News

Aoxin Tianli Group, Inc. Reports Second Quarter 2016 Financial Results
Author:Aoxin Tianli Date:Aug/19/2016

Aoxin Tianli Group, Inc. Reports Second Quarter 2016 Financial Results

Company to Host Earnings Conference Call on Friday, August 12, 2016 at 8:00 a.m. ET

 

WUHAN, China, Aug. 11, 2016 /PRNewswire/ -- Aoxin Tianli Group, Inc. (NASDAQ: ABAC) ("Aoxin Tianli" or the "Company"), a leading 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 second quarter ended June 30, 2016.

 

Mr. Wocheng Liu, Chairman and Co-Chief Executive Officer of Aoxin Tianli Group, Inc., commented, "We are pleased to report solid financial results for the second quarter of 2016 with meaningful improvement in margins and a 26.4% increase in net income from continuing operations. We saw continued improvement in hog market fundamentals with average selling prices for our regular market hogs and black market hogs increasing by 16.5% and 24.8%, respectively, in the second quarter of 2016. Our black hog program remained strong with revenues from black market hog sales and retail growing by 30.8% and 24.4%, respectively, and together accounting for nearly half of our total revenues. However, demand for regular breeder hogs remained weak as both the number of breeder hogs sold and average selling price per hog decreased in the second quarter of 2016. This, combined with a reduction in the number of regular market hogs sold as a result of the sale of two hog farms in the third quarter of last year, led to a 2.4% decrease in overall revenues."    

 

Mr. Liu continued, "Looking ahead, macroeconomics and the state of the hog industry in China will continue to have significant impact on us. While the unprecedented flooding early last month will put a dent in our near term results, we are cautiously optimistic about the long term outlook for our business with our strong balance sheet, established sales and distribution network, and the prospect of expansion beyond the Hubei market through acquisitions."  

 

Three Months Ended June 30, 2016 Financial Results

Revenues

 

For the Three Months Ended June 30,

($ thousands, except per share data)

2016

 

2015

 

% Change

Revenues

$ 9,611

 

$ 9,852

 

-2.4%

   Hog farming

9,232

 

9,547

 

-3.3%

   Retail

379

 

305

 

24.4%

Gross margin

22.7%

 

20.7%

 

2.0%

Operating margin

12.0%

 

9.6%

 

2.4%

Net income

605

 

924

 

-34.5%

   Continuing operations

1,217

 

963

 

26.4%

   Discontinued component

(611)

 

(39)

 

1480.2%

Net income for common shareholders

679

 

919

 

-26.2%

Earnings (loss) per share

0.02

 

0.03

 

-23.4%

   Continuing operations

0.04

 

0.03

 

31.2%

   Discontinued components

(0.02)

 

(0.00)

 

1541.1%

 

Revenues for the second quarter of 2016 decreased by $0.24 million, or 2.4%, to $9.61 million from $9.85 million for the same period of last year. The decrease in revenues reflected a reduction in the number of regular hogs sold as a result of the sale of two hog farms during the third quarter of 2015 and was partially offset by an increase in the blended average selling price per hog.

 

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $0.32 million, or 3.3%, to $9.23 million for the second quarter of 2016 from $9.55 million for the same period of last year. The Company sold a total of 33,834 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $273 per hog during the second quarter of 2016, compared to 40,970 hogs sold and a blended average selling price of $233 per hog for the same period of last year.

 

 

 

For the Three Months Ended June 30,

 

2016

 

2015

 

No. of
Hogs
Sold

 

Average
Price/Hog
($)

 

Sales
($ thousands)

 

No. of
Hogs
Sold

 

Average
Price/Hog
($)

 

Sales
($ thousands)

Breeder hogs - regular hogs

4,096

 

$ 253

 

$ 1,038

 

7,191

 

$ 271

 

$ 1,949

Market hogs - regular hogs

15,960

 

240

 

3,826

 

20,656

 

206

 

4,259

Market hogs - black hogs

13,778

 

317

 

4,368

 

13,123

 

254

 

3,340

Total Hog Farming

33,834

 

273

 

9,232

 

40,970

 

233

 

9,547

                       
       
 

Kilogram

 

Average
Price/kg($)

 

Sales
($ thousands)

 

Kilogram

 

Average
Price/kg ($)

 

Sales
($ thousands)

Retail - specialty black hog pork
products

80,368

 

$ 5

 

$ 379

 

67,155

 

$ 5

 

$ 305

 

Revenues for the second quarter of 2016 from regular breeder hog sales decreased by 46.7% to $1.04 million with the number of regular breeder hogs sold decreasing by 43.0% to 4,096 hogs and the average selling price of regular breeder hogs decreasing by 6.6% to $253 per hog. Revenues for the second quarter of 2016 from regular market hog sales decreased by 10.2% to $3.83 million as the number of regular market hogs sold decreased by 22.7% to 15,960 hogs while the average selling price of regular market hogs increased by 16.5% to $240 per hog. Revenues for the second quarter of 2016 from black market hogs increased by 30.8% to $4.37 million with the number of black hogs sold increasing by 5.0% to 13,778 hogs and the average selling price of black hogs increasing by 24.8% to $317 per hog.

