China-based GM seed producer Origin Agritech's fiscal Q1 net loss swings to 34.5M yuan compared with loss of 21.8M yuan last year; revenue up 57% to 26.9M yuan on sales of higher margin canola seed products

BEIJING , February 23, 2012 (press release) – Gross Profit increases 26.3% from RMB 8.6 million to RMB 10.9 million

Origin Agritech Limited ("Origin" or the "Company"), a technology-focused supplier of hybrid and genetically modified crop seeds in China, today announced unaudited financial results for the first quarter ended December 31, 2011. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.

FINANCIAL RESULTS OVERVIEW

During the first quarter of fiscal 2012, the Company generated revenues of RMB26.9 million (US$4.3 million), an increase of 57% from RMB17.2 million (US$2.6 million) generated in the three months ended December 31, 2010. The revenues were mainly from the sales of higher margin canola seed products for the three months ended December 31, 2011.

Gross profit for the three-months ended December 31, 2011 was RMB10.9 million (US$1.7 million) compared to RMB8.6 (US$1.3 million) in the same period of the prior year. Gross margins for this quarter were 40% versus 50% for Q1 2011. This decline of gross margins was a result of scrap sales of some corn and rice seed products, pesticide during this quarter.

Total operating expenses for the three-months ended December 31, 2011 were RMB 44.6 million (US$7.1 million) compared with RMB 39.0 million (US$5.9million) reported for the same period in 2010. Selling and marketing expenses were RMB 18.2 million (US$2.9 million) for the first quarter of 2012, an increase of 70.8% from RMB 10.6 million (US$1.6 million) for the same period of the last year. Selling and marketing expense increased year-on-year as certain transportation costs were booked in the first quarter this year while these costs were booked in the second quarter during fiscal year 2011. General and administrative expenses were RMB 19.8 million (US$3.1 million) for the first quarter ended December 31, 2011, decreased by 4.4% from RMB 20.8million (US$3.1 million) for the three months ended December 31, 2010. The research and development expenses decreased to RMB7.7 million (US$1.2 million) this quarter from RMB12.3 million (US$1.9 million) for the same quarter last year as certain R&D projects didn't happen this quarter. These differences in expense categories are a result of slight changes across a broad variety of smaller sub-categories and represents small variations year over year. On an annual comparison, we still expect operating expenses to be relatively flat annually, across all operating expenses and within each separate category.

Operating loss for the first quarter of fiscal 2012 amounted to RMB 33.8 million (US$5.3million) compared with an operating loss of RMB 30.4 million (US$4.6 million) for the same period in fiscal 2011.

Net loss for the first quarter of fiscal 2012 was RMB34.5 million (US$5.5 million), or RMB 1.48 (US$0.23) per share, as compared to a net loss of RMB 21.8 million (US$3.3 million), or RMB 0.94 (US$0.14) per share in the same period one year ago.

BALANCE SHEET

Origin's balance sheet at December 31, 2011 included cash and cash equivalents of RMB 192 million (US$30.5 million) and shareholders' equity of RMB 226.1 million (US$35.9 million).

Deferred revenue was RMB270.1 million (US$ 42.9 million) for the three-months ended December 31, 2011 as compared to RMB211.1 million (US$31.8 million) for the same period last year. This mainly represents our orders received and shipped already for products this upcoming selling season. Additionally, we received government subsidy amounted to RMB24.9 million (US$ 4.0 million) in December 2011, which was recorded in the balance of deferred revenue as of December 31, 2011.

The Company received Advances from Customers of RMB 377.2 million (US$59.9 million) as of December 31, 2011 period as compared to RMB 385.7 million (US$58.2 million) as of December 31, 2010. This represents our cash receipts for products to be ordered this upcoming selling season.

About Origin

Founded in 1997 and headquartered in Beijing, Origin Agritech Limited is China's leading, vertically-integrated agricultural biotechnology company specializing in research, development and production to supply the growing populations of China. Origin develops, grows, processes, and markets high quality, hybrid crop seeds to farmers throughout China and parts of Southeast Asia via a network of approximately 3,800 first-level distributors and 65,000 second-level distributors and retailers, and possesses a pipeline of genetically modified seed products including glyphosate resistant corn and Bt Corn. The first genetically modified corn seed product for China, Phytase corn, was approved in November 2009 of which Origin possesses exclusive rights.

