AoxinTianli Group, Inc. Reports Second Quarter 2017 Financial Results

 

WUHAN CITY, China, Aug. 14, 2017 /PRNewswire/ -- Aoxin Tianli Group, Inc. (NASDAQ: ABAC) ("Aoxin Tianli" or the "Company"), a producer of breeder hogs, market hogs and black hogs, as well as specialty processed black hog pork products sold through retail outlets and the internet, with headquarters in Wuhan City, Hubei Province, China, today announced its financial results for the three and six months ended June 30, 2017.

 

Mr. Luchang Zhou, Chief Executive Officer of Aoxin Tianli, commented, “thanks to the continued growth in our retail business, total revenues decreased by only 35.3% to $6.22 million in the second quarter primarily driven by decreases in both the number of hogs sold and the average selling price per hog in our hog farming business. The decrease in the number of hogs sold in our hog farming business was primarily the result of a drop in the number of regular breeder hogs and black hogs sold as a result of the damages caused by the severe floods in July 2016 that limited the number of hogs available for sale in the second quarter. Hog prices were also not in our favor and further declined sequentially during the second quarter.”

 

Mr. Wocheng Liu, Chairman of Aoxin Tianli, added, “while we continue to face significant headwinds in the near term, we are pleased to welcome Mr. Zhou and Ms. Qinyu Liu to join our team as Chief Executive Officer and Chief Financial Officer, respectively. With their significant career accomplishments, Mr. Zhou and Ms. Liu bring tremendous value to Aoxin Tianli as we seek opportunities to take the Company to the next level.”

 

Second Quarter 2017 Financial Results

 

		For the Three Months Ended June 30,
($ thousands, except per share data)		2017				2016				% Change
Revenues		$	6,222			$	9,611				-35.3	%
Hog farming			5,561				9,232				-39.8	%
Retail			661				379				74.3	%
Gross margin			13.4	%			22.7	%			-9.3 pp
Operating margin			0.9	%			12.0	%			-11.1 pp
Net Income (loss )			64				605				-89.4	%
Net income from continuing operations			64				1,217				-94.7	%
Gain (loss) from operations of discontinued component			—				(611	)			NM
Net income (loss ) for common shareholders			64				679				-90.5	%

 

Revenues for the second quarter of 2017 decreased by $3.39 million, or 35.3%, to $6.22 million from $9.61 million for the same period of last year. The decrease in revenues reflected the impact from the ongoing weak demand for regular breeder hogs, lower prices for regular hogs and black hogs, and fewer black hogs available for sale after the July 2016 flood damage.

 

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $3.67 million, or 39.8%, to $5.56 million for the second quarter of 2017 from $9.23 million for the same period of last year. The Company sold a total of 32,179 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $173 per hog during the second quarter of 2017, compared to 33,834 hogs sold and a blended average selling price of $273 per hog for the same period of last year.

 

		For the Three Months Ended June 30,
		2017												2016
		No. of Hogs				Average				Sales				No. of Hogs				Average				Sales
		Sold				Price/Hog ($)				($ thousands)				Sold				Price/Hog ($)				($ thousands)
Breeder hogs- regular hogs			3,344			$	247			$	827				4,096			$	253			$	1,038
Market hogs- regular hogs			17,924				144				2,582				15,960				240				3,826
Market hogs- black hogs			10,911				197				2,153				13,778				317				4,368
Total Hog Farming			32,179				173				5,561				33,834				273				9,232
							Average				Sales								Average				Sales
			Kilogram				Price/kg ($)				($ thousands)				Kilogram				Price/kg ($)				($ thousands)
Retail- specialty black hog pork products			138,123			$	5				661				80,368			$	5				379

 

 

Revenues for the second quarter of 2017 from regular breeder hog sales decreased by 20.3% to $0.82 million with the number of regular breeder hogs sold decreasing by 18.4% to 3,344 hogs and the average selling price of regular breeder hogs decreasing by 2.4% to $247 per hog. Revenues for the second quarter of 2017 from regular market hog sales decreased by 32.5% to $2.58 million as the number of regular market hogs sold increased by 12.3% to 17,924 hogs while the average selling price of regular market hogs decreased by 39.9% to $144 per hog. Revenues for the second quarter of 2017 from black market hogs decreased by 50.7% to $2.15 million with the number of black hogs sold decreasing by 20.8% to 10,911 hogs and the average selling price of black hogs decreasing by 37.8% to $197 per hog.