 

We sold 80,368 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $0.38 million for the second quarter of 2016. This compares to 67,155 kilograms sold at approximately $5 per kilogram and revenues of $0.31 million for the same period of last year. These revenues, combined with the sales of black market hogs, led to $4.75 million in revenues from our black hog program for the second quarter of 2016, compared to $3.64 million for the same period of last year.

 

The results of operations of Hang-ao and OV Orange and their wholly owned subsidiaries, were reclassified as discontinued operations in the Company's financial statements for the three months and six months ended June 30, 2016 and 2015 based on the Company's decision to focus on the hog industry and sell both subsidiaries in the near future. OV Orange was sold on December 29, 2015. We have not found a buyer for Hang-ao as of today.

 

Gross profit

Cost of goods sold decreased by $0.38 million, or 4.9%, to $7.43 million for the second quarter of 2016 from $7.82 million for the same period of last year. Cost of goods sold for hog farming decreased by $0.44 million, or 5.8%, to $7.15 million for the second quarter of 2016 from $7.59 million for the same period of last year, benefitting from a reduction in the purchase prices for our feeds and the sale of two farms during the third quarter of 2015. Cost of goods sold for retail increased by $0.06 million, or 24.3%, to $0.29 million for the second quarter of 2016 from $0.23 million for the same period of last year.

 

Overall gross profit increased by $0.14 million, or 7.1%, to $2.18 million for the second quarter of 2016 from $2.03 million for the same period of last year.

 

Gross profits for hog farming and retail were $2.09 million and $0.09 million, respectively, for the second quarter of 2016, compared to $1.96 million and $0.08 million, respectively, for the same period of last year.

 

Overall gross margin was 22.7%, with gross margins for hog farming and retail of 22.6% and 24.5%, respectively, for the second quarter of 2016. This compared to overall gross margin of 20.7%, and gross margins for hog farming and retail of 20.5% and 24.6%, respectively, for the same period of last year.

 

Operating income

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.06 million, or 5.8%, to $1.03 million for the second quarter of 2016 from $1.09 million for the same period of last year. The decrease was primarily the result of a decrease in our depreciation and amortization expenses from the disposal of our hog farms in 2015.

 

Operating income for the second quarter of 2016 was $1.15 million, compared to an operating income of $0.94 million for the same period of last year. Operating margin for the second quarter of 2016 was 12.0%, compared to operating margin of 9.6% for the same period of last year.

 

Net income

Net income decreased by $0.32 million, or 34.5%, to $0.61 million for the second quarter of 2016 from $0.92 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail increased by $0.25 million, or 26.4%, to $1.22 million for the second quarter of 2016 from $0.96 million for the same period of last year. Net loss from our discontinued operations, including both Hang-ao and OV Orange, was $0.61 million for the second quarter of 2016, compared to $0.04 million for the same period of last year.  

 

After the deduction of non-controlling interests, net income attributable to common shareholders for the second quarter of 2016 was $0.68 million, or $0.02 per diluted share. This compared to net income attributable to common shareholders of $0.92 million, $0.03 per diluted share, for the same period of last year.

 

Six Months Ended June 30, 2016 Financial Results

Revenues

 

For the Six Months Ended June 30,

($ thousands, except per share data)

2016

 

2015

 

% Change

Revenues

$ 18,670

 

$ 19,440

 

-4.0%

   Hog farming

17,871

 

18,639

 

-4.1%

   Retail

799

 

801

 

-0.2%

Gross margin

22.9%

 

18.4%

 

4.5%

Operating margin

11.8%

 

3.3%

 

8.5%

Net income

331

 

708

 

-53.2%

   Continuing operations

2,353

 

604

 

289.7%

   Discontinued component

(2,022)

 

104

 

NM

Net income for common shareholders

574

 

679

 

-15.6%

Earnings (loss) per share

0.01

 

0.02

 

-50.0%

   Continuing operations

0.07

 

0.02

 

250.0%

   Discontinued components

(0.06)

 

-

 

NM

Revenues for the six months ended June 30, 2016 decreased by $0.77 million, or 4.0%, to $18.67 million from $19.44 million for the same period of last year. The decrease in revenues reflected a reduction in the number of hogs sold as a result of the sale of two hog farms during the third quarter of 2015 and was partially offset by an increase in the average selling price per hog.

