter of 2014 increased by 4.0% year-over-year to 6,746 tons, while the average selling price decreased by 5.3% year-over-year to RMB7,185 per ton.
• Revenue from CPE was RMB21.3 million ($3.5 million) in the second quarter of 2014, and the sales volume was 2,448 tons at an average selling price of RMB8,718 per ton. Revenue from foam insulation was RMB2.0 million ($0.3 million) in the second quarter of 2014, and the sales volume was 1,868 cubic meters at an average selling price of RMB1,094 per cubic meter.

During the second quarter of 2014, gross profit decreased by 5.4% to RMB67.5 million ($11.0 million) from RMB71.4 million in the same period of 2013. Gross margin for the second quarter of 2014 decreased to 10.1%, from 11.4% in the same period of 2013, which was primarily attributable to a decrease in average selling price of edible alcohol, as well as lower gross margin from the new CPE and foam insulation businesses during its initial production ramp up.

Operating income decreased by 7.8% to RMB55.3 million ($9.0 million) in the second quarter of 2014, from RMB60.0 million in the same period of 2013, primarily due to lower gross profit earned.

Selling expenses were RMB1.5 million ($0.2 million) in the second quarter of 2014, which remained stable with that in the same period of 2013.

General and administrative expenses increased by RMB0.8 million, or 8.0% to RMB 10.7 million ($1.7 million) in the second quarter of 2014, from RMB9.9 million in the same period of 2013, mainly due to the increasing management cost for our new CPE and foam insulation businesses.

Income tax expenses in the second quarter of 2014 were RMB7.0 million ($1.1 million), representing an effective tax rate of 25.0%.

Net income decreased by 17.8% to RMB21.0 million ($3.4 million) in the second quarter of 2014, compared to RMB25.5 million in the same quarter of 2013. In the second quarter of 2014, basic and diluted earnings per share and per ADS were RMB0.82 ($0.13), and the Company had 25.7 million weighted average basic and diluted shares outstanding.  

As of June 30, 2014, cash and bank deposits of RMB361.8 million ($58.8 million) decreased by RMB159.5 million, compared with RMB521.3 million as of December 31, 2013. Cash flows provided by operating activities for the second quarter of 2014 were RMB77.3 million ($12.6 million), compared with operating cash outflow of $148.1 million in the second quarter of 2013.

Financial Outlook

During the third quarters, the Company historically conducts an annual maintenance of its production facilities, which requires a temporary shut down of all production lines for edible alcohol for approximately one month.

Reflecting the annual maintenance period this summer, and lower average selling prices, the Company estimates that its revenue for the third quarter of 2014 will be in the range of RMB520 million ($84.5 million) to RMB540 million ($87.8 million), an increase of approximately 0.4% to 4.2% over the same quarter of 2013.

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. EDT on Friday, August 22, 2014 (8:00 p.m. Beijing time on Friday, August 22, 2014) to discuss the results and highlights from the second quarter 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:

A replay of the webcast will be accessible through August 30, 2014 on http://ir.chinanewborun.com or by dialing:

About China New Borun Corporation

China New Borun Corporation (NYSE: BORN) is a leading producer and distributor of corn-based edible alcohol sold as an ingredient to producers of baijiu, a popular grain-based alcoholic beverage in China. The Company also produces DDGS Feed, liquid carbon dioxide and crude corn oil as by-products of edible alcohol production, and CPE and foam insulation that are widely used in chemical industries. 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 http://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

Asia Bridge Capital Limited
Wendy Sun
Phone: +86-10-8556-9033 (China)
            +1-888-870-0798  (U.S.)
Email:  wendy.sun@asiabridgegroup.com

SOURCE China New Borun Corporation