BEIJING, CHINA — Deyu Agriculture Corp., a Shanxi, China-based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, announced on Nov. 15 a net loss of $15.2 million in the third quarter.
That compares to net income of $3.5 million in the third quarter of 2012. Loss per diluted share was $1.43, compared to income of 28¢ per diluted share a year ago. Gross profit fell 60.9% to $4 million in the third quarter.
"2013 has been a very challenging year. Our Q3 2013 financial results showed a large decrease in net income,” said Greg Chen, chief executive officer. “China's on-going economic slowdown has been imposing challenges on us. In addition, unexpected extreme weather conditions and increased corn imports have added to an already challenging situation.
"Corn is mainly used as raw material for livestock feeds and processed products. The corn market experienced a boom in the past several years. However, since the beginning of 2013, its market demand has been decreasing. In contrast, with rising labor costs and inflation in China, the minimum farmers' selling prices supported by the government due to its farming protection policies, continues to rise."
"Livestock farming has been going through a very difficult time in 2013. The demand for processed corn products has also been very weak. The price of ethanol hit its lowest level in the past three years. Meanwhile with a good corn harvest in 2012, there has been an influx of low cost corns imported into the market in China. With another good corn harvest in sight for 2013, anticipated increases in corn imports in the coming year, and extended current economic conditions in general, we anticipate the market demand will remain low."
"The deteriorating efficiency of existing retail distribution channels curtailed our retail grain package sales amidst the increasing competitiveness in the market. We allocated more grain resources to bulk trading activity, yet the slowdown in consumer market growth has had negative impacts on the grain bulk trading business."
The company's net revenue for the quarter was $68.3 million compared with $56.5 million in the same period a year ago.
Net revenue for the Corn Division was approximately $47.6 million, an increase of $12.7 million, or approximately 36.5%, as compared to $34.9 million for the third quarter of 2012, which was mainly attributable to the increase in sales volume under the strategy of accelerating the sale of the company’s corn inventory with the management's anticipation of continuous decline of corn's selling price.
Net revenue from the Grain Division was $9.9 million, a decrease of $7.5 million, or 43%, as compared to $17.4 million for the third quarter of 2012, which was mainly due to the decline of retail sales in supermarkets and convenience stores.