American Lorain Corporation Reports Financial Results for the Second Quarter 2010

2010-08-10

JUNAN COUNTY, ChinaAug. 10 /PRNewswire-Asia-FirstCall/ — American Lorain Corporation(NYSEAmex: ALN) (“American Lorain” or “the Company”), an international processed snack foods, convenience foods, and frozen foods company based in Shandong ProvinceChina, today announced its financial results for its second quarter ended June 30, 2010.

    Second Quarter 2010 Highlights
    -- Revenue was $29.2 million, up 21.9% from 2Q2009 with convenience food
       sales improving 62.6% year over year
    -- Gross profit was $6.7 million, up 27.0% from 2Q2009 with gross margins
       of 23.0%, a 90-basis point improvement over 2Q2009
    -- Operating income margin was 15.7% for the quarter, a 255-basis point
       improvement over 2009
    -- Net income was $2.7 million, up 44.4% from 2Q 2009 and earnings per
       diluted shares were $0.10 based on 26.8 million shares


    Second Quarter 2010 Results
                              2Q 2010           2Q 2009             CHANGE
    Net Sales              $29.2 million     $24.0 million          +21.9%
    Gross Profit           $ 6.7 million      $5.3 million          +27.0%
    Net Income             $ 2.7 million      $1.9 million          +44.4%
    EPS (Diluted)*                 $0.10              $0.07         +35.9%

    * Weighted average shares outstanding for Q2 2010 was 26,750,592 and for
      Q2 2009 was 25,177,640

“Sales of chestnut and convenience food products remain the driving force of our operating performance,” began Chairman Si Chen of American Lorain. “Chestnut sales benefitted from a return of export orders in key Asian markets which helps level the seasonality of chestnut in Chinain the first half of the year. We are confident that our new frozen chestnut products will contribute to revenue in the third quarter and are pleased to report we have begun shipping our frozen chestnut raw materials to our Lorain branded retail counters in ChinaJapan and the Korean market. Convenience food products remain an exciting growth category for our Company. After a series of new product launches, including lunch box entr¨¦es, bean products and cold dishes, we are pleased to report that customers have been purchasing popular items in each product family and we thus expect strong re-orders for these items through the balance of the year.”

    Second Quarter 2010 Revenue Segments
                                              Three Months Ended June 30,
                                                   $ millions of USD
                                             2010           2009     % Change
    Chestnut                                 14.9           13.9        7.3%
    Convenience food                         10.3            6.3       62.6%
    Frozen foods                              4.1            3.8        7.7%
    Total                                   $29.2          $24.0       21.9%

Total revenue for the second quarter of 2010 ended June 30, 2010 was $29.2 million, up 21.9% from $24.0 million for the quarter ended June 30, 2009. The increase was primarily due to a higher sales contribution from the convenience food segment, which grew by 62.6% quarter over quarter. In the second quarter of 2010 revenues from convenience food products were 35.1% of total revenues for the quarter, up from 28.9% of total revenues for the quarter ended March 31, 2010. Products in American Lorain's convenience foods product line include “ready to eat” meals and snack foods, “ready to heat” lunch box entrees and “self-heating” meals for military personnel. As of the period ending June 30th 2010, American Lorain has developed and launched more than 100 convenience type foods in the Chinese market and is leveraging its long-standing distributor and retail networks to introduce Lorain(R)-branded convenience foods throughout 5,200 retail points in 26 provinces it currently sells Lorain(R)-branded snack foods.

American Lorain's core product line includes more than 50 varieties of chestnuts and chestnut-based snack. Sales in this category increased 7.3% from the second quarter 2009 and met management expectations. American Lorain's chestnut business accounted for 51% of the Company's revenues and is derived from a combination of domestic and international sales of chestnuts and chestnut-based snack foods. For the quarter, China accounted for 75.4% of chestnut sales. Export markets accounted for the balance of revenues in which Japan, Korea and the United Kingdom remained the largest export markets for the Company.

American Lorain frozen foods are sold in bulk to commercial customers in export markets and quick service restaurant chains like KFC(R) and Pizza Hut(R) restaurants in China. Sales of frozen foods are sold including frozen vegetables and select fruits accounted for 14.0% of revenues in the second of 2010. American Lorain only services a select group of commercial accounts and it is not actively growing this business segment due to its lower margin profile.

