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Deyu Agriculture Corp. Announces Fiscal Year 2012 Results and Schedule Results Conference Call and Website

March 28, 2013

BEIJING, March 28, 2013 /PRNewswire/ — Deyu Agriculture Corp. (OTCBB: DEYU) (the “Company”), a Shanxi Province, China-based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, today announced its financial results for the fiscal year ended December 31, 2012.

Fiscal Year 2012 Results:

  • Net revenue was $254.0 million compared to $261.6 million in 2011;
  • Gross profit was $44.7 million, increasing $1.6 million or 3.8% from $43.1 million in 2011;
  • Gross margin increased to 17.6% for 2012 from 16.5% in 2011;
  • Net income available to common stockholders was $16.0 million compared to $17.3 million in 2011;
  • Earnings per diluted share was $1.30 on 12.6 million shares, compared to $1.42 on 12.5 million shares in 2011.

“In 2012, in order to move to a more sustainable growth approach, we reduced our reliance on bank loans to supplement our working capital for fast growth by decreasing our overall borrowings from banks from $14.4 million to $8.3 million,” said Jianming Hao, Chief Executive Officer of the Company. “Even with a slight decrease of revenue and net income, we are still very pleased with our performance this year. We believe this strategic move significantly reduced our financial risks and can benefit the Company and our shareholders in the long term.

“We are glad to see that our recent acquisition, the Taizihu Group, which has a diversified product line of grain products and large production capacity, made a revenue contribution of $23.3 million. We are also currently working on building strategic alliances with large and well-branded companies such as Wen’s Food Group Co., Ltd. (“WFG”) and Beijing Suning Appliance Co., Ltd. (“Suning”) to build our leading position in the industry,” continued Mr. Hao.

“In October 2012 we elected a new President, Greg Chen, and increased our Board with the additions of Greg and Mr. Jan Poulsen,” Mr. Hao added. “With Greg’s experience in strategic development and operation management, and Jan’s 20+ years of experience in both asset management and business development within the food and beverage industries, we are confident that we can continue to build on our progress.”

Financial Results for the Fiscal Year Ended December 31, 2012

In fiscal year 2012, the Company’s net revenue was $254.0 million, compared with $261.6 million for 2011, a decrease of $7.6 million, or 2.9%. Net revenue from the Corn Division for 2012 was $151.0 million, a decrease of $26.7 million, or approximately 15.0%, as compared to $177.7 million for 2011, which was primarily due to the reduction of working capital for inventory procurement supported by bank loans and bank notes. Net revenue from our Grain Division for 2012 was $73.8 million, an increase of $33.3 million, or 82.2%, as compared to $40.5 million for 2011. The increase was a combined result of an increase of $23.3 million of sales revenue added by the Taizihu Group and an increase of $18.2 million in sales revenue derived from newly retained institutional clients in 2012, partially offset by a decrease of $8.2 million in sales revenue in retail sales in supermarkets and conventional stores caused by the reduction of the sales of unprofitable products in some stores. Net revenue from our Bulk Trading Division for 2012 was $29.2 million, a decrease of $14.2 million, or 32.7% as compared to $43.3 million for 2011. This decrease was mainly attributable to the decrease of working capital supported by bank loans and bank notes.

The Company’s gross profit increased by $1.6 million, or 3.8%, from $43.1 million for 2011 to $44.7 million for 2012. The increase was a combined result of a decrease of $6.1 million in the Corn Division, an increase of $9.6 million in the Grain Division and a decrease of $1.9 million in the Bulk Trading Division. Our gross margin increased from 16.5% for 2011 to 17.6% for 2012. Gross margin for our Corn Division was 15.4% for 2012, down from 16.5% for 2011, which was mainly attributable to the continuous increase in the purchase price of raw corn and supplemental procurement from suppliers while selling prices did not increase consistently. Gross margin for the Grain Division increased from 24.9% for 2011 to 26.7% for 2012, an, which was mainly a combined result of the increase of gross margin of retail sales caused by reducing the sales of unprofitable products in some stores and the decrease of gross margin derived from the addition of new product portfolios containing mixed gross margins that targeted a wider scope of customers. Gross margin for the Bulk Trading Division was 6.0% for 2012, down from 8.3% for 2011, which was mainly attributable to the increase of percentage of sales for certain types of grains with relatively lower gross margin.

