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TORONTO, Aug. 22 /CNW/ - Asia Bio-Chem Group Corp. (TSXV: ABC) ("Asia Bio-Chem" or the "Company") today announced its interim financial statements for the period ending June 30, 2008. In addition, the Company has announced that it has entered into a Letter of Intent to purchase a partially completed 600,000 tonne corn processing plant in Heilongjiang Province, China.
Interim Financial Results
Highlights
- Both revenues and gross profit improved during the first half of
fiscal 2008 compared to the corresponding period in 2007.
- During the first half of 2008, the Company achieved $6.1 million in
net income and $8.9 million in comprehensive income despite higher
costs associated with the expiry of the Company's tax holiday and
additional costs associated with becoming a public company.
- With the successful completion of a $30 million private placement,
the Company had $42.7 million in cash as at June 30, 2008 and no
bank debt. With this strong balance sheet, the Company is well
positioned to execute on its growth strategy.
Asia Bio-Chem, today reported second quarter sales of $21.4 million and net income of $2.9 million. The Company was not required to report comparable numbers for the second quarter of 2007 however comparatives for the first six months of 2007 have been provided.
Higher volumes and improvements in product pricing contributed to an increase in sales revenue during the six month period ending June 30, 2008 to $41.3 million compared with the corresponding period of 2007. Despite 10.8% higher corn costs during the first half of the year, the company achieved a 4.4% increase in gross profit to $9.9 million over the corresponding period in 2007.
Higher general and administrative costs associated with the Company's preparation to become a public company contributed to a decline in income from operations for the first half of fiscal 2008 to $7.7 million from $8.4 million reported as a private company during the first half of fiscal 2007.
"Despite challenging market conditions experienced during the past six months, we continue to maintain our customer base and position our company for growth" stated Mr. Zhiping Wang, President and CEO of Asia Bio-Chem. Mr. Wang added "Continued strong prices for our by-products have helped maintain margins during the first half of fiscal 2008".
SUMMARY FINANCIAL STATEMENTS
in thousands of Canadian
dollars except shares,
per share and percentage 3 Months to 6 Months to 6 Months to
data 6/30/08 6/30/08 6/30/07
------------- -------------- --------------
Sales $ 21,398 $ 41,292 $ 38,947
Gross profit 4,850 9,935 9,518
Gross profit (% of Sales) 22.7% 24.1% 24.4%
Operating expenses 1,297 2,248 1,083
Income from operations 3,554 7,688 8,434
Income taxes 633 1,202 154
Net income 2,938 6,062 8,310
Comprehensive net income 3,343 8,885 4,747
EBITDA 3,760 7,629 8,798
Earnings per share
Basic and diluted $ 0.06 $ 0.23 $ 207.76
Weighted average number
of shares
Basic 53,271,948 26,655,974 40,000
Diluted 53,290,197 26,665,099 40,000
Balance Sheet Highlights
As at As at
6/30/08 12/31/07
-------------- --------------
Cash 42,721 6,655
Working Capital 52,938 4,234
Total assets 70,177 33,811
Current Ratio 12.3:1 1.2:1
As of January 1, 2008 Asia Bio-Chem's operating subsidiary, Chang Tu Bio-Chem Technology Co. Ltd. began paying tax at 50% of the corporate Chinese tax rate (12.5%) and will enjoy this reduced rate until the end of 2010. Consequently, the Company's tax expense was $1.2 million during the six month period ended June 30, 2008 compared with approximately $0.2 million during the same period in 2007.
The higher level of taxes, together with additional general and administrative expenses were the primary factors which caused net income to decline by $2.2 million to $6.1 million during the first six months of the fiscal year compared with the same period in 2007.
On June 19th, 2008 the Company closed a $30 million private placement and completed a going public transaction. The private placement was completed at $1.20 per share and brought a number of institutional and retail investors into the company from Canada, the U.S. and Europe. The private placement was undertaken to provide financing for expansion of the Company's operations.
As a result of completion of its private placement the Company's cash position as at June 30, 2008 increased to $42.7 million. Working capital was also strengthened to $52.9 million by the private placement as well as the conversion of shareholder loans to equity during the period. At June 30, 2008, the Company had no bank debt and a strong shareholders equity base of $65.4 million.
Proposed Acquisition of Corn Processing Plant
The Company has entered into a non-binding letter of intent for the acquisition of Daqing Biochemical Company Ltd. ("Daqing"). Daqing owns a partially completed, 600,000 tonne corn processing plant in Zhaoyuan County of Heilongjiang Province in China. Based on due diligence completed to date, the Daqing plant began construction in late 2007 and has received all necessary approvals and licences to operate the plant.
The purchase price of Daqing will be approximately RMB 160 million (approximately C$24.7 million). The purchase price will be paid 70% in cash at closing and 30% will be in the form of an unsecured note ("Note"). The Note will be non-interest bearing and will be due, in full, 6 months after completion of construction of the plant. As part of the letter of intent with the vendor, the Company has provided a refundable deposit of $5 million which will be applied towards the purchase price on closing of the transaction.
"This acquisition provides an excellent opportunity to accelerate our expansion strategy while ensuring that the plant is constructed in accordance with our standards of quality" stated Mr. Zhiping Wang, President and CEO of Asia Bio-Chem.
The acquisition is subject to both board and TSX Venture approval.
Conference Call
Asia Bio-Chem will be hosting a conference call to discuss the second quarter results and its proposed acquisition at 11 am Monday, August 25, 2008. The details are as follows:
Dial in number: 1-800-733-7571 or 416-644-3416
Taped replay: 416-640-1917
Pass Code: 21280524 followed by the number sign.
(available until September 8th, 2008)
About Asia Bio-Chem Group Corp.
The Company, through its wholly-owned subsidiary in the Peoples Republic of China ("PRC") is in the business of manufacturing cornstarch and related products. From its plant in Liaoning Province, the Company produces approximately 270,000 tonnes of cornstarch, corn germ, gluten and fiber per year for sale into the domestic market in the PRC. The Company's business plan involves the expansion of production capacity either by way of acquisition or construction of new capacity.
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.
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