 

We sold 138,123 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $0.66 million for the second quarter of 2017. This compares to 80,368 kilograms sold at approximately $5 per kilogram and revenues of $0.38 million for the same period of last year. These revenues, combined with the sales of black market hogs, led to $2.81 million in revenues from our black hog program for the second quarter of 2017, compared to $4.75 million for the same period of last year.

 

Gross profit

 

Cost of goods sold decreased by $2.04 million, or 27.5%, to $5.39 million for the second quarter of 2017 from $7.43 million for the same period of last year. Cost of goods sold for hog farming decreased by $2.20 million, or 30.7%, to $4.95 million for the second quarter of 2017 from $7.15 million for the same period of last year. The decrease in cost of goods sold for hog farming was primarily due to lower sale volume, which was partly offset by increased feed costs. Cost of goods sold for retail increased by $0.15 million, or 52.4%, to $0.44 million for the second quarter of 2017 from $0.29 million for the same period of last year. The increase in cost of goods sold for retail was primarily due to increased sales volume.

 

Overall gross profit decreased by $1.34 million, or 61.7%, to $0.84 million for the second quarter of 2017 from $2.18 million for the same period of last year. This decrease in our gross profit reflected a decrease in gross profit of $1.48 million for our hog farming segment, especially in the sale of our regular market hogs. Gross profits for hog farming and retail were $0.61 million and $0.23 million, respectively, for the second quarter of 2017, compared to $2.09 million and $0.09 million, respectively, for the same period of last year.

 

Overall gross margin was 13.4%, with gross margins for hog farming and retail of 11.0% and 34.1%, respectively, for the second quarter of 2017. This compared to overall gross margin of 22.7%, and gross margins for hog farming and retail of 22.6% and 24.5%, respectively, for the same period of last year. The reduction in gross margin from hog farming was due to the increase in the number of large regular market hogs, over 100 kilograms per hog, sold during the period coupled with a decrease in the number of breeder hogs sold. Large hogs normally require more feed to maintain their daily diet and are sold to pork dealers directly. Since the beginning of 2017, we sold more large regular market hogs to pork dealers than the same period in 2016. However, the reduced sale prices of regular market hogs and increased feed costs for maintaining large market hogs caused our gross margin to decrease. The improvement in gross profit from the retail segment was primarily the result of higher sale prices charged to our new customer and an increase in sales volume.

 

Operating income

 

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.25 million, or 24.3%, to $0.78 million for the second quarter of 2017 from $1.03 million for the same period of last year. The decrease was primarily the result of cost control over employee payrolls. Operating income for the second quarter of 2017 was $0.06 million, compared to $1.15 million for the same period of last year. Operating margin for the second quarter of 2017 was 0.9%, compared to 12.0% for the same period of last year.

 

Net income

 

Net income was $0.06 million for the second quarter of 2017, compared to $0.61 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail, was $0.06 million for the second quarter of 2017, compared to $1.22 million for the same period of last year. Net income for the second quarter of 2016 was adversely impacted by the net loss from our discontinued operation, Hang-ao, which was $0.61 million for the second quarter of 2016. Hang-ao was sold on December 23, 2016.

 

After the deduction for non-controlling interests, net income attributable to common shareholders for the second quarter of 2017 was $0.06 million, compared to $0.68 million for the same period of last year.