The Company’s operating expenses increased $4.3 million, or 20.1%, to $25.8 million for 2012 as compared to $21.5 million for 2011. This increase was primarily a combined result of the increase of freight charges caused by the rising costs of railway freight, advertisement expenses spent on brand promotion and distribution expenses, expenses added by the Taizihu Group, increased depreciation and amortization caused by newly-acquired buildings as well as increased payroll and other expenses.

The Company had net income available to common stockholders of $16.0 million for 2012, as compared to a net income of $17.3 million for 2011, a decrease of $1.3 million, or 7.7%. Earnings per diluted share was $1.30 on 12.6 million shares for 2012, compared to $1.42 on 12.5 million shares for 2011.

Recent Updates about the Company

In February 2012, the Company acquired the Taizihu Group, which has a well-established grain product line of grain products under well recognized brand names “Huichun” and “Taizihu”. In June 2012, the Company formed a supply relationship with WFG, one of the largest modern multi-industry and trans-regional livestock enterprises, to which we will provide raw corn on a non-exclusive basis. In August 2012, the Company reached an agreement with Suning, one of the largest electrical and electronic appliance retailers in China, to supply it with refined packaged grain goods valued at 18.4 million USD for its commercial use.

In October 2012, the Company registered a subsidiary named Jilin Jinglong Agriculture Development Limited in Jilin Province, one of the main corn and grain producing areas in Chinatoexplore business in Northeast China, Also in October 2012, the China National Cereals and Oils Committee selected the Company’s wholly-owned subsidiary, Detian Yu, as one of China’s Top 100 Grain and Oil Enterprises. And in December 2012, the Company received approximately $209,000 (RMB 1.3 million) in subsidies from the Jinzhong city government, which will be used to support Deyu’s business operations as well as the construction of its grains processing projects.

Business Outlook

“With the industrial and market resources we have established in the past few years, we are growing to be a more integrated agriculture company with a nationwide sales network covering manufacturers, grain traders, wholesalers, distributors, institutional clients and retail stores in China,” said Jianming Hao. “In view of this goal we are now working on a digital platform to integrate the resources in the whole supply chain, and to deliver value-added services to farmers and our clients.

“In the future, our digital platform will not only provide our current clients and farmers with enhanced services, but also facilitate the extension of Deyu’s value-added services to potential clients and farmers in different regions. In addition, we believe the platform can serve as Deyu’s vital branding platform in the industry and marketplace. We believe we can compete more effectively by utilizing the platform to turn some key barriers imposed by the conventional approaches into strategic advantages,” added Mr. Hao.

Conference Call

The Company will host a conference call on April 2, 2013 at 8:30 AM EDT to discuss the Company’s results for the fiscal year ended December 31, 2012.

To join the conference call, use the dial-in information below. When prompted, ask for the “Deyu Agriculture Call” and/or be prepared to provide the conference ID.

    Date:                                                                  4/2/2013

    Time:          8:30 AM EDT

     Conference
     Line
     Dial-
     In
     (US):         877-407-9205

     International
     Dial-
     In:           201-689-8054

     Conference
     ID#:                                                                    411546

     Webcast
     Link:         http://www.investorcalendar.com/IC/CEPage.asp?ID=170716

Dial in at least 10 minutes before the call to ensure timely participation. A Teleconference Replay will be available until 11:59 PM April 16, 2013. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally.

Utilize the conference ID # for replay: 411546

About Deyu Agriculture Corp.

Deyu Agriculture Corp. is a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province in the People’s Republic of China. The Company has access of 20 years to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. We have a nationwide sales network covering manufacturers, grain traders, wholesalers, distributors, institutional clients and retail stores in China. Deyu Agriculture Corp.’s facilities include sophisticated production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company’s website is located at www.deyuagri.com.

Safe Harbor Statements

This press release contains forward-looking statements made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the current plans, estimates and projections of Deyu Agriculture Corp.’s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company’s ability to maintain its competitive position. Additional Information regarding risks can be found in the Company’s quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov.

