Asia Bio-Chem Group Corp. Announces First Quarter 2011 Financial Results

Jun. 8, 2011 (Canada NewsWire Group) --

TORONTO, June 8, 2011 /CNW/ - Asia Bio-Chem Group Corp. (TSX: ABC) ("Asia Bio-Chem" or the "Company") today announced its interim financial statements for the three-month period ending March 31, 2011.

Interim Financial Results
Highlights

• During the first quarter, the company successfully completed the ramp-up of the Changtu facility, achieving over 90% utilization during March 2011.
• The investment in upgrading the Changtu facility enabled the Company to secure a contract valued at over $70 million per year for the supply of starch to Zhaoqing Huanfa Bio Tech Ltd., one of the largest sweetener producers in China.
• With continued strong starch prices and significant improvements in germ prices, the company achieved gross margin of 16.6% at the Daqing plant during the first quarter of 2011.
• The achievement of capacity at our Daqing plant as well as the ramp-up of Changtu plant contributed to a 3.6% increase in EBITDA during the first quarter of 2011 compared with the same period in 2010.
• Net income increased by $0.3 million, or 14.7%, in the first quarter of 2011 to $2.4 million compared with the same period in 2010.
• The Company completed an $11.6-million prospectus offering during February, which provided the capital to complete the engineering and begin ordering equipment for the downstream expansion project at Daqing.
• The Company is strongly supported by its banking group as evidenced by the addition of $14.7 million in new credit facilities from Yingkou Bank during the first quarter.  In addition we are pleased to announce that we recently refinanced our loan facility from Shanghai Pudong Development Bank from RMB 30 million to RMB 50 million.
• With the successful completion of the equity offering in February, increased borrowings and cash flow from operations, the Company improved the cash position to $23.1 million as at March 31, 2011.

"Our new Changtu facility is now reaching capacity and both plants are running smoothly, which is expected to contribute to improved earnings going forward," stated Mr. Zhiping Wang, President and CEO of Asia Bio-Chem.  "With the proceeds from our first quarter equity offering together with the continued support of our banks, we are now focused on our Daqing downstream expansion and working towards a contribution from this project early in 2012."

During the first quarter revenues and gross profit increased by 28% and 18%, respectively, compared with the first quarter of 2010.  This increase was due to higher capacity achieved from the Daqing facility.  The increased revenues and gross profits were achieved despite only 43% utilization at Changtu during the quarter.

During the first quarter, the Company achieved gross margin of 15.6%. Excluding the effect of the ramp-up of the Changtu facility, gross margin at Daqing was 16.6%, which was comparable to the 17% achieved in the first quarter of 2010.

The Company adopted International Financial Reporting Standards (IFRS) for fiscal year 2011, with restatement of fiscal 2010 comparative periods. The first quarter of 2011 was Asia Bio-Chem's first period reporting under IFRS.  As a result of this changeover, there is no material difference in the income statements. The changes to the balance sheet to conform with IFRS as at December 31, 2010 included an adjustment to intangible assets by $2.6 million, an adjustment to the deferred income tax asset by $1.0 million and the elimination of the deferred income tax liability of $1.6 million.  In addition, there was a reclassification of the accumulated other comprehensive income related to the foreign currency translation adjustment of $1.7 million by reclassifying it to retained earnings and resetting the opening accumulated foreign exchange translation adjustment to nil.

SUMMARY FINANCIAL STATEMENTS

During the first quarter of 2011, the contribution from higher utilization at Daqing was offset by lower average utilization at Changtu and higher transportation and administrative expenses when compared with the same quarter of 2010.  As a result, during the first quarter of 2011, the Company achieved comparable levels of income from operations and EBITDA before stock-based compensation when compared with the first quarter of 2010.

During the first quarter, the Company successfully secured $11.6 million in equity financing by way of a prospectus offering.  In addition, the Company refinanced two of its banking facilities for a net increase in its borrowings of $7.6 million bringing total bank debt to $68.6 million as at March 31, 2011.

With the proceeds from the share issuance, increased borrowing and cash from operations, the Company's cash position increased to $23.1 million as at March 31, 2011.

Daqing Downstream Expansion Update
As announced in January of this year, Asia Bio-Chem has undertaken a downstream expansion project at its Daqing facility.  This project will use a portion of the starch from Daqing for the production of higher-value products with crystallized glucose being the first product from this expansion.

The total capital cost of this project is approximately $30 million, of which the Company has committed to construction and equipment purchases of $17.7 million as at March 31, 2011.

The Company anticipates that this expansion will be phased in starting in the first half of 2012 with full capacity achieved during the second half of the year.

Conference Call
The Company will be hosting a conference call to discuss first quarter results on Thursday, June 9, 2011. The conference call and replay details are as follows:

About Asia Bio-Chem Group Corp.
Asia Bio-Chem Group, through its wholly-owned subsidiaries in the People's Republic of China ("PRC"), is in the business of processing corn. From its plants in Liaoning and Heilongjiang Province, the Company has a total processing capacity of 900,000 tonnes of corn per year, which are processed into cornstarch, corn germ, gluten, and fiber for sale into the domestic Chinese market.

This news release contains certain statements that may be deemed "forward looking statements". Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects,", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Forward looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward looking statements, except as required by law, in the event that management's beliefs, estimates or opinions, or other factors, should change.

For Corporate Information regarding Asia Bio-Chem: