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8-K - FORM 8-K - China Nutrifruit Group LTDnutri8k020510.htm

 
 

Exhibit 99.1

   
Company Contact: Investor Relations Contact:
Mr. Colman Cheng, Chief Financial Officer Mr. Crocker Coulson, President
China Nutrifruit Group Limited CCG Investor Relations
Tel:+ 852 9039 8111 Tel: +1-646-213-1915 (NY office)
Email: zsj@longheda.net Email: crocker.coulson@ccgir.com
Website: www.chinanutrifruit.com Website: www.ccgirasia.com
   
  Elaine Ketchmere, Partner
  Email: elaine.ketchmere@ccgir.com
  Tel: +1-310-954-1345 (LA office)
For Immediate Release  

China Nutrifruit Group Limited Announces
Third Quarter of Fiscal 2010 Results

  • Revenue increased 28% year-over-year to $17.8 million

  • Net income increased 45% to $4.6 million

  • Affirms FY 2010 and FY 2011 Guidance

Daqing, Heilongjiang Province, China – February 5, 2010 China Nutrifruit Group Limited (NYSE Amex: CNGL) (“China Nutrifruit” or “the Company”), a leading producer of premium specialty fruit based products in China (“PRC”), today reported financial results for the third fiscal quarter ended December 31, 2009.

Third Quarter Fiscal Year (“FY”) 2010 Highlights

  • Net sales increased 28.4% year-over-year to $17.8 million

  • Gross profit increased 34.8% year-over-year to $8.1 million, with gross margin of 45.7%

  • Operating earnings increased 40.6% year-over-year to $6.2 million, with operating margin of 34.9%

  • Net income increased 44.7% year-over-year to $4.6 million, or $0.11 per diluted share

  • Successfully raised aggregate gross proceeds of approximately $13.3 million in private placement financing

  • Began production of new glazed fruit production line at the Company’s Daqing facility in Heilongjiang Province, China

“China Nutrifruit had a strong third quarter with solid year-over-year growth in both revenue and net income. As planned, we successfully added a new glazed fruit production line during the quarter which will further boost sales of our rapidly growing glazed fruit products,” commented Mr. Changjun Yu, Chairman of China Nutrifruit. “We experienced a healthy harvest with our facilities operating at a utilization rate in excess of 90%. Our new glazed fruit production line began production in December and will help us meet the growing market demand for our products.”


Third Quarter FY 2010 Results

Net sales for the third quarter of FY 2010 increased 28.4% to $17.8 million, as compared to $13.9 million in the same quarter of fiscal 2009. The strong growth in sales was attributable to the increase in sales volume driven by rising market demand and growth in consumer spending. During the third quarter, net sales from concentrated juice products, which accounted for 47.2% of total net sales, were $8.4 million. Net sales from glazed fruit reached $5.4 million, contributing 30.1% of the net sales during the quarter compared to 6.1% in the prior year primarily due to increased sales of the Company’s new blueberry glazed fruit product.

Gross profit for the third quarter of FY 2010 grew 34.8% to $8.1 million, from $6.0 million for the same period a year ago. Gross margin was 45.7% for the third quarter of FY 2010 compared to 43.5% in the third quarter of FY 2009. The increase in gross margin was mainly due to product mix changes resulting in increased sales of glazed fruit products which had a higher margin of 51.9%, compared with fruit concentrate and concentrate pulp products, which had gross margins of 44.4% and 28.3%, respectively, during the quarter.

In the third quarter of FY 2010, selling, general, and administrative expenses were $1.9 million, up 18.6% from $1.6 million in the same period last year. Selling expenses were $1.1 million, or 6.1% of net sales, compared to $0.9 million, or 6.8% of net sales, in the third quarter of FY 2009. Selling expenses as a percentage of net sales declined due to lower sales related travel expenses as the Company’s established customer relationships resulted in a higher volume of repeat orders from existing customers. General and administrative (“G&A”) expenses were $0.8 million, up 22.9% from $0.7 million a year ago. As a percentage of net sales, G&A expenses decreased to 4.6% compared to 4.8% in the third quarter of FY 2009.

