The company also announced that Greg Chen resigned from his positions as chief executive officer and director, effective March 31 and April 1, respectively. Jan Poulsen resigned his position as president, effective March 31.
The board appointed Hong Wang, chairman of the board of directors, to serve as acting chief executive officer. The company said it intends to replace the vacancy created by the resignation of Poulsen, in the near future. Effective as of March 31, the company closed its New York office.
Deyu reported net revenue of $246.4 million, a decrease of $7.7 million or 3%, compared to $254 million in 2012. Gross profit was $14.6 million, a decrease of $30.1 million or 67.3%, compared to $44.7 million in 2012. Gross margin was 6%, compared to 17.6% in 2012.
"2013 was a very difficult year for the company. Since the beginning of 2013, the corn market has been experiencing weak demand from downstream industries, while the output of the corn harvest continued to increase. China's on-going economic slowdown also impacted the grain and bulk trading businesses," said Wang. "We saw a substantial decrease in gross margins, especially in corn sales, and an increase in the cost of raw materials for grain products, operating expenses, as well as nonrecurring losses including impairment losses of certain assets and corn inventory damages due to weather-related conditions.
"The company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. In December 2013, Management conducted a cost-savings, internal control and efficiency assessment review of all of the Company's subsidiaries and divisions, with a particular focus on reducing administrative costs. After the reviews, improved policies were introduced and implemented forthwith.”
The drop in revenue was a combined result of a $8.5 million decrease in corn sales and a $32.2 million decrease in grain sales.
Net revenue from the Corn Division for 2013 was $142.6 million, a decrease of $8.5 million, or 5.6%, as compared to $151 million for 2012, which such decrease was primarily due to the weak demand with an oversupply in the corn market.
Net revenue from the Grain Division for 2013 was $41.6 million, a decrease of $32.2 million, or 43.6%, as compared to $73.8 million for 2012, which such decrease was mainly attributable to the decline in commercial sales to institutional clients and the decline in retail sales in supermarket and convenience stores.
The gross profit for 2013 was $14.6 million, a decrease of $30.1 million, or 67.3%, as compared to $44.7 million for 2012. This decrease was a combined result of an increase in loss on inventory valuation reserves of $4.5 million, a decrease in gross profits of $11.8 million in the Corn Division and a decrease of $14.2 million in the Grain Division, offset by an increase of $400,000 in the Bulk Trading Division.
"Given that the decrease in demand of corn from downstream industries, another good corn harvest in 2013 and anticipated increases in corn imports with low prices, we anticipate the oversupply in the corn market will continue to impact our business in the coming months," said Wang. "The company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. At the same time, the company is continuing its business development initiatives. We expect these measures, together with new business development, will help us get through this difficult period and restore the growth in the future."