Aug 17 2010
Rodobo International, Inc. (the "Company" or "Rodobo") (OTC Bulletin Board: RDBO), one of the leading independent dairy companies in China, reported financial results for the third quarter ended June 30, 2010.
Third Quarter 2010 Highlights: -- Revenue was $19.1 million, up 86.5% from $10.3 million in 3Q09 -- Gross profit was $7.3 million, up 25.6% from $5.8 million in 3Q09 -- Net income was $2.7 million, up 32.8% from $2 million in 3Q09 -- Earnings per diluted share was down to $0.10 from $0.13 in 3Q09 -- Closed with certain accredited institutional investors the private placement for net proceeds totaling approximately $2.64 million
Fourth Quarter 2010 Guidance:
Management feels confident to give its guidance for the fourth quarter of 2010 for revenue to be in the range of $20 - $24 million and net income to be in the range of $3.0 - $3.2 million.
"We are pleased to report very strong financial results, exceptional revenue growth and strong profitability for the third quarter of 2010. Rodobo has a strong operating history, achieving a very strong and consistent revenue and net income growth over the last four years," stated Mr. Yanbin Wang, the Chairman and Chief Executive Officer of Rodobo. "In addition to these results, we are very pleased with the acquisition and early results of the Beixue Group. Our formula milk products sales expanded to two new provinces, Jiangsu and Anhui and continue to penetrate into other seven provinces."
Third Quarter 2010 Financial Results
Net sales for the third quarter of 2010 were $19.1 million, an increase of approximately $8.8 million or 86.5%, compared to net sales for the third quarter of 2009. This increase was primarily driven by volume growth, with the average selling price remaining relatively flat over both periods. We continued our efforts to develop distribution networks and expand the geographic market areas in the 9 provinces in which we were selling products in 7 of them. The increase was also attributed to the launch of a new product series called "Peer", under our baby/infant formula product line, in July 2009. Sales generated from our "Peer" product series were approximately $6.1 million or 31.9% of total sales revenue for the third quarter of 2010. Hulunbeier Hailaer Beixue, one of our new subsidiaries acquired on February 5, 2010, contributed $6.6 million in sales, or 34.5% of total sales revenue for the third quarter of 2010.
Gross profit increased approximately $1.5 million for the third quarter of 2010, an increase of 25.6% compared to the gross profit for the same period of 2009. The overall gross profit margin had declined from 56.8% in the third quarter of 2009 to 38.3% in the third quarter of 2010.
Overall gross profit margin was diluted due to the recent acquisition of the lower-margin business of Hulunbeier Hailaer Beixue. Hulunbeier Hailaer Beixue has a gross margin of 4.2% for the third quarter of 2010. Excluding the margin dilution impact of this acquisition, gross profit margin actually remained flat at 56.2% for the third quarter of 2010 compared to 56.8% for the third quarter of 2009.
Operating expenses for the third quarter ended June 30, 2010 were $4.6 million, an increase of $0.8 million or 21.9% compared to the third quarter of 2009. Operating expenses as a percentage of net sales decreased from 36.9% for the third quarter of 2009 to 24.1% for the third quarter. The decline in operating expenses as a percentage of net sales was primarily due to Hulunbeier Hailaer Beixue, which has lower operating expenses as a percentage of its net sales. Distribution expenses for the third quarter decreased by 2.2% to $3.4 million, or 18.0% of net sales, compared to $3.5 million, or 34.2% of net sales for the third quarter of 2009. General and administrative ("G&A") expenses increased by 328.3% to $1.2 million, or 6.2% of net sales for the third quarter of 2010, compared to $0.3 million, or 2.7% of net sales for the third quarter of 2009. The increase was primarily due to $0.3 million of stock-based compensation expenses in the third quarter of 2010, which was not incurred in the same period of 2009. The increase is also attributed to an additional $0.2 million of depreciation and amortization expenses related to the newly acquired subsidiaries.
Net income for the third quarter of 2010 was $2.7 million, an increase of $0.7 million (approximately 32.8%) compared with $2.0 million for the third quarter of 2009. This increase in net income was mainly attributable to the increase in net sales, partially offset by an increase in cost of goods sold and operating expenses.
Nine Month Results
For the nine months ended June 30, 2010, net sales increased to $44.5 million, up 75.2% from $25.4 million in the nine months ended June 30, 2009. Gross profit increased 47.7% in the nine months ended June 30, 2010 to $18.6 million from $12.6 million in the comparable period in 2009. Gross margin was 41.8% in the nine months ended June 30, 2010 compared to 49.6% in the comparable period in 2009. Net income for the nine months ended June 30, 2010 was $8.8 million or $0.39 per fully diluted share, up 72.6% from $5.1 million, or $0.34 per fully diluted share, in the comparable period in 2009.
Financial Condition
As of June 30, 2010, Rodobo had $12.8 million in cash and cash equivalents, $6.2 million in current liability and no long-term debt. Shareholders' equity was $56.2 million as of June 30, 2010, up from $21.3 million as of September 30, 2009. Net cash from operating activities during the nine months ended June 30, 2010 was $8.6 million.
Business Outlook
Over the next twelve months, Rodobo intends to pursue its primary objective of increasing its market share in China's diary industry. The Company is also evaluating acquisition and consolidation opportunities in China's fragmented dairy industry. Rodobo's management believes it has sufficient working capital to operate its existing business for the next twelve months by using its cash generated from its operating activities as well as part of the net proceeds from the private placement which closed on June 23, 2010.
"Our markets remain robust as the Chinese government continues to support the modernization of the dairy industry as well as support improved hygiene and food safety standards. We have established a successful vertically integrated business model and remain dedicated to continue building a nationally-recognized leading brand for our premium dairy products and create value for our shareholders," concluded Mr. Wang.
SOURCE Rodobo International, Inc.