Operating earnings in the third quarter of FY 2010 rose 40.6% to $6.2 million, from $4.4 million in the comparable period last year.

Provision for income taxes was $1.6 million compared to $1.1 million a year ago.

Net income in the third quarter of FY 2010 was $4.6 million, or $0.11 per diluted share, up 44.7% from $3.2 million, or $0.09 per diluted share a year ago. The calculation of diluted earnings per share for the third quarter of fiscal 2010 is based on 40.2 million shares compared to share count of 36.1 million in the third quarter of fiscal 2009.

Nine Months Results

For the nine months ended December 31, 2009, net sales were $46.5 million, up 28.4% from $36.2 million for the nine months ended December 31, 2009. Net sales from concentrated juice products increased 10.8% to $20.1 million from $18.1 million in the comparable period last year and accounted for 43.2% of total net sales. Net sales from glazed fruit grew 110.4% to $10.2 million from $4.8 million in the same period last year and accounted for 21.9% of net sales. Sales of concentrate pulp products increased 185.1% to $6.4 million, as compared to $2.2 million in the prior year, and accounted for 13.7% of total net sales.


Gross profit increased 26.6% to $21.8 million from $17.2 million a year ago. Gross margin was 46.8% in the first nine months of FY 2010 compared to 47.5% in the comparable period a year ago. Earnings from operations were $16.8 million, up 23.4% from $13.6 million last year. Net income for the nine months ended December 31, 2009 was $12.5 million, or $0.33 per diluted share, up 25.7% from $10.0 million, or $0.51 per diluted share, in the same period of FY 2009. The calculation of diluted earnings per share for the first nine months of FY 2010 is based on 37.5 million shares compared to share count of 19.5 million in the comparable period of fiscal 2009.

Financial Condition

As of December 31, 2009, China Nutrifruit had $19.1 million in cash and cash equivalents, $3.0 million in total liabilities with no long term debt and working capital of $39.3 million. Shareholders’ equity was $58.9 million as of December 31, 2009.

In first nine months of FY2010, the Company generated $5.7 million in cash flow from operating activities due to net income, the collection of trade receivables offset by the increase in inventory during the production season.

Business Outlook

China Nutrifruit plans to construct a new fruit and vegetable powder manufacturing facility in Daqing, Heilongjiang Province with an annual production capacity of 10,000 tons at a total cost of approximately $19.1 million. The new facility is expected to begin production in September 2010 and will produce tomato, pumpkin and other popular fruit and vegetable powders that can be used as ingredients in a variety of food products. The Company expects the new line to contribute approximately $13 to $14 million in revenue for fiscal year 2011. In addition, China Nutrifruit is seeking to maximize utilization at its new automated glazed fruit production line.

The Company affirms previously issued fiscal 2010 and 2011 guidance. For FY 2010, the Company expects approximately $72.0 - $76.0 million in revenue and $18.5 million in net income, excluding non-cash stock compensation expenses. For FY 2011, the Company expects approximately $90-$95 million in revenue, and projected net income of approximately $22-$23 million.

“We expect strong consumer spending and an increasing demand for healthy products to continue to drive demand for specialty fruit and beverage products. We have received a great deal of interest and demand from both domestic and international distributors for fruit and vegetable powder products. This high growth segment complements our existing product lines and we plan to leverage our widespread network of suppliers and distributors to sell these products,” said Mr. Yu. “We intend to enhance our position as a premium food processor by continuing to introduce new products and utilizing our strong distribution network, industry relationships, and production efficiency.”


Conference Call Information

Management will conduct a conference call at 9:00 a.m. Eastern Time on Friday, February 5, 2010 to discuss its third fiscal quarter 2010 results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-380-4607. International callers should dial +1-702-928-6995. The conference ID number for the call is 53493754. If you are unable to participate in the call at this time, a replay will be available on Friday, February 5, 2010 at 11:00 a.m. Eastern Time, through Friday, February 19, 2010. To access the replay, dial 800-642-1687. International callers should dial +1-706-645-9291. The conference ID number for the replay is 53493754.