Company Contact:

Mr. Greg Chen, President
Deyu Agriculture Corp.
Tel: +1-646-499-5475
Email: gregchen@china-deyu.com

Ms. Amy He, Chief Financial Officer
Deyu Agriculture Corp.
Tel: +86-10-8273-2870 x8522
Email: amy@china-deyu.com

Financial Tables

                                                                                        DEYU AGRICULTURE CORP AND SUBSIDIARIES

                                                                                              CONSOLIDATED BALANCE SHEETS

                                                                                                                             December 31,                  December 31,
                                                                                                                                         2012                         2011
                                                                                                                                         ----                         ----

                                                                         Assets
                                                                         ------

    Current Assets

    Cash and cash equivalents                                                                                                                   $4,937,279                   $8,741,703

    Restricted cash                                                                                                                                815,348                    1,850,999

    Accounts receivable, net                                                                                                                    33,991,288                   36,167,136

    Due from related parties                                                                                                                       397,214                      587,108

    Inventory                                                                                                                                   30,322,191                   20,314,090

    Advance to supplier                                                                                                                          6,145,840                    7,233,371

    Prepaid expenses                                                                                                                             1,453,184                      391,537

    Assets held for sale                                                                                                                                 -                    1,634,274

    Other current assets                                                                                                                           340,456                    2,204,934
                                                                                                                                                   -------                    ---------

    Total Current Assets                                                                                                                        78,402,800                   79,125,152

    Property, plant, and equipment, net                                                                                                         19,442,599                   12,355,946

    Construction-in-progress                                                                                                                     2,614,491                            -

    Long-term Investment                                                                                                                            58,426                            -

    Other assets                                                                                                                                         -                      727,535

    Intangible assets, net                                                                                                                      13,389,075                   10,651,844
                                                                                                                                                ----------                   ----------

    Total Assets                                                                                                                              $113,907,391                 $102,860,477
                                                                                                                                              ============                 ============

                                                                 Liabilities and Equity
                                                                 ----------------------

    Current Liabilities

    Short-term loan                                                                                                                             $8,323,623                  $14,413,480

    Accounts payable                                                                                                                             5,179,729                    1,833,190

    Note payables                                                                                                                                        -                    1,588,840

    Advance from customers                                                                                                                       2,249,282                    8,488,272

    Accrued expenses                                                                                                                             1,506,776                    1,149,205

    Tax payable                                                                                                                                    305,712                            -

    Preferred stock dividends payable                                                                                                              229,171                      219,721

    Due to related parties                                                                                                                       8,933,843                    5,445,115

    Other current liabilities                                                                                                                      720,862                      583,196
                                                                                                                                                   -------                      -------

    Total Current Liabilities                                                                                                                   27,448,998                   33,721,019
                                                                                                                                                ----------                   ----------

    Equity

    Series A convertible preferred stock, $.001 par value,                                                                                           2,040                        1,997
       10,000,000 shares authorized,  2,039,970 and
       1,997,467 shares outstanding, respectively

    Common stock, $.001 par value; 75,000,000 shares                                                                                                10,658                       10,565
       authorized, 10,658,266 and 10,564,774 shares outstanding,
       respectively

    Additional paid-in capital                                                                                                                  20,781,439                   20,367,138

    Other comprehensive income                                                                                                                   5,737,793                    4,831,353

    Retained earnings                                                                                                                           59,500,134                   43,491,465
                                                                                                                                                ----------                   ----------

    Total Stockholders' Equity                                                                                                                  86,032,064                   68,702,518
                                                                                                                                                ----------                   ----------

    Noncontrolling Interests                                                                                                                       426,329                      436,940
                                                                                                                                                   -------                      -------

    Total Equity                                                                                                                                86,458,393                   69,139,458
                                                                                                                                                ----------                   ----------

    Total Liabilities and Equity                                                                                                              $113,907,391                 $102,860,477
                                                                                                                                              ============                 ============

                                          DEYU AGRICULTURE CORP AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                                             For The Years Ended

                                                                 December 31,
                                                                 ------------

                                                                  2012                     2011
                                                                  ----                     ----

    Net revenue                                                           $254,046,098          $261,576,666

    Cost of goods sold                                                    (209,325,445)         (218,480,009)
                                                                          ------------          ------------

    Gross Profit                                                            44,720,653            43,096,657
                                                                            ----------            ----------

    Selling expenses                                                       (16,153,096)          (13,231,094)

    General and administrative
     expenses                                                               (9,619,036)           (8,222,182)
                                                                            ----------            ----------

    Total Operating Expenses                                               (25,772,132)          (21,453,276)
                                                                           -----------           -----------

    Operating income                                                        18,948,521            21,643,381
                                                                            ----------            ----------

    Interest income                                                             37,846                42,159

    Interest expense                                                        (1,477,304)             (805,601)

    Non-operating income                                                       665,270              (180,294)
                                                                               -------              --------

    Total Other Expenses                                                      (774,188)             (943,736)
                                                                              --------              --------

    Income from continuing
     operations before income taxes                                         18,174,333            20,699,645