 

Revenues from hog farming, which includes sales of regular breeder hogs, regular market hogs, and black hogs, decreased by $0.77 million, or 4.1%, to $17.87 million for the six months ended June 30, 2016 from $18.64 million for the same period of last year. The Company sold a total of 68,946 regular breeder hogs, regular market hogs and black hogs with a blended average selling price of $259 per hog during the six months ended June 30, 2016, compared to 84,765 hogs sold and a blended average selling price of $220 per hog for the same period of last year.

 

 

 

For the Six Months Ended June 30,

 

2016

 

2015

 

No. of
Hogs
Sold

 

Average
Price/Hog
($)

 

Sales
($ thousands)

 

No. of
Hogs
Sold

 

Average
Price/Hog
($)

 

Sales
($ thousands)

Breeder hogs - regular hogs

8,436

 

$ 253

 

$ 2,133

 

14,374

 

$ 267

 

$ 3,836

Market hogs - regular hogs

31,890

 

229

 

7,307

 

41,999

 

194

 

8,160

Market hogs - black hogs

28,620

 

295

 

8,431

 

28,392

 

234

 

6,642

Total Hog Farming

68,946

 

259

 

17,871

 

84,765

 

220

 

18,639

                       
       
 

Kilogram

 

Average
Price/kg($)

 

Sales
($ thousands)

 

Kilogram

 

Average
Price/kg ($)

 

Sales
($ thousands)

Retail - specialty black hog pork
products

167,752

 

$ 5

 

$ 799

 

182,087

 

$ 4

 

$ 801

Revenues for the six months ended June 30, 2016 from regular breeder hog sales decreased by 44.4% to $2.13 million with the number of regular breeder hogs sold decreasing by 41.3% to 8,436 hogs and the average selling price of regular breeder hogs decreasing by 5.2% to $253 per hog. Revenues for the six months ended June 30, 2016 from regular market hog sales decreased by 10.5% to $7.31 million as the number of regular market hogs sold decreased by 24.1% to 31,890 hogs while the average selling price of regular market hogs increased by 18.0% to $229 per hog. Revenues for the six months ended June 30, 2016 from black market hogs increased by 26.9% to $8.43 million with the number of black hogs sold increasing by 0.8% to 28,620 hogs and the average selling price of black hogs increasing by 26.1% to $295 per hog.

 

We sold 167,752 kilograms of specialty black hog pork products through retail at approximately $5 per kilogram, generating revenues of $0.80 million for the six months ended June 30, 2016. This compares to 182,087 kilograms sold at approximately $4 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 $9.23 million in revenues from our black hog program for the six months ended June 30, 2016, compared to $7.44 million for the same period of last year.

 

The results of operations of Hang-ao and OV Orange and their wholly owned subsidiaries, were reclassified as discontinued operations in the Company's financial statements for the three months and six months ended June 30, 2016 and 2015 based on the Company's decision to focus on the hog industry and sell both subsidiaries in the near future. OV Orange was sold on December 29, 2015. We have not found a buyer for Hang-ao as of today.

 

Gross profit

Cost of goods sold decreased by $1.47 million, or 9.3%, to $14.39 million for the six months ended June 30, 2016 from $15.86 million for the same period of last year. Cost of goods sold for hog farming decreased by $1.46 million, or 9.6%, to $13.79 million for the six months ended June 30, 2016 from $15.25 million for the same period of last year. The decrease in cost of goods sold primarily results from a reduction in costs in our Hog Farming segment which decreased $1,459,314, as a result of a reduction in the purchase prices for our feeds and the sale of two of our farms.  Cost of goods sold for retail decreased by $0.01 million, or 1.8%, to $0.60 million for the six months ended June 30, 2016 from $0.61 million for the same period of last year.

 

Overall gross profit increased by $0.70 million, or 19.6%, to $4.28 million for the six months ended June 30, 2016 from $3.58 million for the same period of last year.

 

Gross profits for hog farming and retail were $4.08 million and $0.20 million, respectively, for the six months ended June 30, 2016, compared to $3.39 million and $0.19 million, respectively, for the same period of last year.

 

Overall gross margin was 22.9%, with gross margins for hog farming and retail of 22.8% and 24.9%, respectively, for the six months ended June 30, 2016. This compared to overall gross margin of 18.4%, and gross margins for hog farming and retail of 18.2% and 23.7%, respectively, for the same period of last year.

 

Operating income

Total operating expenses, including general and administrative expenses and selling and marketing expenses, decreased by $0.86 million, or 29.2%, to $2.08 million for the six months ended June 30, 2016 from $2.93 million for the same period of last year. The decrease was primarily the result of a cancelation of stock grants to key employees which generated non-cash compensation expense of $0.36 million in 2015, a decrease of $0.61 million in our depreciation and amortization expenses as a result of the disposal of two hog farms in 2015, and a decrease of $0.12 million in bad debt expense.

