American Lorain Corporation Reports Financial Results for the Third Quarter 2010

2010-11-16

JUNAN COUNTY, ChinaNov. 16, 2010 /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 third quarter ended September 30, 2010.

Third Quarter 2010 Highlights

  • Revenue was $48.1 million, up 24.3% from Q3 2009 with convenience food sales increasing 72.5% year over year
  • Gross profit was $10.8 million, up 18.4% from Q32009 with gross margins of 22.4%
  • Net income was $5.1 million, up 13.1% from Q3 2009 and earnings per diluted shares were $0.16, down from $0.18 in Q3 2009 based on 31.7 million shares

Third Quarter 2010 Results

Q3 2010

Q3 2009

CHANGE

Net Sales

$ 48.1 million

$ 38.7 million

+ 24.3 %

Gross Profit

$ 10.8 million

$9.1 million

+ 18.4 %

Net Income

$ 5.1 million

$ 4.5 million

+ 13.1 %

EPS (Diluted)*

$0.16

$0.18

-11.1 %

*Weighted average shares outstanding for Q3 2009 and Q3 2010 were 31,679,871 and 25,200,136 on a fully diluted basis, respectively.

“Sales of chestnut and convenience food products remain the driving force of our operating performance,” began Chairman Si Chen of American Lorain. “We were pleased to see our chestnuts gain traction in the third quarter as we expanded our retail sales network.  Convenience food products remain an exciting growth category for our Company. After a series of new product launches, including lunch box entrées, 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.”

Third Quarter 2010 Revenue Segments

Three Months Ended September 30,

$ millions of USD

2010

2009

% Change

Chestnut

21,233,329

18,305,822

16.0%

Convenience food

18,552,192

10,751,840

72.5%

Frozen foods

8,287,703

9,616,989

-13.8%

Total

48,073,224

38,674,651

24.3%

Total revenue for the third quarter of 2010 ended September 30, 2010 was $48.1 million, up 24.3% from $38.7 million for the quarter ended September 30, 2009.  Sales of chestnuts increased by $2.9 million, or 16.0%, to $21.2 due to effective marketing efforts and a growing domestic and international distribution network. In the third quarter of 2010 revenues from convenience food products were $18.6 million, up 72.5% from the comparable period last year.  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.

American Lorain's core product line includes more than 50 varieties of chestnuts and chestnut-based snacks.  Sales in this category increased 16.0% from the third quarter 2009. American Lorain's chestnut business accounted for 44.2% of the Company's revenues in the third quarter 2010 and is derived from a combination of domestic and international sales of chestnuts and chestnut-based snack foods.  

Sales of frozen foods were $8.3 million compared to $9.6 million last year, representing 17.2% of revenues in the third quarter 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 third quarter of 2010 was $10.8 million, an 18.4% increase from $9.1 million in the third quarter of 2009 as a result of higher labor and depreciation expenses. Overall gross profit margin was 22.4% for the third quarter of 2010 compared to 23.6% for the third quarter of 2009 as percentage revenue contribution for convenience food products, which has slightly lower gross margin compared with chestnut products, continue to increase. 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 0.4% to $7.1 million, with operating margin of 14.7%, versus $7.0 million with operating margin of 18.2% in the third quarter of 2009.  Sales and marketing expenses increased from $1.2 million in the third quarter of 2009 to $2.1 million in the third quarter of 2010 due the Company's ongoing efforts to expand distribution. General and administrative expenses increased 81.3% to $1.6 million.

Net income for the quarter was $5.1 million, an increase of 13.4% from $4.5 million in the same period in 2009.  Based on 31.7 million fully diluted shares outstanding, earnings per diluted share were $0.16 per share, an 11.1% decrease over the $0.18 in the prior year's period.  

Nine Months Results

Nine Months Ended September 30,

$ millions of USD

2010

2009

% Change

Chestnut

49,062,130

44,852,695

9.4%

Convenience food

35,911,359

18,099,093

98.4%

Frozen foods

16,878,265

20,858,242

-19.1%

Total

101,851,754

83,810,030

21.5%

Total revenue for the first nine months of 2010 was $101.9 million, up 21.5% from $83.8 million in the prior year's period. Chestnut sales grew 9.4% to $49.1 million. For the nine months ended September 30, 2010China's domestic market accounted for 79.4% of overall revenue. Export markets accounted for the balance of revenues in which Japan, Korea and the United Kingdomremained the largest export markets for the Company.

Gross profit in the first nine months of fiscal year 2010 was $23.2 million, an increase of 18.7% from $19.6 million in the prior year's corresponding period. The gross profit margin decreased slightly to 22.8% for the first nine months ended September 30, 2010 compared 23.3% in the same period of fiscal 2009.

Operating income in the first nine months of 2010 was $15.0 million, with operating margin of 14.7%, a 13.5% increase from $13.2 million in the prior year's period.

Net income for the first nine months of fiscal year 2010 was $9.6 million, compared to $8.1 millionin the prior year's corresponding period, up 18.7% year-over-year. Earnings per diluted share were $0.31 based on 31.2 million diluted shares, compared with $0.32 per diluted share during the same period in 2009.