    Income taxes                                                            (1,765,514)             (184,384)
                                                                            ----------              --------

    Income from continuing
     operations                                                             16,408,819            20,515,261

    Loss from discontinued
     operations, net of income taxes                                                 -            (3,891,830)
                                                                                   ---            ----------

    Net income                                                              16,408,819            16,623,431
                                                                            ----------            ----------

    Net loss attributable to
     noncontrolling interests:

      Net loss from continuing
       operations                                                               46,599                38,673

    Net loss from discontinued
     operations                                                                      -             1,101,255
                                                                                   ---             ---------

    Total net loss attributable to
     noncontrolling interests                                                   46,599             1,139,928
                                                                                ------             ---------

    Net income attributable to Deyu
     Agriculture Corp.                                                      16,455,418            17,763,359

    Preferred stock dividends                                                 (446,748)             (427,917)
                                                                              --------              --------

    Net income available to common
     stockholders                                                           16,008,670            17,335,442

    Foreign currency translation
     (loss) gain                                                               910,907             2,751,687
                                                                               -------             ---------

    Comprehensive income                                                    16,919,577            20,087,129

    Other comprehensive income
     attributable to noncontrolling
     interests                                                                  (4,467)             (130,653)
                                                                                ------              --------

    Comprehensive income
     attributable to Deyu
     Agriculture Corp.                                                     $16,915,110           $19,956,476
                                                                           ===========           ===========

    Amounts attributable to common
     stockholders:

      Net income from continuing
       operations, net of income taxes                                     $16,008,670           $20,126,017

    Discontinued operations, net of
     income taxes                                                                    -            (2,790,575)
                                                                                   ---            ----------

    Net income attributable to
     common stockholders                                                   $16,008,670           $17,335,442
                                                                           ===========           ===========

    Net income attributable to
     common stockholders per share -
     basic:

      Income from continuing
       operations                                                                $1.51                 $1.91

    Loss from discontinuing
     operations                                                                      -                 (0.27)
                                                                                   ---                 -----

    Net income attributable to
     common stockholders                                                         $1.51                 $1.64
                                                                                 =====                 =====

    Net income attributable to
     common stockholders per share -
     diluted:

      Income from continuing
       operations                                                                $1.30                 $1.64

    Loss from discontinuing
     operations                                                                      -                 (0.22)
                                                                                   ---                 -----

    Net income attributable to
     common stockholders                                                         $1.30                 $1.42
                                                                                 =====                 =====

    Weighted average number of
     common shares outstanding -
     basic                                                                  10,598,603            10,522,432
                                                                            ==========            ==========

    Weighted average number of
     common shares outstanding -
     diluted                                                                12,614,108            12,497,164
                                                                            ==========            ==========

                                                                 DEYU AGRICULTURE CORP AND SUBSIDIARIES

                                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                For The Years Ended

                                                    December 31,
                                                    ------------

                                                                  2012                                    2011
                                                                  ----                                    ----

    CASH FLOWS FROM OPERATING ACTIVITIES

       Net income available to common
        stockholders                                                                         $16,008,670       $17,335,442

       Loss from discontinued operations
        attributable to                                                                                -         2,790,575
       Deyu Agriculture Corp.

       Adjustments to reconcile net income to
        net cash provided
       by operating activities:

    Depreciation &amortization                                                                 2,297,082           979,297

    Allowance for doubtful accounts                                                                    -                 -

    Reserve for inventory valuation                                                                    -                 -

    Loss on disposal of fixed assets                                                                 577                 -

    Share-based compensation                                                                     120,853           428,702

    Preferred stock dividends accrued                                                            446,748           219,721

    Dividends paid with Series A preferred
     stock                                                                                             -           212,420

    Common stocks issued for services                                                            114,400            78,000

    Grain on bargain purchase                                                                   (499,079)                -

    Deferred income tax expense (benefit)                                                        878,746           184,384

    Noncontrolling interests                                                                     (46,599)          (38,673)

    Decrease (increase) in current assets:

    Accounts receivable                                                                        2,649,036       (23,824,017)

    Related-parties trade receivable                                                             226,755          (494,752)

    Inventories                                                                               (8,383,187)       (2,873,705)

    Advance to suppliers                                                                       1,987,857        (5,840,601)

    Prepaid expense and other current assets                                                     (40,331)         (539,339)

    Increase (decrease) in liabilities:

    Accounts payable                                                                           2,967,217         1,584,038

    Advance from customers                                                                    (6,471,286)        1,677,638