Gross profit for the second quarter of 2010 was $6.7 million, a 27.0% increase from $5.3 million in the second quarter of 2009 as a result of increase in revenue. Overall gross profit margin was 23.0% for the second quarter compared to 22.1% for the second quarter of 2009 due to higher margin chestnuts and convenience foods accounting for a higher percentage of revenues in the quarter ended June 30, 2010. Targeted gross margins for each product category are detailed below:

                                                   Gross profit margin (%)
    Chestnut                                              25 - 28
    Convenience food                                      22 - 24
    Frozen foods                                          16 - 18

Operating income for the quarter increased by 45.5% to $4.6 million, with operating margin of 15.7%, versus $3.2 million with operating margin of 13.2% in the second quarter of 2009. Sales and marketing expenses and general and administrative expenses remained flat quarter over quarter at approximately $2.1 million for the quarter.

Net income for the quarter was $2.7 million, an increase of 44.4% from $1.9 million in the same period in 2009. Based on 26,750,592 fully diluted shares outstanding, earnings per diluted share were $0.10 per share, a 35.9% increase over the prior year prior.

    Six Months Results
                                             Six Months Ended June 30,
                                                 $ Millions of USD
                                            2010            2009     % Change
    Chestnut                                27.8            26.5        4.8%
    Convenience food                        17.4             7.3      136.3%
    Frozen foods                             8.6            11.3      (23.8%)
    Total                                  $53.8           $45.2      $19.1%

Total revenue for the first six months of 2010 was $53.8 million, up 19.1% from $45.2 million in the prior year's period. For the first six months in 2010, domestic sales accounted for 81.2% of total revenues while international sales accounted for 18.8% with Japan and South Korea contributing 7.9% and 4.5% of total sales respectively. The trend of increased domestic revenue is consistent with the Company's strategy to gain market share with Chinese consumers.

Gross profit in the first half of fiscal year 2010 was $12.4 million, an increase of 19.0% from $10.5 million in the prior year's corresponding period. The gross profit margin remained constant at 23.1% for the six months ended June 30, 2010 compared to the same period of fiscal 2009.

Operating income in the first half of 2010 was $8.0 million, with operating margin of 14.7%, a 28.5% increase from $6.2 million in the prior year's period.

Net income for the first half of fiscal year 2010 was $4.5 million, compared to $3.6 million in the prior year's corresponding period, a 25.7% increase year over year. Earnings per weighted average diluted share were $0.17 based on 26,750,592 million diluted shares.

Financial Condition

As of June 30, 2010, the Company had $10.3 million in cash, down from $1.8 million as of December 31, 2009; working capital was $45.5 million, on June 30, 2010 and accounts receivable turnover in days for the second quarter of 2010 was 63 days. Cash flow from operations and capital expenditures were $5.5 million and $10.0 million for the first six months of 2010, respectively. With strong cash flow generation and no additional capital expenditures planned for the second half of 2010, the Company expects to end the year in a strong financial position.

Recent Events

June 29, 2010 – American Lorain announced that it has signed a letter of intent to acquire Shandong Greenpia Foodstuff Co. Ltd, a privately-owned food processor specializing in Korean kimchi cold dishes. The deal was valued at approximately $4.3 million with $2.1 million in cash and 731,707 shares of ALN common stock and is expected to be completed in Q3 2010 subject to government approval. The deal is consistent with Management's strategy to allocate more capital to its high growth, high margin convenience food business.

Second Quarter 2010 Conference Call

To attend the call, please use the dial information below. When prompted, ask for the “American Lorain Conference Call” and/or be prepared to provide the conference ID.

    Date:                             August 11, 2010
    Time:                             9:00am ET
    Conference Line Dial-In (U.S.):   1-877-941-1428
    International Dial-In:            1-480-629-9665
    Conference ID:                    4344733
    Webcast link:                     http://viavid.net/dce.aspx?sid=0000793E

Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through August 18, 2010. To listen, please call 1-877-870-5176 within the United States or +1-858-384-5517 when calling internationally. Utilize the pass code 4344733 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=0000793E or at ViaVid's website at http://www.viavid.net , where the webcast can be accessed through August 10, 2011.

