VANCOUVER, May 3 /CNW/ - IND DairyTech Limited ("IND" or the "Company") (TSXV 'IND') today announced financial results for the year ended December 31, 2009. The audited annual consolidated financial statements along with management's discussion and analysis have been filed with SEDAR.
Revenue for the year was $9.4 million compared to $9.6 million in fiscal 2008. Net loss for fiscal 2009 was $0.96 million or $0.01 per share as compared to a loss of $0.91 million in the prior year. The raw milk revenue increased to $5.0 million compared to $2.3 million last year, growing by 119%. This is within management's expectation from last year and management expects milk revenue will continue to increase in 2010 with the expansion of the milking herd and increasing raw milk price in the Chinese market in 2010. The $3.8 million cow sales in 2009 were primarily attributed to cow delivery to Yili Group to fulfill the sales contract for 5,000 cows signed in 2008.
Gross profit totalled $3.1 million in 2009, close to last year's gross profit. But the operation loss increased to $4.8 million from prior year's $2.4 million, primarily due to increasing G&A expenses. The increasing G&A expenses mainly reflect the rapid expansion in farms in China and the corporate expenses since IND becoming a public company.
At December 31, 2009, the Company had a herd size of 12,858 and should continue to expand its herds by using embryo transfer, artificial insemination and purchasing Chinese Holsteins. The total farm capacity is by now over 55,000 cows so the Company is able to expedite its herd growth. As of the end of March 2010, the total herd size had increased to approximately 15,000 cows.
Starting in 2010, there is a unique type of Foot and Mouth Disease ("FMD") prevalent in cows in China, which cannot be prevented with previous vaccine used for traditional FMD. The Company's cows are impacted by the FMD with the major negative impact being decreased milk yield of milking cows in Dalian and Bengbu. Management is making efforts to cure some farms' cows and watching on other farms intensively to prevent any worsen situation. Management believes the disease is under control and there is no significant impact on future revenues.
On December 18, 2009, IND closed the first tranche of its non-brokered private placement (the "Private Placement") of 36,271,800 Series A Preferred Shares (the "Preferred Shares") to SAIF Partners III L.P. ("SAIF") for gross proceeds of RMB 100 million (US$14,630,468), or CAN$0.43 per share. (See the Company's news release on December 21, 2009). As of December 31, 2009, the Company reported cash and cash equivalents of $18.1 million. The Company's resources are dedicated to expanding farms and herd size in China.
On April 6, 2010. James Xiang resigned as CFO of the Company and was appointed as VP Corporate Finance to lead the Company's financing and investor relation activities. Winfield Ding was appointed as CFO of the Company at the same time.
IND China, the Company's 97.61% owned subsidiary, is currently negotiating a capital increase and investment agreement with Jiangsu ETERN Group Ltd. ("ETERN") and SAIF. Pursuant to the capital increase, it is expected that ETERN will invest RMB 38,500,000 for 10 million shares of IND China; SAIF will invest RMB 28,952,000 for 7.52 million shares of IND China; and the Company, through its wholly owned subsidiary IND Lifetech, will invest an additional RMB 77,000,000 for 20 million shares in IND China. SAIF has advised that it is a condition of their participation in the capital increase that the Company waive SAIF's to subscribe for second tranche shares for aggregate gross proceeds of RMB 40 million pursuant to the Series A Preferred Share Purchase Agreement between the Company and SAIF, dated December 18, 2009. SAIF currently owns 23.53% of IND from its first tranche investment in December 2009. In connection with with the capital increase, it is also expected that IND Lifetech and Shanghai KP will agree to transfer up to an additional 4.3 million shares of IND China to both Etern and SAIF if IND China's profits are lower than 50 million RMB for the 2010 fiscal year or 110 million RMB for the 2011 fiscal year. In addition, it is expected that IND Lifetech will agree to redeem all the shares held by Etern and SAIF at cost plus 15% annual interest if IND China is not listed on an recognized exchange by December 31, 2013. The Board of Directors of the Company has approved the general investment terms outlined above, however completion of the transaction remains subject to a number of conditions including the execution of the definitive agreements and receipt of applicable regulatory and exchange approvals.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
FORWARD LOOKING INFORMATION
This news release contains forward-looking statements and information that are based on the beliefs of management and reflect IND's current expectations. Such statements and information reflect the current view of IND with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.
By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking information in this news release includes revenue expected from cow sales, the development and increases in herd size in China, the purchase of Chinese Holstein cows (including cost savings expected to result from the investment made in purchasing these cows), the use of Canadian Holstein embryos to impregnate surrogate cows, the establishment of large scale North American-style farming operations in China, the size of IND as a Canadian Holstein dairy company in China, and the aim of becoming a leading provider of high quality raw milk to the Chinese dairy industry.
There are a number of important factors that could cause IND's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others, risks related to IND's business such as failure of the business strategy and limited operating history, reliance on farm development partners, disruptions due to bovine diseases, dependence on biotechnology, reduction in government support and access to raw materials; risks related to IND's operations, such as additional financing requirements and access to capital, the ability to repay debt, reliance on key personnel, fluctuation in feedstock costs, fluctuations in costs of production, product spoilage and liability, loss of embryo inventory, factors related to milk production, fluctuations in milk prices, fluctuations in milk demand, lack of specificity in certain agreements, litigation, indemnities, insurance, competition, intellectual property and variations in cow lactation periods; risks related to IND and its business generally such as potential exposure to tax under Canadian tax, regulations of the Peoples' Republic of China (the "PRC") relating to offshore special purpose companies, recent PRC regulations relating to cross-border mergers and acquisitions, environmental protection, currency exchange rates and conflicts of interest; and risks related to doing business in the PRC such as tax, repatriation of profit and currency conversion, acquisition and appropriation of land use rights, foreign investment, permits and business licences, employment contracts, government intervention, shareholders' rights and enforcement of judgments and a developing legal system.
IND cautions that the foregoing list of material factors is not exhaustive. When relying on IND's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. IND has assumed a certain progression of its business, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. For additional information with respect to certain of these and other factors, refer to the risk factors section of IND's Management's Discussion & Analysis dated April 28, 2010 available on SEDAR at www.sedar.com.
The forward-looking information contained in this news release represents the expectations of IND as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While IND may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation.
SOURCE IND DAIRYTECH LIMITED
For further information: For further information: Jesse Zhu, Chief Executive Officer, IND DairyTech Limited, (604) 522-1619, firstname.lastname@example.org; James Xiang, VP Corporate Finance, IND DairyTech Limited, (416) 886-1261, email@example.com