    Accrued expense and other liabilities                                                        297,336           346,492
                                                                                                 -------           -------

    Net cash provided by (used in) operating
     activities of                                                                            12,554,795        (7,774,378)
    continuing operations

    Net cash used in operating activities of
     discontinued operations                                                                           -        (3,858,325)
                                                                                                     ---        ----------

    Net cash provided by (used in) operating
     activities                                                                               12,554,795       (11,632,703)
                                                                                              ----------       -----------

    CASH FLOWS FROM INVESTING ACTIVITIES

       Consideration paid for acquisition                                                     (5,501,046)                -

       Construction and remodeling of factory
        and warehouses                                                                          (900,487)         (109,856)

       Purchase of machinery and equipment                                                      (128,383)       (3,759,859)

       Advances to related parties                                                               (33,294)                -

       Cash held by the Taizihu Group at
        acquisition date                                                                          20,272                 -

       Repayment from (loan to) related parties                                                        -           (76,995)

       Prepayments for acquisition of farmland
        use rights                                                                                     -           (76,715)

    Purchase of software and other assets                                                              -            (8,902)
                                                                                                     ---            ------

       Net cash used in investing activities of
        continuing operations                                                                 (6,542,938)       (4,032,327)

    Net cash used in investing activities of
     discontinued operations                                                                           -        (2,476,523)
                                                                                                     ---        ----------

    Net cash used in investing activities                                                     (6,542,938)       (6,508,850)
                                                                                              ----------        ----------

    CASH FLOWS FROM FINANCING ACTIVITIES

       Net (repayments of) proceeds from short-
        term loans from                                                                      (12,658,509)       11,349,219
       bank and others

       Net (repayments of) proceeds from short-
        term bank                                                                             (1,585,087)        1,547,269
       acceptance notes

       Cash released from restriction
        (restricted) for credit line of                                                        1,281,894        (1,802,568)
       bank acceptance notes

       Net proceeds from short-term loans from
        related parties                                                                        3,312,931         3,101,839

       Payment of preferred dividends                                                           (267,721)         (243,678)

       Proceeds from capital contributions                                                        31,702           464,180

       Release of cash restricted held at a
        trust account                                                                                  -           125,560

    Net proceeds from short-term loan from
     others                                                                                            -               952
                                                                                                     ---               ---

      Net cash (used in) provided by financing
       activities of                                                                          (9,884,790)       14,542,773
      continuing operations

    Net cash provided by financing
     activities of discontinued operations                                                             -         5,918,988
                                                                                                     ---         ---------

    Net cash (used in) provided by financing
     activities                                                                               (9,884,790)       20,461,761
                                                                                              ----------        ----------

    EFFECT OF EXCHANGE RATE CHANGE ON CASH
     AND CASH                                                                                     68,509           352,429
    EQUIVALENTS

    NET (DECREASE) INCREASE IN CASH & CASH
     EQUIVALENTS                                                                              (3,804,424)        2,672,637

    NET DECREASE IN CASH & CASH EQUIVALENTS
     FROM                                                                                              -          (403,208)
    DISCONTINUED OPERATIONS

    NET (DECREASE) INCREASE IN CASH & CASH
     EQUIVALENTS                                                                              (3,804,424)        3,075,845
    FROM CONTINUING OPERATIONS

    CASH & CASH EQUIVALENTS, BEGINNING
     BALANCE                                                                                   8,741,703         5,665,858
                                                                                               ---------         ---------

    CASH & CASH EQUIVALENTS, ENDING BALANCE                                                   $4,937,279        $8,741,703
                                                                                              ==========        ==========

    SUPPLEMENTAL DISCLOSURES:

    Income tax paid                                                                             $678,420               $62
                                                                                                ========               ===

    Interest paid                                                                             $1,815,269          $809,448
                                                                                              ==========          ========

    NONCASH INVESTING AND FINANCING
     ACTIVITIES:

    Construction completed and transferred
     to property, plant,                                             $                                 -        $5,914,602
    and equipment

    Construction completed and transferred
     to land use rights                                              $                                 -        $2,320,904
                                                                   ===                               ===        ==========

    Obtained certificates of farmland use
     rights                                                          $                                 -        $8,221,569
                                                                   ===                               ===        ==========

Note: Please refer to the Company’s annual report on Form 10-K for the year ended December 31, 2012 for additional notes, which are an integral part of these consolidated financial statements.

SOURCE Deyu Agriculture Corp.


Source: PR Newswire