About American Lorain Corporation

American Lorain Corporation products include chestnut products, convenience food products and frozen food products. The Company currently sells over 230 products to 26 provinces and administrative regions in China as well as to 42 foreign countries. The Company operates through its four direct and indirect subsidiaries and one leased factory located in China. For further information about American Lorain Corporation, please visit the Company's website at http://www.americanlorain.com .

Forward-Looking Statements

This press release contains certain “forward-looking statements” that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to, the Company's ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems, political and economic factors in the PRC, compliance requirement of laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    -FINANCIAL TABLES FOLLOW-



                           AMERICAN LORAIN CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      AT JUNE 30, 2010 AND DECEMBER 31, 2009
                              (Stated in US Dollars)

                                                At June 30,     At December 31,
    ASSETS                                         2010              2009
    Current Assets
    Cash and cash equivalents                  $10,338,791       $12,111,532
    Restricted cash                                741,442         1,299,889
    Short-term investment                        9,413,040         7,320,248
    Trade accounts receivable                   17,509,252        23,025,772
    Other receivables                            5,165,035         7,837,675
    Related party receivable                       167,484           603,116
    Inventory                                   34,075,760        26,400,117
    Advance to suppliers                        15,153,714        16,938,872
    Prepaid expenses and taxes                     171,173           905,266
    Deferred tax asset                             200,072           199,867
    Total current assets                       $92,935,763       $96,642,354

    Property, plant and equipment, net          50,638,174        41,280,407
    Land use rights, net                         3,835,691         3,871,547
    Deposit                                         16,154            16,088
    TOTAL ASSETS                              $147,425,782      $141,810,396

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
    Short-term bank loans                      $37,750,096       $35,488,212
    Long-term Debt - Current Portion               309,910                --
    Accounts payable                             2,209,103         2,614,515
    Taxes payable                                1,197,417         2,235,341
    Accrued liabilities and other
     payables                                    4,571,902         6,422,492
    Deferred tax liabilities                         2,899                --
    Customers deposits                           1,354,956            13,842
    Total Current Liabilities                  $47,396,283       $46,774,402

    Long Term Liabilities
    Long term bank loans                            12,851           294,873

    TOTAL LIABILITIES                          $47,409,134       $47,069,275

    STOCKHOLDERS' EQUITY
    Preferred Stock, $.001 par value,
     5,000,000 shares authorized; 0
     shares issued and outstanding at
     June 30, 2010 and December 31, 2009                --                --
    Common stock, $0.001 par value,
     200,000,000 shares authorized;
     30,240,202 and 30,240,202 shares
     issued and outstanding as of June
     30, 2010 and December 31, 2009,
     respectively                                   30,240            30,240
    Additional paid-in capital                  35,723,552        35,268,603
    Statutory reserves                           8,895,477         8,895,477
    Retained earnings                           42,995,493        38,455,349
    Accumulated other comprehensive
     income                                      5,998,789         6,068,569
    Non-controlling interests                    6,373,097         6,022,883

                                              $100,016,648       $94,741,121

    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                   $147,425,782      $141,810,396



                          AMERICAN LORAIN CORPORATION
                      CONSOLIDATED STATEMENTS OF INCOME
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

                          Three months ended June 30, Six months ended June 30,
                              2010         2009         2010         2009

    Net revenues           $29,218,314  $23,965,924  $53,778,530  $45,166,461
    Cost of revenues       (22,499,645) (18,675,167) (41,335,771) (34,713,370)
    Gross profit            $6,718,669   $5,290,757  $12,442,759  $10,453,091

    Operating expenses
    Selling and marketing
     expenses               (1,194,996)  (1,220,317)  (2,567,348)  (2,391,164)
    General and
     administrative
     expenses                 (932,210)    (914,892)  (1,948,662)  (1,891,197)

    Operating income        $4,591,463   $3,155,548   $7,926,749   $6,170,730

    Investment income              589           --          589           --
    Government subsidy
     income                    196,003       97,663      377,424      196,252
    Interest and other
     income                      8,901      127,279      130,982      208,648
    Other expenses             (44,714)     (69,286)     (72,237)    (181,603)
    Interest expense        (1,023,129)    (744,825)  (1,943,553)  (1,348,651)