 

 

First Half 2017 Financial Results

 

		For the Six Months Ended June 30,
($ thousands, except per share data)		2017				2016				% Change
Revenues		$	12,903	$			18,670				-30.9	%
Hog farming			11,535				17,871				-35.5	%
Retail			1,368				799				71.2	%
Gross margin			13.7	%			22.9	%			-9.2 pp
Operating margin			0.6	%			11.8	%			-11.2 pp
Net income (Loss)			98				331				-70.5	%
Net income from continuing operations			98				2,353				-95.9	%
Gain (loss) from operations and disposal of discontinued component			—				(2,022	)			NM
Net income (loss) for common shareholders			98				574				-83.0	%

 

Revenues for the first half of 2017 decreased by $5.77 million, or 30.9%, to $12.90 million from $18.67 million for the same period of last year. The decrease in revenues reflected the impact from the ongoing weak demand for regular breeder hogs, lower prices for regular hogs and black hogs, and fewer black hogs available for sale after the July 2016 flood damage.

 

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $6.34 million, or 35.5%, to $11.54 million for the first half of 2017 from $17.87 million for the same period of last year. The Company sold a total of 62,396 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $185 per hog during the first half of 2017, compared to 68,946 hogs sold and a blended average selling price of $259 per hog for the same period of last year.

 

		For the Six Months Ended June 30,
		2017												2016
		No. of Hogs				Average				Sales				No. of Hogs				Average				Sales
		Sold				Price/Hog ($)				($ thousands)				Sold				Price/Hog ($)				($ thousands)
Breeder hogs- regular hogs			6,181			$	246			$	1,523				8,436			$	253			$	2,133
Market hogs- regular hogs			34,716				156				5,427				31,890				229				7,307
Market hogs- black hogs			21,499				213				4,585				28,620				295				8,431
Total Hog Farming			62,396				185				11,535				68,946				259				17,871
							Average				Sales								Average				Sales
			Kilogram				Price/kg ($)				($ thousands)				Kilograms				Price/kg ($)				($ thousands)
Retail- specialty black hog pork products			274,804			$	5			$	1,368				167,752			$	5			$	799

 

Revenues for the first half of 2017 from regular breeder hog sales decreased by 28.6% to $1.52 million with the number of regular breeder hogs sold decreasing by 26.7% to 6,181 hogs and the average selling price of regular breeder hogs decreasing by 2.5% to $246 per hog. Revenues for the first half of 2017 from regular market hog sales decreased by 25.7% to $5.43 million as the number of regular market hogs sold increased by 8.9% to 34,716 hogs while the average selling price of regular market hogs decreased by 31.8% to $156 per hog. Revenues for the first half of 2017 from black market hogs decreased by 45.6% to $4.59 million with the number of black hogs sold decreasing by 24.9% to 21,499 hogs and the average selling price of black hogs decreasing by 27.6% to $213 per hog.

 

We sold 274,804 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $1.37 million for the first half of 2017. This compares to 167,752 kilograms sold at approximately $5 per kilogram and revenues of $0.80 million for the same period of last year. These revenues, combined with the sales of black market hogs, led to $5.95 million in revenues from our black hog program for the first half of 2017, compared to $9.23 million for the same period of last year.

 

Gross profit

 

Cost of goods sold decreased by $3.26 million, or 22.7%, to $11.13 million for the first half of 2017 from $14.39 million for the same period of last year. Cost of goods sold for hog farming decreased by $3.58 million, or 25.9%, to $10.22 million for the first half of 2017 from $13.79 million for the same period of last year. The decrease in cost of goods sold for hog farming was primarily due to lower sale volume, which was partly offset by increased feed costs. Cost of goods sold for retail increased by $0.32 million, or 52.5%, to $0.92 million for the first half of 2017 from $0.60 million for the same period of last year. The increase in cost of goods sold for retail was primarily due to increased sales volume.

 

 

Overall gross profit decreased by $2.51 million, or 58.6%, to $1.77 million for the first half of 2017 from $4.28 million for the same period of last year. This decrease in our gross profit reflected a decrease in gross profit of $2.76 million for our hog farming segment, especially in the sale of our regular market hogs, partially offset by improvement in our retail sales. Gross profits for hog farming and retail were $1.32 million and $0.45 million, respectively, for the first half of 2017, compared to $4.08 million and $0.20 million, respectively, for the same period of last year.