About China Nutrifruit Group Limited

Through its subsidiary Daqing Longheda Food Company Limited, China Nutrifruit, is engaged in developing, processing, marketing and distributing a variety of food products processed primarily from premium specialty fruits grown in Northeast China, including golden berry, crab apple, blueberry and raspberry. The Company’s processing facility possesses ISO9001 and HACCP series qualifications. Currently, the Company has established an extensive nationwide sales and distribution network throughout 20 Provinces in China. For more information, please visit http://www.chinanutrifruit.com .

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act"”). Such statements include, among others, those concerning our projections for the new fruit and vegetable powder manufacturing facility, expected financial performance in FY 2010 and FY2011 and strategic and operational plans, our expectations regarding the market for our products, our expectations regarding the continued growth of the specialty fruit and beverage market, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,” “aim,” “will” or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended March 31, 2009, and other risks and uncertainties mentioned in our other reports filed with the Securities and Exchange Commission. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

– Financial Tables Follow –

 

 


CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)        
(Stated in US Dollars)            
             
    December 31,     March 31,  
    2009     2009  
ASSETS            
Current assets:            
   Cash and cash equivalents $  19,135,592   $  4,768,542  
   Proceeds from private placement held in escrow account   931,630     -  
   Trade receivables, net of allowance   8,284,033     11,423,996  
   Inventories, net   13,706,578     3,692,892  
   Other current assets   191,365     481,679  
Total current assets   42,249,198     20,367,109  
Property and equipment, net   18,253,354     16,614,930  
Deferred tax assets   1,241,881     1,406,814  
Land use rights, net   186,563     189,303  
TOTAL ASSETS $ 61,930,996   $  38,578,156  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Current liabilities:            
   Other payables and accrued expenses $  929,175   $  2,675,983  
   Trade payables   507,906     260,322  
   Income taxes payable   1,554,027     1,416,835  
Total current liabilities   2,991,108     4,353,140  
Non-current liabilities:            
   Amounts due to shareholders   -     7,407,748  
TOTAL LIABILITIES   2,991,108     11,760,888  
             
Commitments and Contingencies            
Shareholders' equity            
Preferred stock            

Authorized: 5,000,000 shares, par value $0.001

           

Issued and outstanding: 403,418 shares as at December 31, 2009; (nil as at March 31, 2009)

  403     -  
Common stock            

Authorized: 120,000,000 shares, par value $0.001

           

Issued and outstanding: 36,125,754 shares as at December 31, 2009;

           

(36,125,754 shares as at March 31, 2009)

  36,126     36,126  
Additional paid-in-capital   36,376,516     16,746,971  
Noncontrolling interests   -     -  
Statutory reserves - restricted   4,563,920     2,873,880  
             
Accumulated other comprehensive income   406,223     425,675  
Retained earnings   17,556,700     6,734,616  
TOTAL SHAREHOLDERS’ EQUITY   58,939,888     26,817,268  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $  61,930,996   $  38,578,156  




CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES                    
                     
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)              
(Stated in US Dollars)                        
             