 

Operating income increased by $1.56 million, or 241.3%, to $2.20 million for the six months ended June 30, 2016 from $0.65 million for the same period of last year. Operating margin for the six months ended June 30, 2016 was 11.8%, compared to operating margin of 3.3% for the same period of last year.

 

Net income

Net income decreased by $0.38 million, or 53.2%, to $0.33 million for the six months ended June 30, 2016 from $0.71 million for the same period of last year. Our net income from continuing operations, including both hog farming and retail, increased by $1.75 million, or 289.7%, to $2.35 million for the six months ended June 30, 2016 from $0.60 million for the same period of last year. Net loss from the operations of our discontinued operations, Hang-ao and OV Orange, was $2.02 million for the six months ended June 30, 2016, compared to net income of $0.10 million for the same period of last year.

 

After the deduction of non-controlling interests, net income attributable to common shareholders for the six months ended June 30, 2016 was $0.57 million, or $0.02 per diluted share. This compared to net income attributable to common shareholders of $0.68 million, $0.02 per diluted share, for the same period of last year.

 

Financial Condition

As of June 30, 2016, the Company had cash and cash equivalents of $52.44 million, compared to $49.66 million at the end of 2015. Working capital as of June 30, 2016 was $60.70 million as compared to $63.98 million at December 31, 2015. Net cash provided by operating activities was $7.25 million for the six months ended June 30, 2016, compared to $9.11 million for the same period of last year. Net cash used in investing activities was $3.00 million for the six months ended June 30, 2016, primarily for purchases of new equipment for our hog farms. This compared to net cash provided by investing activities of $1.62 million for the same period of last year, mostly generated by our discontinued operations. Net cash used in financing activities was $0.31 for the six months ended June 30, 2016, compared to $3.47 million used in financing activities for the same period of last year.

 

Company Update

On July 19, 2016, the Company announced it had entered into a Letter of Intent to acquire a majority stake in Hannan Chengmai Zaohuaxiang Hog Industry Co., Ltd, a high-end specialty black hog farm operator based in Hainan Province with annual production capacity of 30,000 hogs. The transaction is subject to due diligence investigations by the relevant parties, the negotiation and execution of definitive agreements, the approval of the Company's Board of Directors, and the satisfaction of other customary closing conditions.

 

On July 12, 2016, the Company announced that its hog farms in Wuhan City and some of the independently operated black hog farms in Enshi Prefecture were damaged as torrential rains caused devastating flooding in southern China in early July with Wuhan City being one of the hardest hit areas. The Company expects total losses associated with the floods to be approximately $1.5 million to $2 million.

 

On June 16, 2016, the Company announced that the Board of Directors of the Company has appointed Mr. "Tommy" Chun Choi Law as the Company's Chief Financial Officer, replacing Mr. Houliang Yu, who resigned as Chief Financial Officer of the Company on June 13, 2016.

 

On June 2, 2016, the Company announced that upon the recommendation of Mrs. Hanying Li, its Board of Directors has elected Mr. Wocheng Liu as a Director, the Chairman of the Board, and Co- Chief Executive Officer of the Company. Mrs. Li resigned from her position as Chairperson of the Company to accommodate the election of Mr. Liu. Mrs. Li will remain with Aoxin Tianli as a member of the Board of Directors and Co-Chief Executive Officer. Mrs. Li and Mr. Liu will have equal responsibility and authority as Co-CEOs, with Mrs. Li focusing on internal operations and Mr. Liu on external affairs and business development.  

 

Earnings Conference Call

Aoxin Tianli will host an earnings conference call and live webcast covering its second quarter of 2016 financial results at 8:00 a.m. ET on August 12, 2016, which is 8:00 p.m. in Beijing on August 12, 2016. To attend the call, please use the information below for either dial-in access or webcast access. When prompted on dial-in, ask for "AoxinTianli / ABAC".

Conference Call

 

Date:

Friday, August 12, 2016

Time:

8:00 am ET, U.S.

U.S. Dial-in:

+1 877-317-6789

International Dial-in:

+1 412-317-6789

Conference ID:

Aoxin Tianli / ABAC

Webcast Link:

http://mms.prnasia.com/ABAC/20160812/default.aspx

 

For those unable to participate, an audio replay of the call will be available beginning approximately one hour after the end of the live call through August 19, 2016. The audio replay can be accessed by dialing +1-877-344-7529 within the United States or +1-412-317-0088 internationally, and entering access ID No. 10091213.

 

About Aoxin Tianli 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:

Tina Xiao
Weitian Group LLC
Phone: +1-917-609-0333
Email: tina.xiao@weitian-ir.com