 

Overall gross margin was 13.7%, with gross margins for hog farming and retail of 11.4% and 33.1%, respectively, for the first half of 2017. This compared to overall gross margin of 22.9%, and gross margins for hog farming and retail of 22.8% and 24.9%, respectively, for the same period of last year. The reduction in gross margin from hog farming was due to the increase in the number of large regular market hogs, over 100 kilograms per hog, sold during the period coupled with a decrease in the number of breeder hogs sold. Large hogs normally require more feed to maintain their daily diet and are sold to pork dealers directly. During the first half of 2017, we sold more large regular market hogs to pork dealers than the same period in 2016. However, the reduced sale prices of regular market hogs and increased feed costs for maintaining large market hogs caused our gross margin to decrease. The improvement in gross profit from the retail segment was primarily the result of higher sale prices charged to our new customer and an increase in sales volume.

 

Operating income

 

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.39 million, or 18.6%, to $1.69 million for the first half of 2017 from $2.08 million for the same period of last year. The decrease was primarily the result of cost control over employee payrolls. Operating income for the first half of 2017 was $0.08 million, compared to $2.20 million for the same period of last year. Operating margin for the first half of 2017 was 0.6%, compared to 11.8% for the same period of last year.

 

Net income

 

Net income was $0.10 million for the first half of 2017, compared to $0.33 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail, was $0.10 million for the first half of 2017, compared to $2.35 million for the same period of last year. Net income for the first half of 2016 was adversely impacted by the net loss from our discontinued operation, Hang-ao, which was $2.02 million for the first half of 2016. Hang-ao was sold on December 23, 2016.

 

After the deduction for non-controlling interests, net income attributable to common shareholders for the first half of 2017 was $0.10 million, compared to $0.57 million for the same period of last year.

 

Financial Condition

 

As of June 30, 2017, the Company had cash and cash equivalents of $57.89 million, compared to $54.46 million at the end of 2016. Working capital as of June 30, 2017 was $60.20 million as compared to $57.50 million at December 31, 2016. Net cash provided by operating activities was $2.64 million for the first half of 2017, compared to $7.25 million for the same period of last year. Net cash used in investing activities was $nil for the first half of 2017, compared to $3.00 million for the same period of last year. Net cash used in financing activities was $0.58 million for the first half of 2017, compared to $0.31 million for the same period of last year.

 

About AoxinTianli Group, Inc.

 

Aoxin Tianli Group, Inc. (the "Company"), previously known as Tianli Agritech, Inc., is in the business of breeding, raising and selling breeder and market hogs in China. The Company also sells specialty processed black hog pork products through supermarkets and other retail outlets, as well as the internet.

 

Forward-Looking Statements

 

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

 

 

For more information, please contact:

 

Tony Tian, CFA
Weitian Group LLC
Phone: +1-732-910-9692
Email: tony.tian@weitian-ir.com

 

 

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(AMOUNTS EXPRESSED IN US DOLLARS)

(UNAUDITED)

 

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2017				2016				2017				2016
Revenue		$	6,222,160			$	9,610,789			$	12,903,151			$	18,670,057
Cost of goods sold			5,387,139				7,431,963				11,130,023				14,390,715
Gross profit			835,021				2,178,826				1,773,128				4,279,342
General and administrative expenses			701,029				914,129				1,532,989				1,858,064
Selling expenses			78,580				115,903				156,328				218,191
Operating expenses			779,609				1,030,032				1,689,317				2,076,255
Income from operations			55,412				1,148,794				83,811				2,203,087
Other income (expense):
Interest income			7,845				59,606				11,669				141,449
Other income, net			1,165				8,206				2,036				8,665
Total other income			9,010				67,812				13,705				150,114
Income  before income taxes			64,422				1,216,606				97,516				2,353,201
Income taxes			—				—				—				—
Net income from continuing operations			64,422				1,216,606				97,516				2,353,201
Discontinued operations:
Loss from operations of discontinued component, net of taxes			—				(611,417	)			—				(2,022,204	)
Net income			64,422				605,189				97,516				330,997
Net loss attributable to the noncontrolling interest			—				73,370				—				242,664
Net income (Loss) attributable to Aoxin Tianli Group, Inc. and Subsidiaries		$	64,422			$	678,559			$	97,516			$	573,661
Earnings per share, continuing operations– Basic and Diluted		$	0.01			$	0.15			$	0.01			$	0.29
Loss per share, discontinued operations– Basic and Diluted		$	—			$	(0.08	)		$	—			$	(0.25	)
Weighted average shares outstanding – Basic and Diluted			7,983,745				7,988,000				7,987,870				8,134,208
Comprehensive income (loss):
Net income attributable to Aoxin Tianli Group, Inc. and Subsidiaries		$	64,422			$	678,559			$	97,516			$	573,661
Unrealized foreign currency translation adjustment			1,423,687				(2,743,550	)			2,080,452				(2,135,287	)
Comprehensive income (loss)		$	1,488,109			$	(2,064,991	)		$	2,177,968			$	(1,561,626	)

