News

AoxinTianli Group, Inc. Reports Second Quarter 2017 Financial Results
Author:Aoxin Tianli Date:Aug/17/2017

 

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.”

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.

 

 

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.

 

 

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.

 

 

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