        
        UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
        (In thousands, except share data)
                                                           Three Months ended December 31,
                                                    2010                                2011
                                              RMB               US$               RMB               US$
        Revenues                            17,193             2,596            26,931             4,258
        Cost of revenues                    (8,581)          (1,296)         (16,058)          (2,539)
                                        ---------- ---    ---------- ---    ---------- ---    ---------- ---
        Gross profit                         8,612             1,300            10,873             1,719
                                        ----------        ----------        ----------        ----------
        Operating expenses:
        Selling and marketing              (10,643)          (1,607)         (18,183)          (2,875)
        General and administrative         (20,763)          (3,135)         (19,844)          (3,138)
        Research and development           (12,264)          (1,852)          (7,724)          (1,221)
        Other operating income, net          4,648               702             1,121               177
        Total operating expenses           (39,022)          (5,892)         (44,630)          (7,057)
                                        ---------- ---    ---------- ---    ---------- ---    ---------- ---
        Loss from operations               (30,410)          (4,592)         (33,757)          (5,338)
                                        ---------- ---    ---------- ---    ---------- ---    ---------- ---
        Interest expense                      (536)             (81)            (942)            (149)
        Share of net income of equity        2,022               305               664               105
        investment
        Interest income                        495                75               628                99
        Loss before income taxes and       (28,429)          (4,293)         (33,407)          (5,282)
        noncontrolling interests
        Income tax expense
        Current                                (28)              (4)            (152)             (24)
        Deferred                             3,311               500                 -                 -
                                        ----------        ----------        ----------        ----------
        Income tax expense                   3,283               496              (152)             (24)
                                        ----------        ----------        ---------- ---    ---------- ---
        Net loss                           (25,146)          (3,797)         (33,559)          (5,306)
        Less: Net income (loss)             (3,359)            (507)             934               148
        attributable to the
        noncontrolling
        interests
                                        ---------- ---    ---------- ---    ----------        ----------
        Net loss attributable to           (21,787)          (3,290)         (34,493)          (5,454)
        Origin Agritech Limited
                                        ---------- ---    ---------- ---    ---------- ---    ---------- ---
        Other comprehensive
        income (loss)
        Net loss                           (25,146)          (3,797)         (33,559)          (5,306)
        Foreign currency translation           678                86               492                78
        difference
        Comprehensive loss                 (24,468)          (3,711)         (33,067)          (5,229)
                                        ---------- ---    ---------- ---    ---------- ---    ---------- ---
        Less: Comprehensive income          (3,359)            (507)             934               148
        (loss) attributable to
        noncontrolling
        interests
                                        ---------- ---    ---------- ---    ----------        ----------
        Comprehensive loss                 (21,109)          (3,204)         (34,001)          (5,376)
        attributable to Origin
        Agritech
        Limited
                                        ========== ===    ========== ===    ========== ===    ========== ===
        Net loss per share - basic           (0.94)           (0.14)           (1.48)           (0.23)
                                        ========== ===    ========== ===    ========== ===    ========== ===
        Net loss per share - diluted         (0.94)           (0.14)           (1.48)           (0.23)
                                        ========== ===    ========== ===    ========== ===    ========== ===
        Shares used in calculating      23,292,412        23,292,412        23,382,812        23,382,812
        basic net loss per share
                                        ========== ===    ========== ===    ========== ===    ========== ===
        Shares used in calculating      23,292,412        23,292,412        23,382,812        23,382,812
        diluted net loss per share
                                        ========== ===    ========== ===    ========== ===    ========== ===
        


        UNAUDITED CONSOLIDATED BALANCE SHEETS
        (In thousands, except share data)
                                  December 31   September 30        December 31
                                 -------------  ------------  ----------------------
                                    2010          2011           2011        2011
                                     RMB           RMB            RMB         US$
        Assets
        Current assets:
        Cash and cash              184,032       129,942        192,003      30,472
        equivalents
        Accounts                    12,659         6,616          8,654       1,373
        receivable
        Due from related                 7         5,183            207          33
        parties
        Advances to                 19,005        12,418         11,132       1,767
        suppliers
        Advances to                 16,780        78,623          6,646       1,055
        growers
        Inventories                528,515       210,826        552,998      87,763
        Income tax                   2,745         2,155          2,155         342
        recoverable
        Other current               14,230        65,055         13,597       2,158
        assets
                                 ---------      --------      ---------    --------
        Total current              777,973       510,818        787,382     124,963
        assets
        Land use rights,            20,784        33,094         32,914       5,224
        net
        Plant and                  166,516       190,094        202,571      32,150
        equipment, net
        Equity investments          24,527        20,503         21,167       3,359
        Goodwill                    16,665        11,973         11,973       1,900
        Acquired                    33,600        29,232         27,642       4,387
        intangible assets,
        net
        Deferred income             13,077         3,028          3,028         481
        tax assets
        Other assets                 3,510        19,640         45,109       7,159
                                 =========      ========      =========    ========
        Total assets             1,056,652       818,382      1,131,786     179,623
        Liabilities and
        equity
        Current liabilities:
        Short-term                  20,000        20,000        105,000      16,664
        borrowings
        Accounts payable            26,307         5,740         21,645       3,435
        Due to growers              12,270         7,947         10,170       1,614
        Due to related               8,840         1,728          6,826       1,083
        parties
        Advances from              385,654       397,933        377,234      59,870
        customers
        Deferred revenues          211,072        19,812        270,060      42,861
        Income tax                  42,275        39,060         39,059       6,199
        payable
        Other payables              37,895        40,351         47,985       7,616
        and accrued
        expenses
                                 ---------      --------      ---------    --------
        Total current              744,313       532,571        877,979     139,342
        liabilities
        Other long-term              6,409             -              -           -
        liabilities
                                 =========      ========      =========    ========
        Total liabilities          750,722       532,571        877,979     139,342
         Shareholders'
         equity:
        Preferred stock                  -             -              -           -
        (no par value;
        1,000,000 shares
        authorized,
        none
        issued)
        Common stock (no                 -             -              -           -
        par value;
        60,000,000 shares
        authorized,
        23,292,412,
        23,382,812
        and
        23,382,812 shares
        issued and
        outstanding as of
        December
        31,
        2010, September
        30, 2011 and
        December 31, 2011
        respectively)
        Additional paid-in         388,478       394,344        395,402      62,753
        capital
        Retained deficit          (98,241)      (99,533)      (134,025)    (21,271)
        Treasury stock at         (29,377)      (29,377)       (29,377)     (4,662)
        cost (498,851
        shares)
        Accumulated                (8,659)       (6,397)        (5,905)       (937)
        other
        comprehensive
        loss
                                   252,201       259,037        226,095      35,883
             Total Origin
             Agritech Limited
             shareholders'
             equity
                                    53,729        26,774         27,712       4,398
             Noncontrolling
             interests
                                 ---------      --------      ---------    --------
        Total equity               305,930       285,811        253,807      40,281
                                 =========      ========      =========    ========
        Total liabilities and    1,056,652       818,382      1,131,786     179,62

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