 

 

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN US DOLLARS)

 

		June 30, 2017				December 31, 2016
			(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	57,891,099			$	54,458,026
Accounts receivable, net			71,099				60,283
Inventories, net			5,071,017				5,506,085
Advances to suppliers, net			395,506				1,129,477
Prepaid expenses			34,868				112,676
Other receivables, net			297,384				293,377
Total Current Assets			63,760,973				61,559,924
Long-term prepaid expenses, net			1,254,052				1,196,989
Plant and equipment, net			20,470,230				21,113,840
Biological assets, net			1,996,914				1,901,744
Intangible assets, net			2,366,792				2,403,637
Total Assets		$	89,848,961			$	88,176,134
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term bank loans		$	2,065,682			$	2,591,793
Accounts payable and accrued liabilities			17,744				5,327
Other payables			1,473,717				1,465,164
Total  Current Liabilities			3,557,143				4,062,284
Stockholders’ Equity:
Common stock ($0.004 par value, 25,000,000 shares
authorized, 7,983,745 shares and 7,988,245 shares issued and outstanding on June 30, 2017 and December 31, 2016, respectively)			31,934				31,952
Additional paid in capital			61,395,579				61,395,561
Statutory surplus reserves			2,416,647				2,416,647
Retained earnings			26,933,101				26,835,585
Accumulated other comprehensive loss			(4,485,443	)			(6,565,895	)
Total Stockholders’ Equity			86,291,818				84,113,850
Total Liabilities and Stockholders’ Equity		$	89,848,961			$	88,176,134

 

 

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)

(UNAUDITED)

 

		For the Six Months Ended June 30,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations			97,516			$	2,353,201
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,418,330				1,194,716
Amortization of prepaid expenses			94,422				249,698
Amortization of long-term prepaid expenses			51,606				53,997
Loss from disposal of biological assets			67,945				427,071
Stock-based compensation			4,015				12,046
Changes in operating assets and liabilities:
Accounts receivable			(9,194	)			182,316
Inventories			892,224				2,764,344
Prepaid expenses			(19,756	)			(11,879	)
Other receivables			3,200				605
Long-term prepaid expenses			(78,683	)			—
Accounts payable and accrued liabilities			14,212				67,973
Other payables			105,441				—
Total adjustments			2,543,762				4,940,887
Net cash provided by operating activities from continuing operations			2,641,278				7,294,088
Net cash provided by (used in) operating activities from discontinued operations			—				(41,000	)
Net cash provided by operating activities			2,641,278				7,253,088
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment			—				(3,002,759	)
Net cash used in investing activities from continuing operations			—				(3,002,759	)
Net cash provided by investing activities from discontinued operations			—				—
Net cash provided by (used in) investing activities			—				(3,002,759	)
CASH FLOWS FROM FINANCING ACTIVITIES
Restricted cash received from banks			—				9,180,826
Proceeds of short-term loans			2,036,317				2,754,248
Repayments of short-term loans			(2,618,122	)			(12,241,101	)
Net cash used in financing activities from continuing operations			(581,805	)			(306,027	)
Net cash provided by financing activities from discontinued operations			—				—
Net cash used in financing activities			(581,805	)			(306,027	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			1,373,600				(1,159,599	)
NET INCREASE IN CASH			3,433,073				2,784,703
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			54,458,026				49,656,897
CASH AND CASH EQUIVALENTS, END OF PERIOD			57,891,099			$	52,441,600