Financial Condition

As of September 30, 2010, the Company had $11.9 million in cash, down from $12.1 million as of December 31, 2009; working capital was $58.6 million on September 30, 2010 and accounts receivable turnover in days for the third quarter of 2010 was 48.5 days. Year-to-date cash outflows from operations and capital expenditures were $9.4 million and $13.4 million, respectively. With our sales and receivables collection being strongest in the fourth quarter, we expect to generate healthy cash flows for the full year of 2010.

Recent Events

November, 2 2010 – American Lorain announced it has expanded its Lorain®-branded counters for three of its chestnut products including Bottom Open Chestnut, Roasted Chestnut and Roasted Sweet Chestnut, to 1,190 by the end of September 2010. American Lorain Corporation sells over 50 branded chestnut products across 24 provinces in China. As of September 30, 2010, Lorain®-branded counter number for the Company's Bottom Open Chestnut, introduced experimentally last year, and Roasted Chestnut, introduced this year, reached 513 and 428, respectively. Counter number for Roasted Sweet Chestnut reached 249 as of September 30, 2010 as compared to 179 as of December 31, 2009. These branded counters are located primarily in supermarkets, including Wal-Mart, Carrefour, Trust-Mart, and Lotus, mid-sized supermarkets such as Times Supermarkets and Anyang Supermarkets, and small retail stores, including Family Mart, Circle K and QUIK convenient stores.

September 13, 2010 – The Company completed a $9.6 million equity financing with Tongley Investment Ltd., a private fund in China, together with other accredited investors. American Lorain plans to use the proceeds for raw material procurement as we enter the chestnut season.

On June 28, 2010, the Company signed a Letter of Intent to acquire 100% ownership of Shandong Greenpia Foodstuff Co., Ltd., a manufacturer of retail-packaged, Korean-style kimchi cold dishes. The acquisition included cash and stock offer of $2.1 million in cash and 731,707 shares of American Lorain common stock, respectively. On September 23, 2010, the Company, through its subsidiaries Junan Hongrun and International Lorain, completed its acquisition of all the outstanding registered capital of Shandong Greenpia Foodstuff Co., Ltd. (“Shandong Greenpia”) by paying $2,100,000 cash to Taebong Inc, who owned 50% owner of Shandong Greenpia, and issuing 731,707 shares of the Company's restricted common stock, valued at $2.87 per share, to Mr. Zhenwei Ji, owner of Shandong Green Safety Import Export Co., Ltd, who owned 50% of Shandong Greenpia. Accordingly, beginning September 23, 2010, the Company has accounted for Shandong Greenpia as an indirectly held wholly owned subsidiary.

Third Quarter 2010 Conference Call

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

Date:

November,17 2010

Time:

8:30am ET

Conference Line Dial-In (U.S.):

1-877-941-2068

International Dial-In:

1-480-629-9712

Conference ID:

4385954

Webcast link:

http://viavid.net/dce.aspx?sid=00007E4E

Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through November 24, 2010. To listen, please call 1-877-870-5176 within the United Statesor +1-858-384-5517 when calling internationally. Utilize the pass code 4385954 for the replay.

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.

For more information, please contact:

At the company:

 American Lorain Corporation

 Tinghao Fu

 Tel:   +86-539-7317959

 Email: futinghao@163.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

AMERICAN LORAIN CORPORATION

CONSOLIDATED BALANCE SHEETS

AT SEPTEMBER 30, 2010 AND DECEMBER 31, 2009

(Stated in US Dollars)

At September 30,

At December 31,

ASSETS

2010

2009

Current assets

Cash and cash equivalents

$

11,885,550

$

12,111,532

Restricted cash

845,233

1,299,889

Short-term investment

9,336,710

7,320,248

Trade accounts receivable

25,927,949

23,025,772

Other receivables

3,729,677

4,398,805

Inventory

35,766,659

26,400,117

Advance to suppliers

26,216,051

20,980,858

Prepaid expenses and taxes

470,914

905,266

    Deferred tax asset

200,879

199,867

Total current assets

$

114,379,622

$

96,642,354

Property, plant and equipment, net

54,867,192

41,280,407

Land use rights, net

4,848,427

3,871,547

Deposit

16,469

16,088

TOTAL ASSETS

$

174,111,710

$

141,810,396

LIABILITIES AND STOCKHOLDERS' EQUITY

Short-term bank loans

$

46,810,749

$

35,488,212

Long-term debt – current portion

230,794

Notes payable

716,621

Accounts Payable

2,630,930

2,614,515

Taxes payable

1,831,117

2,235,341

Accrued liabilities and other payables

2,058,517

6,422,492

Deferred tax liabilities

2,947

Customers deposits

1,456,230

13,842

Total current liabilities

$

55,737,905

$

46,774,402

Long term liabilities

Long term bank loans

13,063

294,873

TOTAL LIABILITIES

$

55,750,968

$

47,069,275

STOCKHOLDERS' EQUITY

Preferred Stock, $.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2010 and December 31, 2009

Common stock, $0.001 par value, 200,000,000 shares authorized; 34,419,709 and 30,240,202 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively

34,420

30,240

Additional paid-in capital

52,155,306

35,268,603

Statutory reserves

9,926,320

8,895,477

Retained earnings

41,887,949

38,455,349

Accumulated other comprehensive income

6,681,151

6,068,569

Non-controlling interests

7,675,596

6,022,883

TOTAL STOCKHOLDER'S EQUITY

$

118,360,742

$

94,741,121

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY

$

174,111,710

$

141,810,396

AMERICAN LORAIN CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(Stated in US Dollars)

Three months ended 

September 30,

Nine months ended 

September 30,

2010

2009

2010

2009

Net revenues

$

48,073,224

$

38,674,651

$

101,851,754

$

83,841,112

Cost of revenues

(37,293,496)

(29,566,601)

(78,629,267)

(64,279,971)

Gross profit

$

10,779,728

$

9,108,050

$

23,222,487

$

19,561,141

Operating expenses

Selling and marketing expenses

(2,072,152)

(1,165,107)

(4,639,500)

(3,556,271)

General and administrative expenses

(1,643,967)

(906,847)

(3,592,629)

(2,798,044)

Operating income

$

7,063,609

$

7,036,096

$

14,990,358

$

13,206,826

Government subsidy income

321,537

43,864

698,961

240,118

Interest and other income

628,008

24,196

759,579

232,844

Other expenses

(16,269)

(52,694)

(88,506)

(234,298)

Interest expense

(1,127,993)

(857,089)

(3,071,546)

(2,205,740)

Earnings before tax

$

6,868,892

$

6,194,373

$

13,288,846

$

11,239,750

Income tax

(1,476,363)

(1,396,694)

(3,005,959)

(2,580,172)

Net income

$

5,392,529

$

4,797,679

$

10,282,887

$

8,659,578

Net income attributable to:

-Common stockholders

$

5,084,475

$

4,497,364

$

9,624,619

$

8,109,069

-Non-controlling interest

308,054

300,315

658,268

550,509

$

5,392,529

$

4,797,679

$

10,282,887

$

8,659,578

Earnings per share

– Basic

$

0.16

$

0.18

$

0.32

$

0.32

– Diluted

$

0.16

$

0.18

$

0.31

$

0.32

Weighted average shares outstanding

– Basic

31,083,710

25,177,640

30,525,487

25,177,640

– Diluted

31,679,871

25,200,136

31,221,758

25,717,588

AMERICAN LORAIN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(Stated in US Dollars)

Three months ended

Nine months ended

September 30,

September 30,

2010

2009

2010

2009

Cash flows from operating activities

Net income

$

5,392,529

$

4,797,679

$

10,282,887

$

8,659,578

  Stock and share based compensation

195,868

80,484

650,817

86,636

  Depreciation

554,385

276,694

1,242,370

942,173

  Amortization

40,053

22,217

109,114

158,209

  Gain on acquisition of Shandong Greenpia

(479,332)

(479,332)

Change in assets and liabilities net of effects from acquisition of Shandong Greenpia:

  (Increase)/decrease in accounts & other receivables

(12,081,954)

1,776,531

(3,787,024)

7,583,260

  (Increase)/decrease in inventories

(979,407)

(8,751,246)

(8,655,050)

(10,778,999)

Decrease/(increase) in prepayment

(5,152,378)

(4,418,283)

  Increase/(decrease) in accounts and other payables

(2,425,974)

(961,609)

(4,376,091)

(22,389,528)

  Net cash (used in)/provided by operating activities

(14,936,210)

(2,759,250)

(9,430,592)

(15,738,671)

Cash flows from investing activities

  Shandong Greenpia acquisition net of cash acquired

(1,929,773)

(1,929,773)

Sales (investment) in short term investment fund

(183,966)

58,384

(161,739)

61,151

(Increase)/decrease in restricted cash

(103,792)

(14,642)

454,656

2,707,991

Payment of land use rights

(72,466)

(4,590)

(105,671)

(125,600)

Payments for purchase of equipment & plant

(1,295,379)

(881,610)

(11,341,132)

(1,408,140)

Decrease (increase) in deposit

(2,045)

Net cash used in investing activities

(3,585,376)

(842,458)

(13,083,659)

1,233,357

Cash flows from financing activities

Proceeds from bank borrowings

41,717,825

2,465,431

64,869,426

20,000,733

Repayment of bank loans

(32,736,075)

(53,597,904)

Proceeds from issuance of notes

716,621

716,621

Repayment of notes

(1,614,364)

(5,208,485)

Issuance of common stock

8,693,478

8,693,478

Net cash provided by/(used in) financing activities

$

18,391,849

$

851,067

$

20,681,621

$

14,792,248

Net Increase/(decrease) of Cash and Cash Equivalents

(129,737)

(2,750,641)

(1,832,630)

286,934

Effect of foreign currency translation on cash

and cash equivalents

1,676,496

80,722

1,606,648

1,033,529

Cash and cash equivalents–beginning of year

10,338,791

6,831,721

12,111,532

2,841,339

Cash and cash equivalents–end of year

$

11,885,550

$

4,161,802

$

11,885,550

$

4,161,802

SOURCE American Lorain Corporation