    Three months ended     Nine months ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Net sales $  17,816,916   $  13,873,857   $  46,502,988   $  36,212,228  
Cost of sales   (9,680,959 )   (7,836,719 )   (24,734,449 )   (19,020,828 )
Gross profit   8,135,957     6,037,138     21,768,539     17,191,400  
Selling expenses   (1,094,111 )   (945,802 )   (2,592,363 )   (2,035,655 )
General and administrative expenses   (816,069 )   (664,202 )   (2,333,033 )   (1,505,804 )
Operating earnings   6,225,777     4,427,134     16,843,143     13,649,941  
Other income (expenses)                        
   Interest expense   -     (128,455 )   -     (318,050 )
   Other income   9,204     6,555     48,575     26,092  
Total other income (expenses)   9,204     (121,900 )   48,575     (291,958 )
Earnings before noncontrolling interests and income taxes   6,234,981     4,305,234     16,891,718     13,357,983  
Provision for income taxes   (1,609,004 )   (1,107,292 )   (4,379,594 )   (3,190,845 )
Earnings before noncontrolling interests   4,625,977     3,197,942     12,512,124     10,167,138  
Noncontrolling interests   -     -     -     (209,308 )
Net earnings   4,625,977     3,197,942     12,512,124     9,957,830  
Other comprehensive income                        
   Foreign currency translation   (39,255 )   (34,698 )   (19,452 )   (402,187 )
Comprehensive income $  4,586,722   $  3,163,244   $  12,492,672   $  9,555,643  
                         
Earnings per share                        
   Basic $  0.12   $  0.09   $  0.34   $  0.51  
   Diluted $  0.11   $  0.09   $  0.33   $  0.51  
                         
Weighted average number of common stock outstanding                        
   Basic   36,125,754     36,061,476     36,125,754     19,463,339  
   Diluted   40,167,345     36,091,242     37,507,917     19,465,518  


CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in US Dollars)

       
    Nine months ended  
    December 31,  
    2009     2008  
Operating activities:            
   Net earnings $  12,512,124   $  9,957,830  
     Adjustments to reconcile net earnings to net cash used in operating activities        
         Noncontrolling interests   -     209,308  
         Depreciation and amortization   1,120,793     654,849  
         Benefit for deferred income taxes   164,934     (53,113 )
         Loss on disposal of property and equipment   -     289  
    Changes in operating assets and liabilities:            
         Trade receivables   3,149,316     172,808  
         Inventories   (10,010,662 )   (10,501,428 )
         Prepayments   291,788     (499,412 )
         Other current assets   (1,462 )   (64,981 )
         Trade payables   247,371     1,049,463  
         Income taxes payable   136,031     425,577  
         Advances from customers   -     1,727,701  
         Consideration payables   -     (5,352,352 )
         Amount due to a director   -     (59,076 )
         Amount due to an affiliate   -     -  
         Other payables and accrued expenses   (1,908,952 )   (116,020 )
    Net cash provided by/(used in) operating activities   5,701,281     (2,448,557 )
             
Investing activities:            
Cash outflow from acquisition of subsidiaries   -     (1,451,038 )
Purchases of property and equipment   (2,577,984 )   (13,102,841 )
Proceeds from disposal of property and equipment   -     3,918  
Net cash used in investing activities   (2,577,984 )   (14,549,961 )
             
Financing activities:            
Proceeds from borrowings   -     4,353,113  
Repayment of borrowings   -     -  
Amounts due to shareholders   -     7,360,552  
Proceeds from issue of common stock   -     8,578,706  
Proceeds from issuances of preferred stocks   12,006,646     -  
Proceeds from issuances of warrants   1,302,354     -  
Cost of raising capital   (1,094,047 )   (1,741,421 )
Net cash provided by financing activities   12,214,953     18,550,950  
             
Increase in cash and cash equivalents   15,338,250     1,552,432  
             
Effect of exchange rate on cash and cash equivalents   (39,570 )   (260,356 )
             
Cash and cash equivalents at beginning of the period   4,768,542     7,104,849  
             
Cash and cash equivalents and proceeds from private placement held in escrow account at end of the period $  20,067,222   $  8,396,925  
             
Analysis of balances:            
Proceeds from private placement held in escrow account $  931,630   $  -  
Cash and cash equivalents   19,135,592     8,396,925  
  $  20,067,222   $  8,396,925  
             
Supplemental disclosure of cash flows information:            
Cash paid for:            
           Interest $  -   $  318,050  
           Income taxes $  4,078,629   $  2,818,381  
             
Supplemental disclosure of non-cash information:            
           Issuance of warrants $  367,156   $  -  
           Purchases of property and equipment $  160,183   $  -  

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