    Earnings before tax     $3,729,113   $2,566,379   $6,419,954   $5,045,376

    Income tax                (857,604)    (602,706)  (1,529,596)  (1,183,478)

    Net income              $2,871,509   $1,963,673   $4,890,358   $3,861,898
    Net income
     attributable to:

    -Common Stockholders    $2,679,613   $1,855,628   $4,540,144   $3,611,704
    -Non-controlling
     Interest                  191,896      108,045      350,214      250,194
                            $2,871,509   $1,963,673   $4,890,358   $3,861,898

    Earnings per share
      - Basic                    $0.10        $0.07        $0.17        $0.14
      - Diluted                  $0.10        $0.07        $0.17        $0.14

    Weighted average
     shares outstanding
      - Basic               26,075,413   25,177,640   26,075,413   25,177,640
      - Diluted             26,750,592   25,177,640   26,750,592   25,177,640



                          AMERICAN LORAIN CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOW
             FOR THE TH REE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
                          (Stated in US Dollars)

                         Three months ended June 30, Six months ended June 30,
                                2010        2009         2010         2009
    Cash flows from
     operating activities
    Net income               $2,871,509  $1,963,673   $4,890,358   $3,861,898
     Stock and share based
      compensation              205,943          --      454,949           --
     Depreciation               322,416     331,026      687,985      665,480
     Amortization                33,341      91,615       69,061      135,992
     (Increase)/decrease in
      accounts & other
      receivables             4,205,909  (6,927,729)   8,294,930   (5,234,644)
     (Increase)/decrease in
      inventories             1,798,055     832,815   (7,675,643)  (2,027,754)
     Decrease/(increase) in
      prepayment                972,209   1,002,431      734,094      908,005
     Increase/(decrease) in
      accounts and other
      payables               (1,648,161) (7,086,166)  (1,950,117)  (8,571,918)
     Net cash (used
      in)/provided by
      operating activities    8,761,221  (9,792,335)   5,505,617  (10,262,941)

    Cash flows from
     investing activities
    Sales (investment) in
     short term investment
     fund                            --         (13)      22,227        2,767
    (Increase)/decrease in
     restricted cash            376,613          --      558,448           --
    Payment of land use
     rights                     (18,318)    (98,320)     (33,205)    (121,009)
    Payments for purchase
     of equipment & plant    (9,618,218)   (383,364) (10,045,753)    (526,530)
    Decrease (increase) in
     deposit                         --     213,860           --       (2,045)
    Net cash used in
     investing activities    (9,259,923)   (267,837)  (9,498,283)    (646,817)

    Cash flows from
     financing activities
    Bank borrowings           5,297,856   2,886,255   23,151,602   17,535,302
    Repayment of bank loans  (2,900,729)         --  (20,861,829)          --
    Notes payable                    --   1,614,365           --   (3,594,121)
    Issue of common stock            --       6,147           --        6,152
    Net cash provided
     by/(used in) financing
     activities              $2,397,127  $4,506,767   $2,289,773  $13,947,333

    Net Increase/(decrease)
     of Cash and Cash
     Equivalents              1,898,425  (5,553,405)  (1,702,893)   3,037,575

    Effect of foreign
     currency translation
     on cash and
     cash equivalents           (89,298)    141,404      (69,848)     952,807

    Cash and cash
     equivalents-beginning
     of year                  8,529,664  12,243,722   12,111,532    2,841,339

    Cash and cash
     equivalents-end of
     year                   $10,338,791  $6,831,721  $10,338,791   $6,831,721

    Supplementary cash flow
     information:
    Interest received            $3,998      $1,620       $6,802      $66,610
    Interest paid            $1,018,530    $744,825   $1,938,954   $1,348,651
    Income taxes paid          $649,208    $602,706   $2,489,131   $1,183,478


    For more information, please contact:

    At the company:

     American Lorain Corporation
     Alan Jin, CFO
     Tel:   +86-539-731-7959
     Email: alanjin@americanlorain.com
     Web:   http://www.americanlorain.com

    Investor relations:

     John Mattio, SVP
     HC International, New York
     Tel:   +1-203-616-5144
     Email: john.mattio@hcinternational.net
     Web:   http://www.hcinternational.net

SOURCE American Lorain Corporation