Green Star Reports Record Third Quarter 2011 Financial Results

- Third consecutive quarter of record sales and EBITDA driven by a 76% increase in revenue from the canned food division -

TORONTO, Nov. 28, 2011 /CNW/ - China Green Star Agricultural Corporation (TSXV: GRE) ("Green Star" or the "Company"), an advanced processer of agricultural products such as canned fruits and vegetables for distribution to international and domestic markets, today announced financial results for the three- and nine-month periods ended September 30, 2011.

Q3 2011 Key Financial Results

In thousands except share data and EPS Q3 2011 Q3 2010 Change
Total revenue $9,559 $6,118 +56.2%
Gross profit $3,821 $2,548 +50.0%
EBITDA1 $3,105 $2,370 +31.0%
Net earnings before taxes $3,055 $2,264 +34.9%
Net earnings after taxes $2,229 $1,698 +31.3%
EPS - fully diluted $0.07 $0.14 -50%
  Sept. 30, 2011 Dec. 31, 2010  
Cash and cash equivalents $6,988 $1,497 +366.8%
Total assets $31,956 $21,239 +50.5%

"Our record performance to date in fiscal 2011 continues to validate our decision to focus on the opportunities inherent in our canned food division," said Lianyun Guan, Chairman and CEO of Green Star.  "The increase in tomato paste production and sales, as well as the addition of our newest product line of canned grapes during the quarter, demonstrates our ability to identify and execute on growth opportunities in our markets."

Q3 2011 Operational and Financial Highlights

  • Record Q3 revenue of $9.6 million, an increase of 56% over $6.2 million in Q3 2010
  • Record Q3 EBITDA of $3.1 million, up 31% from $2.4 million in Q3 2010
  • Record Q3 net earnings of $2.2 million, up 31% from $1.7 million in Q3 2010
  • Completed the first annual season of its newest production line, canned grapes, which added $1.2 million of revenue and took advantage of previously idle seasonal capacity in its canned fruits division
  • Completed the annual two-month long canned yellow peach and mature bamboo harvest seasons, mature bamboo being a byproduct of the bamboo shoot industry in which the wood materials are sold to various industries such as furniture production and the making of disposable chop sticks

Highlights Subsequent to Quarter End

  • Began the annual mandarin orange harvest on October 17, lasting until January
  • Announced a proposed corporate reorganization to terminate the variable interest equity structure and move to a direct equity structure

Review of Financial Results
Green Star's principal sources of revenue are from the sale of canned food and fresh agriculture produce. The canned food division mainly consists of canned food processing which includes the manufacturing of canned tomato paste, canned boiled bamboo shoots, canned oranges, canned peaches and various other types of fruit.  The agricultural produce division consists of the cultivation and harvesting of agricultural produce such as fresh oranges and bamboo shoots for sale either directly as fresh produce or canned and sold domestically and overseas.

Green Star reported consolidated revenue of $9.6 million for the third quarter ended September 30, 2011, up 56.2% from $6.1 million for the same period in the prior year. The revenue growth was primarily due to additional production and sales of canned tomato paste and the introduction of a new product line of canned grapes within the canned food division, as well as rising selling prices of its canned products.

Revenue from the canned food division increased 77.2% in Q3 2011 compared to Q3 2010 while revenue from the agricultural produce division was down 13.3% in Q3 2011 versus Q3 2010.

The growth in the canned produce division was primarily due to a $3.2 million increase of revenue in canned tomato paste and the $1.2 million revenue generated from the new product line of canned grapes that Green Star launched in July 2011.  The average increase in the selling price of canned food was 22.7% from Q3 2010 to Q3 2011, which was caused by an increase in raw material costs.  The quantity of sales for the canned food division increased 45.4% for Q3 2011 over Q3 2010.  In Q3 2011, canned food revenue increased 77.2% versus Q3 2010.

All of the agricultural produce revenue generated in the quarter was from the sale of mature bamboo, which is a by-product of the bamboo shoot product line.  As part of its bamboo shoot crop management, the Company carefully selects certain mature bamboo trees to harvest and sell in the use of various wood industries such as furniture making and disposable chop sticks.  The decrease in the price of agricultural produce was 6.3% from Q3 2010 to Q3 2011.  The quantity of sales for agricultural produce decreased by 7.0% compared with Q3 2010.  Revenue from the agriculture produce division decreased by 13.3% from Q3 2010.  The decrease in revenue from agriculture produce division was due to a combination of a decrease in production due to poor weather and a decrease in demand of mature bamboo wood.

The revenue mix for Q3 2011 was approximately 87% canned foods and 13% agricultural produce compared to approximately 77% canned foods and 23% agricultural produce for Q3 2010.

On a nine-month basis, the Company generated consolidated revenue of $24.4 million for FY2011, up 36.4% from $17.9 million for FY2010. The revenue growth on a nine-month basis was due to additional production and sales of canned tomato paste, canned oranges and canned grapes within the canned food division.

The revenue mix for the nine-months ended September 30, 2011 was 83% canned foods and 17% agricultural produce compared to 77% and 23% respectively for the same period for 2010.

