Rodobo fourth quarter revenue increases 172.6% to $25.3 million

Rodobo International, Inc. (the "Company" or "Rodobo") (OTC Bulletin Board: RDBO), a fast growing dairy company in China, reported financial results for the fourth quarter and full year ended September 30, 2010.

Fourth Quarter 2010 Highlights:

• Revenue was $25.3 million, up 172.6% from $9.3 million in 4Q09, outperformed 4Q10 guidance range of $20 - $24 million
• Gross profit was $9.4 million, up 87.5% from $5.0 million in 4Q09
• Net income was $3.6 million, up 112.4% from $1.7 million in 4Q09, outperformed 4Q10 guidance range of $3.0 - $3.2 million
• Earnings per diluted share was $0.13, up from $0.10 in 4Q09

Full Year 2010 Highlights:

• Revenue was $69.8 million, up 101.2% from $34.7 million in 2009
• Gross profit was $28.0 million, up 59.0% from $ 17.6 million in 2009
• Net income was $12.4 million, up 82.5% from $6.8 million in 2009  
• Earnings per diluted share was up to $0.53 from $0.42 in 2009

First Quarter 2011 Guidance:

Management feels confident to give its guidance for the first quarter of 2011 for revenue to be in the range of $24 - $26 million and net income to be in the range of $3.2 - $3.5 million.

"Rodobo closed its fiscal year 2010 with strong fourth quarter results and it is our fourth consecutive top line growth quarter. Our strong revenue and net income growths demonstrated the strong market demand for Rodobo's high quality, fresh and nutritious milk powder products, the effectiveness of our strategy of expanding our production capacity, and our ability in marketing execution" stated Mr. Yanbin Wang, the Chairman and Chief Executive Officer of Rodobo. "Overall, 2010 was an extraordinary and successful year for Rodobo. The acquisition of the Beixue Group is a key groundwork of our growth strategy. As we move into 2011, we will continue to consolidate our acquisition, realign our product lines and improve our capacity utilization as we continue to expand our distribution network and further penetrate into our existing market in both formulated dairy and raw milk powder products."

Fourth Quarter 2010 Financial Results

Net sales for the fourth quarter of 2010 were $25.3 million, an increase of approximately $16.0 million or 172.6%, compared to net sales for fourth quarter of 2009. This increase was primarily derived from the contribution from the acquisition of Hulunbeier Hailaer Beixue, one of the three companies comprising the Beixue Group that were acquired by the Company on February 5, 2010. We also increased the selling price of whole milk powder products produced by Hulunbeier Hailaer Beixue after the acquisition. The revenue growth was also attributed to the sales of our "Peer" infant formula product series launched in July 2009. The "Peer" series is a high-end product line with higher selling price. During the fourth quarter, we continued our efforts to develop distribution networks and expand the market areas in the 9 provinces in which we currently sell products.

During the fourth quarter of 2010, sales generated from baby/infant formula accounted for 40.7% of total sales, sales generated from middle-aged and elderly formula accounted for 13.5% of our total sales, and sales generated from whole milk powder formula accounted for 45.8% of total sales.

Our gross profit for the fourth quarter of 2010 was $9.4 million, an increase of approximately $4.4 million or 87.5%, compared to the gross profit for the fourth quarter of 2009. The overall gross profit margin for the fourth quarter of 2010 decreased to 37.0% from 53.8% for the fourth quarter of 2009.  

Our overall gross profit margin was diluted due to the acquisition of lower-margin business. The newly acquired, Hulunbeier Hailaer Beixue, has a gross margin of 7.4% for the fourth quarter of 2010. Excluding the margin dilution impact of the acquisition, gross profit margin actually improved to 64.0% for the fourth quarter 2010 from 53.8% for the fourth quarter of 2009, which was primarily driven by the high-margin new baby/infant formula "Peer", which has a gross margin of 70.8% and accounted for approximately 52.6% of total formulated milk powder product sales (excluding sales from Hulunbeier Hailaer Beixue) in the fourth quarter of 2010.

Operating expenses for the fourth quarter of 2010 were $6.3 million, an increase of approximately $2.9 million, or 85.6%, compared to the fourth quarter of 2009. Operating expenses as a percentage of net sales decreased to 24.8% in the fourth quarter of 2010 from 36.4% in the fourth quarter of 2009. The decrease of the operating expenses as a percentage of net sales was primarily due to a decrease in operating expenses, especially fewer distribution expenses expended by Hulunbei Hailaer Beixue as its whole milk powder products are sold directly to end users' processing plants.

Distribution expenses for the fourth quarter of 2010 were $5.8 million, an increase of approximately $2.7 million or 90.9%, compared to $3.1 million for the fourth quarter of 2009. The increase was mainly due to sales growth and market expansion. The increase was also attributed by $0.4 million amortization of customer list that we acquired in connection with the acquisitions of the Beixue Group made on February 5, 2010.

General and administrative expenses for the fourth quarter of 2010 were $0.4 million, an increase of $0.1 million from $0.3 million for the fourth quarter of 2009.

Net income for the fourth quarter of 2010 was $3.6 million, an increase of $1.9 million or 112.4%, compared to $1.7 million for the fourth quarter of 2009. Earnings per diluted share were $0.13 for the fourth quarter of 2010, compared with $0.10 per diluted share for the fourth quarter of 2009.

Full Year 2010 Financial Results

Net sales for the full year 2010 were $69.8 million, an increase of approximately $35.1 million or 101.2%, from $34.7 million in 2009. Gross profit increased was $28.0 million, an increase of 59.0% from $17.6 million in the comparable period in 2009. Gross margin was 40.1% in 2010 compared to 50.7% in the comparable period in 2009. Income from operation was $10.0 million, an increase of 56.8% from $6.4 million in the same period a year ago. Net income for 2010 was $12.4 million or $0.53 per fully diluted share, up 82.5% from $6.8 million, or $0.42 per fully diluted share, in the comparable period in 2009.

Financial Condition

As of September 30, 2010, Rodobo had $5.2 million in cash and cash equivalents, $5.5 million in current liabilities and no long-term debt. Shareholders' equity was $61.0 million as of September 30, 2010, up from $21.3 million as of September 30, 2009. Net cash from operating activities during 2010 was $12.8 million, compared with $3.6 million in 2009.