Gross profit increased to $3.8 million in Q3 2011 from $2.5 million in Q3 2010, an increase of 50.0%.   Gross profit as a percentage of sales decreased to 40.0% in Q3 2011, compared to 41.6% for Q3 2010. The decrease in gross profit percentage for Q3 2011 over Q3 2010 was a result of a decrease in sales margins for the agricultural produce division, which was caused by lower sales margins on canned grapes during its first year of production as compared to other mature canned products and partially offset by an increase in sales margins in the canned food division. The canned food division's gross profit margin was 36.3% in Q3 2011 and 30.2% in Q3 2010, a reflection of improved efficiency. The agricultural produce division's gross profit was 65.0% in Q3 2011 and 79.6% in Q3 2010, the decrease being a result of increase costs to maintain the farming land.

For the nine-month period of FY2011, gross profit increased to $9.5 million from $6.9 million, an increase of 38.4%.

General and administrative expenses totaled $0.8 million in Q3 2011, up from $0.3 million for Q3 2010.  The increase in costs being associated with the increase costs of being a public company this year versus a private company last year.  On a nine-month basis, general and administrative expenses totaled $1.6 million for FY2011 and $1.1 million for FY2010, respectively.

EBITDA was $3.1 million for Q3 2011, up 31.0% from $2.4 million for Q3 2010. The increase was due to the increase of sales and an increase in prices while margins remained relatively stable as discussed previously.  EBITDA for the nine-month period of FY2011 was $8.3 million, up 35.9% from $6.1 million for FY2010.

Green Star generated net income of $2.2 million in Q3 2011, up 31.3% from $1.7 million for Q3 2010.  The gains in revenue for the quarter were as a result of the increase in sales of its products and consistent gross margin during the third quarter ended September 30, 2011.  On a fully diluted per share basis, the Company generated earnings of $0.07 in the quarter compared to $0.14 in the same period last year.  The decrease is a result of a significant increase in the diluted weighted average common shares outstanding for the quarter.  On a year-to-date basis, Green Star generated net income of $5.0 million for FY2011 compared to net income of $4.3 million for FY2010. The growth in net income on a yearly basis was a result of increased levels of revenues, static gross margins and relatively small increase in operating expenses. On a fully diluted per share basis, the Company generated earnings of $0.17 for the year compared to $0.35 in the same period last year. The decrease is a result of a significant increase in the diluted weighted average common shares outstanding.

At September 30, 2011, Green Star held cash and cash equivalents of $7.0 million and working capital of $18.1 million. This compares to $1.5 million and $8.8 million, respectively, as of December 31, 2010.  The increase in both cash and working capital was a result of improved operating results.

Outlook
"We look forward to the fourth quarter and reporting our best fiscal year as a Company and our first as a publicly listed issuer." said Mr. Guan.  "We are encouraged by our growth and progress to date and look to build on that success in the coming quarters and fiscal years."

_______________________________
1 Earnings before interest, taxes, depreciation and amortization (EBITDA) is often used as a measure of financial performance. However, EBITDA is a not a term that has specific meaning in accordance with IFRS, and may be calculated differently by other companies.  EBITDA excludes cost associated with the IPO.

About Green Star
Green Star operates two main divisions, agricultural and food processing.  The agricultural division is involved in the cultivation and harvesting of agricultural products such as fresh fruit and vegetables, for sale either directly as fresh fruit and vegetables or canned, and sold overseas and domestically.  The food processing division is primarily involved in the manufacturing of canned food which includes canned tomato paste, canned boiled bamboo shoots, canned oranges, canned peaches and various other types of fruits and vegetables.

The Company has been operating for over 18 years, and has focused on maintaining product and reputational excellence and a high standard of food quality, through the application of science and technology in production, quality control and assurance, business operations and management. Key assets include a well established management team, modern production facilities, and a close partnership with local farmers.

China Green Star Agricultural Corp. is listed on the TSX Venture Exchange under the symbol "GRE."

For more information on the Company, please visit our web site at www.cgsac.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Caution Regarding Forward-Looking Information:

Certain statements in this press release may constitute ''forward looking'' statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this press release, such statements may use such words as ''may'', ''will'', ''expect'', ''believe'', ''plan'' and other similar terminology. In particular, forward looking information in this press release includes management's plan to increase production capacity for tomato paste, schedule for construction of two new tomato paste production lines, and its plan to secure tomato pulp supplies.  These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this press release. These forward looking statements involve a number of risks and uncertainties. Some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward looking statements are the effects of, as well as changes in: international, national and local business and economic conditions; political or economic instability in the Company's markets; competition; legislation and governmental regulation; and accounting policies and practices. The foregoing list of factors is not exhaustive.  Please see the Company's annual MD&A dated April 28, 2011, available on www.sedar.com, for a more detailed description of the risk factors.  The Company undertakes no obligation to update publicly or revise any forward looking information, whether a result of new information, future results or otherwise, except as required by law.

SOURCE China Green Star Agricultural Corporation

For further information:

Green Star Agricultural Corp.
Michael Lam
Chief Financial Officer
416 849 3858

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China Green Star Agricultural Corporation

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